TaxTMI 
TaxTMI 
2020 (8) TMI 169
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.... & Ors as they have confessed in the search proceedings initiated against Gautam Jain & Ors u/s. 132 of the Act. Based on the above information the Assessing Officer reopened the assessment on the ground that assessee has obtained bogus unsecured loan entries from M/s. Marine Gems Pvt. Ltd., and M/s. Nikhil Gems Pvt. Ltd., for Rs..36,40,000/- and Rs..2,13,60,000/- respectively during the relevant i.e. A.Y. 2013-14. The assessment was reopened solely based on the statements recorded from Gautam Jain & Ors that they have provided accommodation entries. In the course of the re-assessment proceedings Assessing Officer appears to have issued notices u/s. 133(6) of the Act to the creditors namely M/s. Marine Gems Pvt. Ltd., M/s. Nikhil Gems Pvt. Ltd., and M/s. Parshwanath Gems Pvt. Ltd., on 01.12.2016 calling for information. Further, the assessee was also required to prove the genuineness of the loans. The assessee filed its submissions along with the evidences to prove the genuineness, creditworthiness and identity of the creditors. However, the Assessing Officer not convinced with the submissions and the evidences furnished he concluded that the assessee has obtained only accommodatio....
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.... total loan transactions have been duly established by furnishing the documentary evidences in the form of loan Confirmations, bank statements, financials and ITR Acknowledgements of the creditors. Learned Counsel for the assessee submitted that nothing adverse has been found by the Assessing Officer in the said documentary evidences furnished by the assessee in the course of assessment proceedings. 7. Ld. Counsel for the assessee further submits that the loans taken from all these parties were also duly repaid through banking channels in F.Y.2013-14 and F.Y.2015-16. Ld. Counsel for the assessee further submits that all the three lender companies had sufficient bank balances out of which the loans were advanced to the assessee. It was also not a case where any cash deposits were preceded before providing the funds to the assessee. Learned Counsel for the assessee submitted that adequate balance in the bank account of the companies clearly proves the creditworthiness of the lenders and this view was also upheld by the Hon'ble Delhi High Court in the case of CIT v. Oasis Hospitalities (P.) Ltd. [198 taxman 247 (Delhi)]. For the very same proposition that adequate funds in the ....
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....that the entire assessment order has been framed based on the statement of Shri Gautam Jain who is neither a director nor a shareholder in the alleged creditor companies and therefore he has no locus standi to comment or to give any statement which could have any evidentiary value. Learned Counsel for the assessee submitted that the Assessing Officer treated the unsecured loans received by the assessee as unaccounted income of the assessee u/s. 68 of the Act solely based on the statements recorded from Shri Gautam Jain in the course of search proceedings in his case. Learned Counsel for the assessee submitted that Assessing Officer has not carried out any worthwhile independent enquiry in the matter. Therefore, the Ld. Counsel for the assessee submitted that the addition purely based on bald statements of alleged entry providers without any corroborative evidence is not sustainable in view of the judgement of the Hon'ble Bombay High Court in the case of CIT v. Paradise Inland Shipping Pvt Ltd [400 ITR 439]. It is also submitted that the SLP filed by the revenue against this judgement was also dismissed by the Hon'ble Apex Court in the case of PCIT v. Paradise Inland Shippin....
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....rlidhar Lahorimal v. CIT [280 ITR 512 (Guj HC)] 12. Ld. Counsel for the assessee further submits that no cogent material or evidence has been brought on record to indicate that the assessee's own unaccounted money has been received back under the garb of unsecured loans. Ld. Counsel for the assessee placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of ITO v. M/s.Celebrity Lifespace Pvt Ltd. in ITA. No. 6301/Mum/2017 dated 05.12.2019 and submitted that an identical issue in relation to addition of unsecured loans based on mere statement of Shri Gautam Jain was deleted by the Tribunal. Ld. Counsel for the assessee also placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of ITO v. Shri Dhansukh D. Mehta in ITA No. 1725/Mum/2018 dated 12.07.2019 and submitted that similar issue of alleged accommodation loan entries from Surat based companies merely based on the statement of Shri Bhanwarlal Jain was held to be not correct and justified. 13. Ld. Counsel for the assessee coming to the decision relied on by the Ld. DR in the case of PCIT v. Bikram Singh (supra) submitted that the said decision is distinguishable due to pec....
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....ent decision in the case of PCIT v. M/s. Ami Industries (India) P Ltd., (supra). 16. Therefore, it is submitted that in view of these submissions and evidences furnished the assessee has discharged its onus u/s. 68 of the Act to prove the identity, genuineness and creditworthiness of the creditors, the nature and source of the alleged loans received from the said creditors and therefore the Ld.CIT(A) has rightly appreciated the evidences furnished and deleted the addition made by the Assessing Officer. Thus, it is submitted that the order of the Ld.CIT(A) be sustained and the appeal of the Revenue be dismissed. 17. We have heard the rival submissions, perused the orders of the authorities below. On perusing the assessment order we find that the addition u/s. 68 of the Act was solely made based on the statement said to have been recorded in the case of Shri Gautam Jain in the course of search proceedings against him, where he has said to have deposed that he is providing accommodation entries. The assessment was reopened solely on the basis of the statements recorded from the third party. The evidences furnished before the Assessing Officer, First Appellate Authority and also ....
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.... "7.1 During the appellate proceedings, the appellant has stated that the appellant has submitted the confirmation, bank statement, Acknowledgement, ITR and financial statements of the lender and affidavits during the scrutiny proceeding before the A.O. Further, stated that the AO has not brought any material on records to prove the loan taken by the appellant as the accommodation entry. On the contrary, the appellant has proved the transaction of loan as genuine loan with evidence on records. The AO has made the disallowance u/s 68 inspite of all the conditions satisfied by the appellant. 7.2 The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Hon'ble Supreme Court, in Kale Khan Mohd.Hanif vs. CIT, pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. As far as the creditworthiness or financial ....
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....e cheques drawn from the bank accounts of the creditors. It held that the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of accounts but not the source of the source. 7.5 Further, in the case of Namichand Kothari vs CIT - [264 ITR 254] [Gau], the Hon'ble High Court had held that: "A harmonious construction of section 106 of the Evidence Act and section 68 of the Income-tax Act will be that though apart from establishing the identity of the creditor, the assessment establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditor nor is it the burden of the assessee to prove that the sub-creditor had the ....
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....he appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus cast on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transactions cannot be treated as accommodation entries. Identical issues decided by the Hon'ble ITAT, Mumbai in the case of Reliance Corporation vs. ITO 32(3)(2), Mumbai dated on 12-04-2017 ITA No.1069 to 1071. The relevant part of decision are as under:- Held (i) that the assesses had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him, under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness t....
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....the IT A No.1069/M/2017 and other three appeals identical issue and two of the Creditors in that case, i.e. Mis. Laxmi Trading Co. and Ms. Rose Impex were also parties in the case of the assessee. In the case of Andaman Timber Industries (supra), the Hon ble Supreme - 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 nullify in as much as it amounted to violation of principles of Natural Justice because pf which the assessee was adversely affected." The order was vacated. The aforesaid view was earlier considered by the Jurisdictional High Court in the case of CIT v. Ashish International In our considered view the facts of the assessee case are squarely covered by the ratio laid down in the decisions referred to above. We therefore, in view of our observations and the ratio laid down by the various decisions are inclined to set aside the order of CIT(A) and direct he AO to delete the additions of Rs. 1,29,04,231/-. Since we have decided the issue of addition u/s 68 in favour of the....
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....in the price list itself could be the subject matter of cross-examination. That apart, the Adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the sold dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-03-2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement o the aforesaid t\vo witnesses was the only basis of issuing the Show Cause....
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....ecision of ITAT, "E" Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.1819/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. 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 assessee maintained for any ....
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....ntity of creditors can be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by A/c payee cheque. Creditworthiness of the lender can be established by attending circumstances. 7.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of concerned parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss 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 ....
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....y held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors: - a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010-11; c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank Statement through which cheques were issued. 20. Tribunal noted that Assessing Officer had referred the matter to the investigation wing of the department at Kolkata for making inquiries into the three creditors from whom share application money was received. Though report from the investigation wing was received, Tribunal noted that the same was not considered by the Assessing Offic....
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...., copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid deci....