TaxTMI 
TaxTMI 
2019 (3) TMI 1835
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....t the assessee has not satisfactorily discharged the primary onus of proving the identity of the creditors, their creditworthiness and the genuineness of the transaction. 2. Whether on the facts and in the circumstances of the case and in law, the Id CIT(A) erred in deleting the addition of Rs. 19,53,222/- on account of interest expenses without appreciating the findings of the AO that the lender companies have been used by the assessee for introduction of capital into Assessee Company by way of loan and the whole transaction only a colourable device used by assessee to make the transaction appear genuine for which TDS was deducted by the assessee. 3. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 3. In the first ground of appeal, the Revenue has challenged the deletion of addition by Ld. CIT(A) of Rs. 3,69,00,000/- as made by the AO on account of unexplained cash credits under section 68 of the Act. 4. The facts in brief are that the assessee filed the return of income o....
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....O that the statement made by the director of the company Shri Dinesh Jain was recorded under pressure and duress wherein he stated that unsecured loan obtained from the concerns related to Shri Pravin Kumar Jain were in the nature of accommodation entries and he agreed to offer these loans as income over and above the regular return/assessed income which were based upon the pressure on the said director and was not made in the normal course and circumstances. Even the statement given by Shri Pravin Kumar Jain under section 132(4) was withdrawn and retracted by him and therefore has no legal sanctity. Even otherwise, mere admission of the director of the company based on incorrect facts could not be the basis of addition in the hands of the assessee. The assessee submitted that even at the time of survey as well as in the current assessment proceeding, no opportunity of cross examination was provided to the assessee. The assessee also stated that it has filed various evidences corroborating and substantiating the loan transactions such as loan confirmations, copies of ITR, bank statements along with balance sheets and profit and loss account to prove the identity of the lenders , ge....
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....days earlier was recorded under pressure and no reliance could be placed on the same. In view of the above facts, I am of the opinion that once the statement had been retracted by Shri Dinesh Jain almost immediately and such retraction statement was available with the AO during the course of entire assessment proceedings as well, he should not have placed reliance on the earlier statement dated 26.03.2014 especially when he could find no adverse findings in the retraction statement. In such a scenario, he should have determined the genuineness of the transaction on the basis of various documentary evidences produced before him. Needless to say, the same would also have been in line with various CBDT circulars as submitted by the appellant in his submission. Further, the statement of Shri Pravin Jain on which the AO has also placed reliance upon has not been confronted to the assessee ever. As held by the Hon'ble Apex Court in the case of the M/s. Andaman Timber Industries CIVIL APPEAL NO. 4228 OF 2006, placing reliance on such a statement would be in violation of the principles of natural justice and hence no reliance could have been placed by the AO on the statement of Shri Pr....
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....tity, creditworthiness and the transaction. What is peculiar in the present case is when the assessment was being completed the A.O. has not made much investigation, which would have established that the identity of the loan creditors, the genuineness of the transaction and the creditworthiness of the creditors were not apparent. It has been submitted that these details called for by the A.O. were duly filled by the appellant. Even otherwise, the details of loan creditors particulars were available with the A.O. in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion that he did, the A.O. did not consider it worthwhile to make any further enquiry. There is no finding to the effect as to how the alleged unaccounted cash/money of the assessee company was routed through various levels and it finally reached to the assessee. There is no evidence or material on record to show that the said amount representing unsecured loans moved from the assessee and reached to the assessee. The assessee company has received the money through banking channels and the applicants had shown the said amount as investment in their books of account. The money rout....
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....reholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 6.6 The judgment of the Supreme Court in the case of CIT v. P. Mohanakala [2007] 291 ITR 278 is also relevant on the facts of the case. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying section 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The Commissioner of Income-tax (Appeals) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter w....
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....s on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. 6.7 It is clear from the decision of the Hon'ble Delhi High Court in the case of Oasis-Hospitalities P Ltd. 2011 333 HR 119 (Del.), that once the assessee filed copy of PAN, Acknowledgement copy of the return of income of the investing company, their bank accounts statements for the relevant period; then even if the parties were not produced in spite of the specific ejections of the Assessing Officer, the addition could not be sustained as the primary onus was discharged by the assessee by producing the PAN, balance sheet, copy of the acknowledgement copy of return of the applicants etc.. In the instant case, there is no dispute about the identity of the creditor companies, who had given the Loan money and the source of the loan was also found in the respective bank accoun....
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....see raised a sum of Rs. 3.69 crores from 9 private companies related to Shri Pravin Kumar Jain group who were part of hawala racket which came to light upon a search on the said person and his associated concerns that the entire business being run and operated by the Pravin Kumar Jain group was only bogus and they were engaged in providing accommodation entries in the form of unsecured loan, share application money and long term capital gain etc. Shri Praveen Kumar Jain admitted during the recording of statement u/s 132(4) of the Act. Nevertheless the said statement was retracted later on but that was only after though. The Ld. D.R. submitted that Ld. CIT(A) allowed relief to the assessee on the basis that Shri Dinesh Jain, director of the assessee company retracted his statement dated 26.03.2014 on 29.04.2014 on the ground that statement was given under duress and pressure. The Ld. D.R. further stated according to the ld CIT(A), the AO should not have placed reliance on the statement dated 26.03.2014 as Shri Dinesh Jain has retracted his statement. The Ld. D.R. submitted that according to Ld. CIT(A) the statement of Shri Pravin Kumar Jain was not confronted to Shri Dinesh Jain, th....
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....mitted that the decisions relied upon by the ld CIT(A) are distinguishable on facts namely (i) CIT vs. Creative World Tele Films Ltd ( 2011) 333 ITR 100 (Born-High Court); CIT vs. P. Mohanakala 291 ITR 278;(ii) CIT vs. Oasis Hospitalities Pvt. Ltd. 333 ITR 119. The Ld. D.R. heavily relied on the decision of Hon'ble Delhi High Court in the case of M/s. Jansampark Advertising & Marketing P Ltd. 56 Taxman 286 wherein the Hon'ble Court held that Ld. CIT(A) should have made proper enquiry if AO fails to make enquiries. The Ld. D.R. submitted that Ld. CIT(A) merely relied upon the fact that assessee filed bank statement, ITRs, PAN number, confirmations, bank statement and form No.16A for TDS deduction. The Ld. D.R. contended that mere filing all these documents would not prove the identity, genuineness of the transactions and creditworthiness of the lenders automatically. The Ld. D.R. relied on the following decisions in defense of his arguments : 1. Nemi Chand Kothari vs. CIT 264 ITR 253 2. CIT vs. Korlay Trading Co. Ltd. 238 ITR 820 (Kolkata HC) Finally, the Ld. D.R. prayed before the Bench that in view of the detailed submissions , arguments and ratio laid down by....
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....ding thereof and in view of the fact that despite assessee discharging its onus by filing all the necessary evidences , the AO has not done anything to disbelieve and disapprove the evidences filed by the assessee by conducting any investigation/enquiry during the assessment proceedings. Therefore, the order of Ld. CIT(A) may be confirmed. 8. We have heard the rival submissions of both the parties and perused the material on record including the written submissions filed by the Ld. A.R. and the Ld. D.R. along with various case laws referred and relied by both the parties. The undisputed facts are that the assessee company was formed and constituted on 15.09.2010 and it has taken over business of M/s. D.N.H Spinners a partnership firm on going concern basis. There was a survey action under section 133A of the Act on the assessee on 25.03.2014. During the course of survey a statement under section 131 of the Act was recorded of Shri Dinesh Jain on 26.03.2014 who is director of the assessee company wherein the survey team informed him that various unsecured loans taken by the assessee from seven entities controlled by Shri Pravin Kumar Jain who has admitted before the Investigation....