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2021 (7) TMI 1120
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....ential disallowance of interest thereon on such loans. 3. Briefly stated the facts are that, the Assessing Officer reopened the assessments u/s. 147 of the Act based on information received from DGIT(Inv.), Mumbai that the assessee has taken accommodation entries in the form of loans from various parties as mentioned in the Assessment Order. Assessing Officer was of the view that these parties are managed and controlled by Bhanwarlal Jain Group and assessee is one of the beneficiary of accommodation entries for loans. Based on the statement of Bhanwarlal Jain obtained in the course of the search in Bhanwarlal Jain Group the Assessing Officer concluded that the transactions of loans are nothing but accommodation entries obtained by the assessee from various concerns of Bhanwarlal Jain Group and they were treated as bogus accommodation entries and brought to tax u/s. 68 of the Act as unexplained cash credits. The Assessing Officer also disallowed interest on such loans. 4. On appeal the Ld.CIT(A) following the order of the Tribunal in assessee's own case for the A.Y.2013-14 and A.Y.2014-15 in ITA.Nos. 2661 and 2718/Mum/2018 dated 08.07.2019 deleted the addition made u/s. 68 of ....
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.... and circumstances of this case is whether unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain is unexplained cash credit, which comes under the provisions of section 68 of the Act or not. The AO has made additions of Rs.Rs...15,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain under Section 68 of the Act, on the ground that the assessee has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of the parties. The AO has extensively discussed the issue in his assessment order in light of facts gather during the course of search in case of Bhanwarlal Jain group of cases and survey in the case of assessee's group concern. Accordingly, the AO, opined that although the assessee has furnished various documents including confirmations from the loan creditors and their ITR acknowledgment, but failed to prove the genuineness of transactions and creditworthiness of the parties in order to come out the provisions of Section 68 of the Act. The AO further was of the opinion that mere furnishing certain paper documents is not suffi....
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....his associates were involved in providing accommodation entries and the assessee is one of the beneficiaries of such accommodation entries. The AO has taken note of statement recorded by the department from Shri Bhanwarlal Jain and his associates. The AO has taken note to survey proceedings conducted in the group cases of assessee and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidences has been brought on record by the AO to disprove the claim of the assessee that these are genuine transactions and unsecured loan taken under normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of accounts of the assessee are hit by the provisions of section 68 of the Act or not. The sole basis for the AO to make additions is statement of Shri Bhanwarlal Jain recorded under Section 132(4) of the Act, where he was admitted that he is involved in providing bogus unsecured loans entries to various beneficiaries. The statement given by Shri Bhanwarla Jain has been retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason f....
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....ement by filing affidavit. Further, the AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions u/s 68 of the Act No doubt, the AO is having every right to suspect the transactions but, that by itself would not give rise an occasion for the AO to make additions u/s 68 of the Act, when the evidences filed by the assessee clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act. 10 Coming to the cases relied upon by the assessee, the assessee has relied upon various judicial precedence including the decision of the Hon'ble Supreme Court in the case of CIT vs Lovely Export Pvt Ltd. (2008) 216 CTR 195. The case laws relied upon by the assessee has been dealt as under:- CIT vs. Goa Sponge a....
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.... the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company." CIT vs. Steller Investment Ltd (2001) 251 ITR 263 (SC) (civil appeal) "That the increase in subscribed capital of the respondent company could not be a device of converting black money into white with the help of formation of an investment company, on the round that, even if it be assumed that the subscribers to the increased capital were not genuine, tinder no circumstances could the amount of share capital be regarded as un disclosed income, an appeal was taken by the Department to the Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusion on facts and no interference was called for." CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com289 (All-High Court) "We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to Rs. 25,00.000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity ....
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....he initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no avail. The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about ....
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....eneral Hospital Ltd (2013) 356 ITR 65 (MP-High Court) "Held, dismissing the appeals , that it the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made tinder section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part o f the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription an d that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted." CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com177....
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....dited balance sheets and have also filed returns before the IT authorities. The decision of the Tribunal deleting the addition cannot be faulted." 11. The assessee has also relied upon various decision of the Co-ordinate Bench of ITAT, Mumbai. We find that the coordinate Bench of ITAT Mumbai, in number of cases has considered an identical issue in light of search and seizure operations as well as survey conducted by the department in light of statement of Shri Bhanwarlal Jain recorded during the course of search u/s 132(4) of the Act. The Tribunal after considering the relevant facts and also considering the retracted statements filed by Shri Bhanwarlal Jain came to the conclusion that one documents filed by the assessee to prove the identity, genuineness of transactions and creditworthiness of the parties are clearly established the fact that the transactions between the parties are genuine which are undertaken under normal commercial business, no reason for the AO to make additions u/s 68 of the Act. 12. We further noted that in most of the cases, the Tribunal has considered the companies controlled and operated by Shri Bhanwarlal Jain in light of observations m....
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....d analysed there is a factual finding in Para-5.3 that the assessee discharged the primary onus as the lender had responded to notices issued u/s 133(6) of the Act confirming the transaction. The learned Assessing Officer did not controvert the claim of the assessee. The loans were taken through banking channel and the receipt of taking the loan has been duly examined in Para-5.3 (Page-13) of the impugned order. The loans were duly reflected in the loans and advances column in the Balance Sheet and there is further factual recording that there was neither any cash deposit nor any withdrawal in any bank account castigating the same as accommodation entries. It is further noted that the assessee duly paid the interest on the loan amount and deducted. Copy of Form no.16A was also filed and the learned Assessing Officer has not brought on record any evidence / reason to disbelieve the evidence filed by the assessee. I am satisfied with the reasoning of the learned CIT(A) that the addition was merely made on the basis of presumption that all the five concerns from whom loan was taken were managed and controlled by Shri Bhawarlal Jain. The statement was also recorded wherein the....
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....der dated 30.05.2018 passed by Hon'ble ITAT, Mumbai in the case of ACIT vs. Vashu Bhagnani in ITA No. 5648/M/2016 8. Order dated 10.08.2018 passed by Hon'ble ITAT, Mumbai in the case of DCIT vs. Jainam Investments in ITA No. 6099/M/2016 9. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Pabal Housing Pvt. Ltd. in ITA Nos. 2687 to 2689/Mum/2018 10. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Skyline Construction in ITA Nos. 2692 to 2694/Mum/ 2018 11. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. P.S. Construction in ITA Nos. 3226 to 3229/Mum/2018 12. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Shanti Developers in ITA No. 2690/Mum/2018 13. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Mega Developers in ITA Nos. 2691/Mum/ 2018 14. We have also considered the following judgements relied We have also considered the following judgements relied upon by the learned D.R.: upon by the learned D.R.: -- 1. Princip....
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....d for the mode of investment but no reasons were supplied for paying a huge premium of Rs. 190/paying a huge premium of Rs. 190/-- per share. Another striking per share. Another striking featfeature was that most of the investors had reflected meagre ure was that most of the investors had reflected meagre income during assessment year under dispute. The two income during assessment year under dispute. The two companies in Mumbai as well as Guwahati were found to be companies in Mumbai as well as Guwahati were found to be nonnon--existent. With respect to Kolkata companies, the existent. With respect to Kolkata companies, the response came through DAK only and noresponse came through DAK only and nobody appeared. body appeared. Further, the bank statements were not produced in most of the cases to establish the source of funds for making huge the cases to establish the source of funds for making huge investments. investments. However, the factual matrix, before us, in the present case is quite different. In the present case, we find that the assessee has duly discharged the initial onus of proving the identity of the investors, creditworthiness of the transactions and genui....
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.... he had admitted that he charged 0.2% commission on all accommodation entries. We noted that the issue of unsecured loans has been decided in preceding paragraphs, where we held that the transactions between the parties are genuine which cannot be considered as unexplained cash credit u/s 68 of the Act, consequently, additions made towards disallowance of interest and estimation of commission on such unsecured loans is also needs to be considered in the light of discussions in the preceding paragraphs. Therefore, we are of the considered view that the AO as well as the Ld. CIT(A) was erred in making additions towards interest on unsecured loans and commission on such unsecured loans. Accordingly, we direct the AO to delete the additions made towards disallowance of interest and estimation of commission. 17. In the result, the appeal filed by the assessee is allowed.In the result, the appeal filed by the assessee is allowed. 18. In all the other appeals the assessees have raised identical In all the other appeals the assessees have raised identical grounds. Therefore the findings given in the paragraphs grounds. Therefore the findings given in the paragraphs above ....