TaxTMI 
TaxTMI 
2021 (7) TMI 78
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.... on the following grounds: "1. On the facts and in the circumstances of the appellant's case and in law the Ld. AO erred in reopening the assessment u/s. 147 by issue of notice u/s. 148 dated 16.01.2015 which is barred by limitation in view of the 1st proviso to section 147 and the Ld. CIT(A) erred in not quashing the assessment order passed by the AO u/s. 143(3) r.w.s 147 of the Act. 2. On the facts and in the circumstances of the appellants case and in law the Ld. CIT(A) erred in confirming the addition of Rs. 3,75,00,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Act. 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs. 3,72,328/- under the provisions of Income Tax Act. 4. On facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making addition of Rs. 1,40,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 5. On facts and in the circumstances of the a....
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....se of the assessee was reopened under Sec. 147 of the Act. Objections filed by the assessee as regard the assumption of jurisdiction by the A.O under Sec. 147 were disposed off by the A.O vide his letter dated 28.01.2015. 3. During the course of the reassessment proceedings, it was observed by the A.O that as per the information shared by the DDIT(Inv.)-II, Mumbai the assessee was stated to have received accommodation entries for loans amounting to Rs. 3.75 crores from benami concerns managed and controlled by Shri. Bhanwarlal Jain and his associates-cum-employees, as under: Sr. No. Particulars Amount 1. M/s Meenakshi Exports Rs. 25,00,000/- 2. M/s Navkar Diamonds Rs. 50,00,000/- 3. M/s Rose Impex Rs. 50,00,000/- 4. M/s Rose Gems Pvt. Ltd. Rs. 1,25,00,000/- 5. M/s Surya Diam Rs. 50,00,000/- 6. M/s Pankaj Exports Rs. 50,00,000/- 7. M/s Sankhala Finvest Ltd. Rs. 25,00,000/- Total Rs. 3,75,00,000/- It was observed by the A.O that in the course of the search and seizure proceedings conducted by the DGIT(Inv.), Mumbai on 03.10.2013 on Shri. Bhanwarlal Jain, an infamous accommodation e....
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.... * With regard to the genuineness of the loans, Shri. Nemichand P. Jain merely stated that the loans were taken through proper banking channel. * The rate of interest on these loans is 9% per annum which is much less than the rate of interest charged by banks on secured loans. On a perusal of the records, it was observed by the A.O that during the course of the search and post search analysis in the case of Shri. Bhanwarlal Jain group, it transpired that the concerns from whom the assessee had claimed to have raised loans were dummy concerns which were used by Shri. Bhanwarlal Jain as conduits for providing accommodation entries of loans and advances to various beneficiaries. Backed by his aforesaid observation the A.O called upon the assessee to explain that as to why the loans raised from the aforesaid tainted concerns may not be treated as bogus. In reply, the assessee tried to impress upon the A.O that it had raised genuine loans from the aforesaid concerns and vide its letter dated 24.02.2016 submitted as under: "In this regard we have to state as submit as under: 1). Addition of Loans taken of Rs. 3.75 Crores: 1.1 We had taken loans f....
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.... statement is doubtful and suspicious. This is more particularly so when my name has not been specifically mentioned in the confession. We respectfully submit that in case any contrary documentary evidence is available on record which could be used against us, then a copy of such evidence/survey report may kindly be provided to us to controvert the same and kindly allow us to cross examine the alleged concerns to justify the genuineness of its recorded transactions. 1.7 In respect of the said loans accepted by us from the said concerns, it is to submit that our firm is absolutely not involved in their alleged hawala transactions. It is to submit that the said concerns, as per statement, might have given few bogus loans, however it does not mean that each transaction made by such parties including with us are ingenuine. It is submitted that merely on the basis of assumptions & presumption and without any corroborative evidence one cannot conclude that said loans taken from the alleged concerns are ingenuine. 1.8 We would also state that during the course of survey at our premises, Mr. Nemichand P Jain's statement was recorded under coercion, pressure and duress....
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..... and the rate of the same may be lower but considering Neminath Group reputation and credit worthiness and the fact that the same are "Sharafi Loans" i.e. payable on demand, the rate of interest can be considered as reasonable. 2.2 Further, to submit that we had paid due interest on the said loans taken by cheques only after deduction of T.D.S. U/sec 194A and therefore the same is allowable U/sec 36(1)(iii) as the same is utilized in business only. 2.3 Regarding disallowance of commission paid to brokers on said loans taken, we would like to submit that during the course of Survey, Mr. Nemichand P Jain had admitted following statements under pressure and out of fear only vide Oath Administered dated 16/10/2014 and 17/10/2014. However, it is submitted that the said statements are retracted by Mr. Nemichand P jain vide his Affidavit dated 16.11.2014 to your good self. i. Refer A. No. 12 "For arranging the loans Mr. Ratanlalji Sankhla has been paid Commission at the rate of 0.25% on the amount of loans arranged. These commissions have been paid in cash are not reflected in my books of account for the respective years." ii. Refer A. No. 26 "In some ....
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.... As claimed by the assessee, original assessment was earlier framed by the A.O vide his order passed u/s. 143(3), dated 31.10.2011 and the income returned by the assessee was accepted. It was the claim of the assessee that the A.O while framing the original assessment u/s. 143(3), dated 31.10.2011 had only after verifying the documentary evidence that were filed by the assessee had accepted the genuineness of the loan transactions in question. In order to drive home its claim that it had raised genuine loans from the aforesaid parties the assessee had drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were ....
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....namely:- * High Turnover * Major portion of assets in the balance sheet comprise of Loan & Advances, Debtors and Investments wherein assets almost match the figure of Creditors. * The advance tax or self assessment tax payments are Nil in spite of Turnover running into several crores. * Almost the entire TDS deducted (by the builders) on the interest payable against their "Loans and Advances" is claimed as refund Thereafter, the A.O referring to the incriminating material/documents that were unearthed during the course of search proceedings conducted on Shri Bhanwarlal Jain and his associates-cum-employees dwelled at length on the modus operandi that was adopted by them for providing accommodation entries for bogus loans/bogus sales/purchases/import for others through their various benami concerns. It was further observed by the A.O that Shri. Bhanwarlal Jain in his statement recorded on 11.10.2013 u/s. 132(4) of the Act had admitted the modus operandi of providing accommodation entries through dummy concerns whose affairs were managed and controlled by him. Also, the A.O was of the view that the failure on the part of the assessee to produce ....
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....he assessee assailed the assessment order before the CIT(A). Insofar the claim of the assessee that the A.O had wrongly assumed jurisdiction u/s. 147 of the Act on the basis of a 'change of opinion', the same was rejected by the CIT(A). On merits, the CIT(A) on the basis of his exhaustive deliberations was of the view that as the assessee had raised loans from concerns which were managed and controlled by Shri. Bhanwarlal Jain and his associates-cum-employees, therefore, the documentary evidences which were filed by the assessee to support the genuineness of the impugned loan transactions, viz. confirmation of accounts; balance sheets of lender parties; copies of the returns of income of the lender parties; PAN Nos. of the lender parties; copies of the bank accounts of the lender parties highlighting the loans advanced to the assessee and also the interest received on the said loans, did not carry any evidentiary value and were of no significance. It was further observed by the CIT(A) that the basic features of the benami concerns of Shri. Bhanwarlal Jain clearly indicated that they were not engaged in the business of diamond trading but were into an organized business of p....
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....he remaining transactions tallied with those accounted for in the books of accounts of the aforesaid benami concerns which were managed and controlled by Shri. Bhanwarlal Jain and his associates. In sum and substance, the CIT(A) by drawing support from the incriminating material/documents seized in the course of the search proceedings and the statements of Shri. Bhanwarlal Jain and his associates-cum-employees was of a strong conviction that the aforesaid benami concerns were engaged in an organized activity of providing accommodation entries for bogus loans/bogus sales/purchases/import for others. Further, the CIT(A) exhaustively discussed the modus operandi that was adopted by Shri. Bhanwarlal Jain and his associates in providing accommodation entries through a chain of 68 benami concerns floated by them. Adverting to the notings of commission received by Shri. Bhanwarlal Jain from providing of accommodation entries, it was observed by the CIT(A) that the same too were recorded in a coded manner. It was further observed by the CIT(A) that as the books of accounts of all the group concerns of Shri. Bhanwarlal Jain did not reflect the actual state of affairs, therefore, the same we....
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....dus operandi adopted by the various concerns of Shri. Bhanwarlal Jain group it could safely be gathered that cash would have been given by the assessee for getting the accommodation entries of unsecured loans. In support of his aforesaid claim the CIT(A) observed that parallel books of account found during the course of the aforesaid search operation revealed that there were cash transactions recorded therein, which were contra to the entries of cheque/RTGS entries reflected in the regular books of account of the various concerns of the aforesaid person. It was further observed by the CIT(A) that even the identity of the lenders was in doubt. It was observed by him that as per the investigations done by the department the concerns of Shri. Bhanwarlal Jain group were proved to be dummy concerns engaged in providing accommodation entries, therefore, merely producing PAN or financials or assessment details would not establish the identity of the person concerned. It was observed by the CIT(A) that as the entries of loans were given after taking cash, hence, those were not real loan transactions. As regards creditworthiness of the lenders and genuineness of the transactions in question....
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....l has been sought by the assessee for adjudicating the core issue, viz. that as to whether the lower authorities are right in law and facts of the case in concluding that the unsecured loans of Rs. 3.75 crore received by the assessee during the year were to be held as unexplained cash credit within the meaning of Sec. 68 of the Act. Consequent to and in fact as a corollary to adjudication of the aforesaid issue, we shall also look into the sustainability of the addition u/s. 69C of commission of Rs. 1,40,000/- which as per the lower authorities the assessee would had parted for availing the accommodation entries. Also, the disallowance of interest of Rs. 3,72,328/- claimed by the assessee to have been paid on the loans in question has been assailed by the assessee before us. 10. At the very outset of the hearing of the appeal it was submitted by the ld. A.R that as instructed the Ground of appeal No. 1 wherein the validity of the jurisdiction assumed by the A.O u/s. 147 of the Act had been assailed was not being pressed. We, thus, as per the concession of the ld. A.R dismiss the Ground of appeal No. 1 as not pressed. 11. We shall for the sake of clarity briefly cull out the f....
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....eived from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. It was submitted by the assessee that all the aforesaid facts and the documentary evidences substantiating the authenticity of the loan transactions in question were filed with and looked into by the A.O in the course of the original assessment proceedings. However, the A.O was not persuaded to subscribe to the claim of the assessee that it had raised genuine loans from the aforementioned parties and had vide his reassessment order passed under Sec 143(3) r.w.s 147, dated 29.02.2016 held the same as unexplained cash credit u/s. 68 of the Act. Further, the A.O made an addition towards commission of Rs. 1,40,000/- which as per him the assessee would had paid for procuring the accommodation loan entries. Also, the interest of Rs. 3,72,328/- claimed by the assessee to have been paid on the loans in question was disallowed by the A.O. On appeal, the CIT(A) as observed by us hereinabove had concurred with the view taken by the A.O and dismissed the appeal. 12. As is discernible from the orders of the lower author....
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....s had concluded that no genuine loans were raised by the assessee from the aforementioned parties. At this stage, we may herein observe that the lower authorities while stamping the loan transactions in question as bogus had summarily discarded the documentary evidences/facts that were strongly relied upon by the assessee to drive home its claim of having raised genuine loans from the aforementioned concerns. As observed by us hereinabove, it was the claim of the assessee that the A.O while framing the original assessment vide his order passed u/s. 143(3), dated 31.10.2011 had verified the genuineness of the loan transactions in question in the backdrop of the documentary evidences that were filed by the assessee in support thereof. In order to dispel any doubts, the assessee in the course of the reassessment proceedings had once again relied on the same set of facts and the documentary evidence in support of its claim of having raised genuine loans from the aforementioned parties, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the in....
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....of their respective search and survey proceedings. As observed by us hereinabove, we find that the A.O had drawn adverse inferences as regards the authenticity of the loans raised by the assessee from the aforementioned parties, inter alia, for the reason that in the course of the survey action conducted on the assessee; Shri Neminath P. Jain, the key person of Neminath group had admitted vide his statement recorded on oath on 16/10/2014 and 17/10/2014 that the various concerns belonging to his group had received accommodation entries in the form of bogus loans and advances in different years from various name lending concerns managed and controlled by Shri. Bhanwarlal Jain and his son Shri. Rajesh Bhanwarlal Jain. However, it is a matter of fact borne from the records that Shri Neminath P. Jain had thereafter vide an "affidavit", dated 16.11.2014 retracted from his aforesaid statement, for the reason, that the same was obtained under coercion, pressure and duress, to which he had yielded considering the poor state of his health at the relevant point of time. In the backdrop of the aforesaid facts, we shall deliberate on the evidentiary value of a statement of an assessee recorded ....
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.... against the assessee. It was observed by the Tribunal as under: "Apart from this statement, the Revenue has not brought anything on record in support of its conclusion that the assessee has undisclosed income. During the course of survey, the officer could record this statement of a person under sub-section (3) (iii) of section 133A of the Income-tax Act, 1961. This clause authorise the authority to record the statement of any person which may be useful for or relevant to any proceedings under the Act. However, the officer is not authorised to record the statement on oath and hence the statement taken during the course of search has no evidentiary value. It is simply an information which can be used for corroboration purpose for deciding any issue in favour or against the assessee. This issue has come up before the Hon'ble Kerala High Court in the case of Paul Mathews and Sons (supra) and the court has made the following observations (page 108): "Section 133A(3) (iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to....
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....nes advising the survey team not to take voluntary disclosure unless incriminating material was collected. In the case of T.P. Indrakumar (supra), the Assessing Officer specifically lay his hands on unexplained gifts, in that situation the assessee had mode voluntary disclosure and filed a revised return. In the present case, the Department failed to collect any material during the course of survey and the Assessing Officer is simply harping upon the statement of the assessee, extracted supra. According to the authoritative pronouncement of the Hon'ble Supreme Court in the case of S. Khader Khan Son (supra) as well as the Hon'ble Kerala High Court, this statement does not carry any evidentiary value and, therefore, no addition is sustainable on the strength of this statement. In view of the above discussion, we find force in the first ground of appeal raised by the assessee and delete the addition of Rs. 2 crores." Also, a similar view had been taken by the Hon'ble High Court of Kerala in the case of Paul Mathews & Sons Vs. CIT (2003) 263 ITR 101 (Ker). In the aforesaid case, it was observed by the Hon'ble High Court that as the statement elicited during the cour....
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....aced on record supporting documentary evidence to substantiate the authenticity of the loan transactions in question, therefore, it was incumbent upon the A.O to conclusively prove on the basis of corroborative material that the assessee had as a matter of fact obtained accommodation entries in the garb of the aforesaid loan transactions and could not have simply drawn adverse inferences on the basis of the aforesaid statement recorded in the course of the survey proceeding. As observed by us hereinabove, a statement recorded in the course of the survey proceeding can only be used for corroborative purposes for deciding any issue in favour or against the assessee. In our considered view, the A.O pursuant to retraction of the statement by Shri. Neminath P. Jain (supra) was obligated to place on record documentary evidence which despite withdrawal of the aforesaid statement would have corroborated the facts which were earlier stated by him. As a statement recorded under Sec. 133A has no evidentiary value in absence of any corroborative evidence, therefore, the same on a standalone basis could not have justified drawing of adverse inferences as regards the authenticity of the loan tra....
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....framing the relevant assessment orders." On the basis of our aforesaid observations, we are of a strong conviction that in the case before us the mere admission on the part of Shri. Neminath P. Jain (supra) in the course of the survey proceedings, which thereafter had been withdrawn, de hors any corroborative material could not have been acted upon and pressed into service by the revenue on a standalone basis for drawing of adverse inferences in the hands of the assessee. In sum and substance, we are of a considered view that the heavy reliance placed by the A.O on the retracted statement of Shri Neminath P. Jain (supra) that was recorded in the course of the survey proceedings conducted on 16/10/2014 and 17/10/2014 could not have been acted upon by the revenue in the absence of any corroborative material supporting drawing of such adverse inferences in the hands of the assessee. 14. We shall now advert to the claim of the ld. A.R that the lower authorities had erred in treating the loans aggregating to Rs. 3.75 crores as bogus on the basis of the statement of Shri. Bhanwarlal Jain that was recorded under Sec. 132(4) of the Act on 11.10.2013, wherein he had admitted before th....
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.... of the original assessment proceedings that were culminated vide an order passed by the A.O under Sec. 143(3), dated 31.10.2011 and also in the course of the reassessment proceedings under consideration, had drawn support from certain facts and documentary evidence to support the same, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. Further, as observed by us hereinabove, the assessee had in the course of the reassessment proceedings in order to drive home its claim as regards the genuineness of the loan transactions under consideration also drawn support from the fact that most of the loans had already been repaid by it. 15. We ha....
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....ct as long as the same is not retracted. However, in case the assessee retracts the statement, then, the evidentiary value of the said statement suffers a serious dent. Accordingly, the mandate envisaged under sub-section (4) of Sec. 132 of using the statement as evidence in any proceedings under the Act gets honoured only when there is no other version of the assessee vis-à-vis the said statement. To sum up, a statement recorded under Sec. 132(4) has though an evidentiary value, however, the same cannot be ascribed the status of a proven fact. In our considered view, a retracted statement under Sec. 132(4) of the Act would require some corroborative material for the A.O to proceed and make additions on the basis of the facts stated in such statement. Now, in the case before us, we are seized with a situation where the revenue had sought to draw adverse inferences in the hands of the assessee by drawing support from the statement of a 'third party' recorded under Sec. 132(4) of the Act, which as observed by us hereinabove had thereafter been retracted. We cannot remain oblivious of the fact that now when a statement recorded under Sec. 132(4) of the Act which had the....
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.... to the person who made the admission to show that it is incorrect. We further find that the Hon'ble High Court of Gujarat in DCIT (Investigation) Vs. Narendra Garg & Ashok Garg (AOP) (ITA No. 1531 & 1532 of 2007, dated 28.07.2016), had held, that as the assessee had retracted from his statement recorded under Sec. 132(4) which though was not accepted by the revenue, therefore, it was incumbent on the part of the A.O to have supported the addition made on the basis of the disclosure made by the assessee in his aforesaid statement on the basis of evidence collected during the course of the search proceedings. It was observed by the Hon'ble High court that the A.O cannot proceed on a presumption under Sec. 132(4) of the Act and there must be something more than a bare suspicion to support the assessment or addition. We find that the Hon'ble High Court in the aforementioned case had observed that even in a case where the retraction of the disclosure made by the assessee in his statement recorded under Sec. 132(4) is not accepted by the revenue, even then, the addition/disallowance has to be based by the revenue on the basis of evidence collected during the course of the se....
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....ein observe, that though the CIT(A) in his order had exhaustively referred to the modus operandi that was stated to have been adopted by Shri. Bhanwarlal Jain for providing accommodation entries for bogus loans/bogus sales/purchases/import for others through certain benami concerns which were managed and controlled by him, and further, in support thereof had referred to and carried out an in depth analysis of certain incriminating documents and material that were found and seized in the course of the search proceedings, but at no stage he had referred to any such material/document which would evidence that the assessee had raised accommodation entries in the garb of loans from the aforementioned concerns in question. In fact, a thorough scrutiny of the orders of the lower authorities reveals that there is not a word of whisper about any such incriminating material found in the course of the search proceedings or in the statements of Shri. Bhanwarlal Jain or his associates-cum-employees alleging, much the less evidencing, that the assessee had in the garb of the loans in question received accommodation entries. In sum and substance, though the lower authorities had in their respecti....
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....iscarded by both the lower authorities in the course of the reassessment proceedings and the appeal arising therefrom, without pointing out any such material or allegation on the basis of which the same had lost its evidentiary value and was no more of any significance for proving the authenticity of the loans in question. On a perusal of the orders of the lower authorities, we find, that they held a conviction that as the lender concerns figured in the list of the benami concerns which were being used by Shri. Bhanwarlal Jain and his associates for providing accommodation entries, thus, the claim of the assessee of having raised genuine loans from the said concerns stood negated and the documents filed by it to substantiate the authenticity of the loan transactions in question could not be acted upon. 17. We have given a thoughtful consideration to the observations of the lower authorities and are unable to persuade ourselves to subscribe to the manner in which they had drawn adverse inferences as regards the genuineness of the loan transactions in question and without dislodging the authenticity of the documentary evidence that was placed on record by the assessee in support t....
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....cerns were carrying on an organised activity of providing accommodation entries analysed certain seized material viz. parallel account pertaining to a loan beneficiary i.e. M/s. Amba Corporation, as was retrieved from a "white colour Sony 4GB pen drive" that was seized in the course of the search proceedings vis-à-vis the ledger a/c of the said party as appearing in the books of account of M/s. Impex Gems, a benami concern of Shri. Bhanwarlal Jain, which revealed that the aforesaid party i.e. M/s. Amba Corporation (supra) had received an accommodation entry of loan from the aforesaid benami concern i.e. M/s. Impex Gems, however, there is no reference in the orders of either of the lower authorities of any such material which would similarly evidence that the assessee had in the garb of the loan transactions in question raised accommodation entries from the aforesaid concerns. To sum up, in the absence of any specific material unearthed in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates or in the survey action conducted on Shri. Nemichand P. Jain (supra) which would evidence that the assessee had in the garb of the loans in question ....
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....eferred loans taken cannot be doubted on the basis of a general statement given by the alleged concerns and that too obtained without our knowledge. It seems that statement of any person was neither recorded by the A.O and not in my presence and hence the credibility of the statement is doubtful and suspicious. This is more particularly so when my name has not been specifically mentioned in the confession. We respectfully submit that in case any contrary documentary evidence is available on record which could be used against us, then a copy of such evidence/survey report may kindly be provided to us to controvert the same and kindly allow us to cross-examine the alleged concerns to justify the genuineness of its recorded transactions." However, despite the aforesaid specific request of the assessee, we find, that the A.O neither supplied the copies of the incriminating documents nor allowed cross-examination of the persons whose statements were being relied upon by him for drawing of adverse inferences as regards the genuineness of the loan transactions in question. In our considered view, the aforesaid failure on the part of the A.O to allow a cross-examination of the aforement....
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.... by the assessee apparently by account payee cheque and was repaid vide account payee cheque, the least that the department should have done was to grant an opportunity to the assessee to meet the case against him by providing the material that was sought to be used against it before passing the order of reassessment. Observing, that the A.O had failed to afford an opportunity to the assessee to meet the case against him, it was observed by the Hon'ble High Court that the denial of such opportunity would go to the very root of the matter and strike at the foundation of the assessment order and render it vulnerable. In the case of Pr. CIT Vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR 82 (Del) it was observed by the Hon'ble High Court of Delhi that the onus of ensuring the presence of the person on whose statement the department was relying for drawing of adverse inferences in the hands of the assessee was upon the department and the same could not be shifted to the assessee. It was further observed by the Hon'ble High Court that as the person on whose statement reliance was placed by the department could not be produced for cross-examination, the said fact was suffic....
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....ans from the aforementioned seven parties had in the course of the reassessment proceedings drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced to and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. By placing on record the aforesaid documentary evidence the assessee discharged the primary 'onus' that was cast on it to prove the authenticity of the loan transactions in question. However, the veracity of the claim of the assessee was not accepted by the A.O primarily on the ground that the names of the lender concerns viz. M/s. Mohit Enterprises; M/s. Jewel Diam; M/s. Meenakshi Exports; M/s. Rose Impex; M/s. Rose Gems Pvt. Ltd.; M/s. Surya ....
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.... Investigation wing had named the lender concerns as conduits of Shri. Bhanwarlal Jain. Also, it was noticed by the A.O that as per the information received from the Investigation wing, Mumbai, the assessee's name figured in the list of beneficiaries to whom bogus loans were advanced by the benami concerns of Shri. Bhanwarlal Jain. Further, the A.O referred to the relevant extract of the statement of Shri. Bhanwarlal Jain recorded u/s. 132(4), dated 11.10.2013 wherein he had in reply to Q. No. 24 had provided the details of 68 concerns which were managed and controlled by him for providing accommodation entries. On the basis of his observations, the A.O had concluded that the assessee had invested his own unaccounted money in the garb of loans projected to have been raised from the aforesaid benami concerns. On appeal, the CIT(A) found favour with the view taken by the A.O that the assessee had not raised any genuine loans from the aforementioned concerns and had only received accommodation entries from them. It was observed by the CIT(A) that the documents found during the course of survey conducted on the assessee revealed that it had collected unaccounted on-money on sale of....
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....anaged and controlled by Shri. Bhanwarlal Jain. It was, further, observed by the CIT(A) that it was not possible for the revenue to decode all the unaccounted entries recorded in the incriminating seized material and correlate them with the regular books of accounts of the group concerns of Shri. Bhanwarlal Jain and then provide cross-examination of Shri. Bhanwarlal Jain to all the beneficiaries which ran into thousands. It was observed by the CIT(A) that once it was proved that the parallel books of accounts seized in the course of search proceedings contained unaccounted entries since 2004, then, nothing more was required to be proved by the department. Accordingly, on the basis of his aforesaid observations the CIT(A) was of the view that none of the entries recorded in the books of account of the various concerns of Shri. Bhanwarlal Jain group were genuine and had to be necessarily treated as accommodation entries. 20. We have deliberated at length on the observations of the lower authorities on the basis of which they have stamped the loan transactions in question as accommodation entries. Before proceeding any further, we may herein observe that the documentary evidence th....
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....that was cast upon it as regards proving the identity and creditworthiness of the lenders and genuineness of the loan transactions, had in the course of the reassessment proceedings filed with the A.O the same set of facts and documentary evidence that were earlier filed in the course of the original assessment proceedings and was accepted by him, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. However, the A.O without taking any cognizance of the aforesaid facts and documents concluded that as the lenders in question were benami concerns of Shri. Bhanwarlal Jain, therefore, the aforesaid documents relied upon by the assessee in suppor....
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....stion had in the garb of the loan transactions raised accommodation entries from the aforesaid concerns or that any of the seven lender concerns were similarly involved in the alleged nefarious activities of providing accommodation entries. Apart from that, we find that the lower authorities had in their orders neither referred to any such incriminating material which would irrefutably evidence that the assessee in question had raised accommodation entries of loans from the abovementioned concerns nor any such specific allegation in context of the assessee is discernible from any of the statements of Shri. Bhanwarlal Jain or that of his associates-cum-employees recorded u/s. 132(4) and u/s. 131 of the Act. In fact, it remains as a matter of fact borne from the records that though the statements of Shri. Bhanwarlal Jain and his associates-cum-employees had been heavily relied upon by the lower authorities for supporting their generalized observations that the assessee had not raised any genuine loans from the lender concerns in question, but then, the statements of neither of the said persons had ever been made available to the assessee. In our considered view, the assessee by leadi....
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....discarded. 21. We shall in the backdrop of our aforesaid observations deal with the documents that were filed by the assessee in support of its claim of having raised genuine loans from the aforementioned lender parties. As observed by us hereinabove, the assessee by placing on record the copies of the income-tax returns of the lender concerns had duly established their identity. We are unable to concur with the CIT(A) that the assessee had failed to establish the identity of the lender concerns. Copies of the bank accounts of the lender concerns filed by the assessee with the A.O revealed that the loans in question were received by the assessee company by RTGS/NEFT. Also, the interest received by the assessee on the loans in question stood credited in the said respective bank accounts. Observation of the CIT(A) that no cash was introduced in the bank accounts of the said lenders prior to advancing of the loans to the assessee, in our considered view, in itself fortifies the fact that the assessee had not parted with any cash in lieu of the loans received from the lender concerns. Although, it is alleged by the lower authorities that the assessee's own unaccounted money was ....
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....dentity and creditworthiness of the lenders and also the genuineness of the transaction under consideration. In our considered view, now when the assessee had on the basis of the documentary evidence filed by him discharged the onus that was cast upon him as regards proving the authenticity of the loan transactions in question, then, the A.O without discharging the onus that was shifted on him as regards disproving the authenticity of the said transactions could not have justifiably drawn adverse inferences as regards the same. Our aforesaid view is supported by the order passed by a coordinate bench of the Tribunal i.e. ITAT "B" Bench, Mumbai in the case of the group entities of the assessee, viz. Shri. Nemicand Jain & Ors Vs. DCIT, Central Circle 1(3), Mumbai, ITA Nos. 2641, 2480 & 2388/Mum/2018; dated 08.07.2019. In its aforesaid order it was observed by the Tribunal that when the assessee had discharged the initial onus that was cast upon him as regards proving the genuineness of the loan transactions, then, the A.O without discharging the onus that was thereafter shifted on him by dislodging the assessee's claim on the basis of irrefutable material could not have drawn adv....
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....tions and creditworthiness of the parties. If the assessee proves all ingredients provided under Section 68 of the Act, then the onus shifts to the A.O to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings recorded by the A.O in his assessment order, one has to examine whether the assessee has discharged the burden cast upon it u/s. 68 of the Act in respect of unsecured loan received from certain companies controlled and managed by Shri. Bhanwarlal Jain. The A.O never disputed the fact that the assessee furnished various evidences to prove identity of the loan creditors. The A.O has categorically admitted that the assessee has filed various details including PAN card, ITR acknowledgement, financial statements, bank statements, confirmation letters and affidavits from the parties from whom loans has been taken. The A.O has disputed the genuineness of transactions and creditworthiness of the parties. The sole basis for the A.O to doubt the genuineness of transactions is search conducted in the cases of Bhanwarlal Jain by DGIT(Inv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal Jain ....
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....heir PAN details, master data, affidavits from the directors/partners/proprietors of those companies. Income tax acknowledgements receipts along with financial statements, bank statements of loan creditors in order to prove the identity, genuineness of transaction and creditworthiness of the parties. We, further, noted that all these loans have been taken through proper banking channels. The assessee has paid interest after deducting applicable TDS as per the law. These loans have been repaid during subsequent financial year. All these documents are part of the assessment proceedings. The A.O has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for A.O to suspect the transactions between the parties only on the reground that the person who gave unsecured loan had admitted in his statement u/s. 132(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the A.O failed t....
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....al assessment, then, merely for the reason that the said lenders had not appeared before him would even otherwise not justify characterising the loan transactions in question as bogus/sham. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of Commissioner of Income Tax-8 Vs. M/s. Orchid Industries Pvt. Ltd. (2017) 397 ITR 136 (Bom). In the aforesaid case, it was observed by the Hon'ble High Court that now when the assessee had placed on record documentary evidence to support the genuineness of the transactions under consideration, then, only because the creditors had not appeared before the A.O would not justify drawing of adverse inferences as regards the authenticity of the said transactions. Still further, we find that neither of the lower authorities had brought on record any evidence which would suggest that the assessee had paid cash to the lenders in lieu of loans received from them. Further, the fact that the assessee company had paid interest on the loans raised from the aforementioned parties after deduction of tax at source also fortifies its claim as regards the authenticity of the loan transactions. Also, the fact a....
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....nd controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, survey action was conducted on the aforementioned assessee on 25.03.2014. In the course of the survey action, the director admitted in his statement recorded under Sec. 133A that the assessee company had received accommodation entries. However, the aforesaid concern thereafter did not offer the amount of the unsecured loans for tax in its return of income. Relying upon two aspects viz. (i) that the director of the assessee company in his statement recorded in the course of the survey proceedings had admitted that it had raised bogus unsecured loans; and (ii) that the lender concerns were managed and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, the A.O held the loans as unexplained cash credits u/s. 68 of the Act. On appeal, the Tribunal while upholding the order of the CIT(A) observed that the A.O had not brought on record any adverse material to rebut the credibility of the corporate entities from which loans were raised by the assessee. Also, it was observed by the Tribunal that the assessee had placed on record supporting documentary evidence to substantiate th....
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....On appeal, the Tribunal after relying on a host of judicial decisions vacated the addition made by the A.O, on the ground, that as the assessee by filing the necessary details had discharged the onus that was cast upon it to prove the genuineness of the loans in question, the onus, thus, was shifted on the department to disprove the said claim of the assessee. It was observed by the Tribunal that the A.O without bringing any material against the assessee on record had merely proceeded on the basis of information received from DGIT(Inv.), Mumbai and concluded that the assessee as a beneficiary had in the garb of loans received accommodation entries. Also, it was observed by the Tribunal that no cross-examination was allowed to the assessee. Accordingly, on the basis of his aforesaid observations the Tribunal vacated the stamping of the loan transactions as accommodation entries by the A.O and deleted the consequential addition made by the A.O. 22. We, thus, in the backdrop of our aforesaid deliberations are of the considered view that as the assessee had discharged the 'onus' that was cast upon it under Sec. 68 of the Act, therefore, the A.O without rebutting the genuinen....
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....the following grounds before us: "1. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the addition of Rs. 75,00,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Act. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs. 39,91,000/- under the provisions of Income Tax Act. 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making notional addition of Rs. 1,70,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 4. On the facts and in the circumstances of the appellants case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from M/s. Mohit Enterprises and M/s. Jewel Diamond during the previous year relevant to the assessment year 2010-11 and other loans taken from 7 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(I....
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....dence which were submitted by the assessee to substantiate the genuineness of the aforesaid loan transactions and held the aforesaid loans as accommodation entries. Backed by his aforesaid deliberations the A.O made an addition of the impugned loans amounting to Rs. 75 lacs in the hands of the assessee. Also, the claim of the assessee with respect to interest of Rs. 39,91,000/- paid on the loans which were claimed to have been raised in the immediately preceding year i.e. A.Y. 2009-10 and during the year under consideration, the same was disallowed by the A.O, for the reason, that once the loans in question were proved to be bogus, therefore, the assessee's claim of having paid interest on such loans could not be allowed and was liable to meet the same fate. Apart from that, the A.O made an addition towards commission of Rs. 1,75,000/- which as per him the assessee would have parted with for availing the aforesaid accommodation entry with respect to bogus loans. Accordingly, the A.O assessed the income of the assessee company at Rs. 1,16,61,000/-. 31. On appeal, the CIT(A) not finding favour with the contentions which were advanced by the assessee to substantiate the genuine....
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....in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 4. In any event, the Ld. AO erred in raising a demand of Rs. 17,61,730/- and the Ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 5. The appellant craves leave to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal. 6. The appellant prays before the Hon'ble Tribunal to quash the assessment order and/or delete the additions made by the A.O." 35. Briefly stated, the assessee company had filed its return of income for A.Y. 2011-12 on 14.09.2011, declaring its total income at Rs. nil. Initially the return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received by the A.O from DGIT(Inv.), Mumbai, that the name of the assessee figured in the list of the tainted parties which had raised accommodation entries for loans from benami concerns of Shri. Bhanwarlal Jain, an infamous accommodation entry provi....
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....aking notional addition of Rs. 77,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 4. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from M/s. Amit Diamonds during the previous year relevant to the assessment year 2013- 14 and other loans taken from 9 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 5. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the ass....
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....ome of the assessee company at Rs. 79,04,027/-. 42. As the facts and the issue involved in the captioned appeal remains the same as were there before us in the appeal of the assessee for A.Y. 2009-10 in ITA No. 2554/Mum/2018, therefore, our order therein passed while disposing off the appeal for A.Y. 2009-10 in ITA No. 2554/Mum/2018 shall apply mutatis mutandis for the purpose of disposal of the present appeal. As such, the order of the CIT(A) is set aside and the addition of Rs. 35 lac made by the A.O is vacated. On a similar footing, the addition u/s. 69C towards commission expenses of Rs. 77,000/- and disallowance of interest expenditure of Rs. 43,27,027/- is also vacated. 43. Accordingly, the appeal of the assessee is allowed in terms of our aforesaid observations. ITA No. 3527/Mum/2018 A.Y. 2014-15 44. We shall now deal with the appeal filed by the assessee for A.Y. 2014-15. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds before us: "1. On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of the disallowing interest amounting to Rs. 15,64,5....