TaxTMI 
TaxTMI 
2021 (10) TMI 499
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....list of beneficiaries who have taken loans from the concerns operated by the PKJ. In the assessment year under consideration the assessee has taken unsecured loan of Rs..25,00,000/- from M/s. Josh Trading Private Limited and as this entity was controlled by PKJ the assessee was required to prove the genuineness of the transactions, as according to the Assessing Officer it was providing only accommodation entries. Assessee filed copy of confirmations received from M/s. Josh Trading Private Limited along with ledger account, bank statements and copy of return of income filed by M/s. Josh Trading Private Limited, copy of PAN Card and complete set of balance sheet, Profit and Loss Account along with annexures Auditors Report and Directors Report of M/s. Josh Trading Private Limited to prove the identity, genuineness and creditworthiness of the lender. However, not convinced with the evidences furnished by the assessee and the explanations given thereon, Assessing Officer relying on the statement of PKJ deposed u/s.133(4) of the Act came to the conclusion that the loan transaction is nothing but the accommodation entry and accordingly Assessing Officer treated the unsecured loans of Rs.....
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....al Turnover of the Lender Company as on 31-03-2011 Aggregate of Loan money paid by the Lender in Rs. (1) (2) (3) Josh Trading Pvt Ltd 114,67,08,904 76,92,49,460 25,00,000 In view of the aforesaid details, the Appellant submits that the Lender company had adequate financial strength to lend to the Appellant. Hence, the creditworthiness of the Lender company cannot be doubtful. Further, the Appellant submit that the Income-tax Jurisdiction details and financials of the Lender company proved the identity as well as financial capacity i.e. creditworthiness of the Lender company. Also creditworthiness or financial strength of the Lender company is proved by producing it's bank statement duly showing that it had sufficient balance in its accounts to lend. The Ld.CIT (A) treated unsecured loan receipts from M/s Josh Trading Limited as unexplained cash credit under section 68 of the Act on the alleged ground that the appellant hasw not brought on record to prove the identity, genuineness of the transactions and creditworthiness of the lender without appreciating that the Appellant/Lender have submitted the copies of I....
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....t that assessee-company was beneficiary of certain bogus accommodation entries provided by two bogus companies on which search was conducted - In reply to notice under section 133(6), assessee submitted that said sums were received in earlier assessment year 2010-11 and were already verified and assessed by revenue authorities - However,, in current year, Assessing Officer issued reassessment notice in respect of these sums with view that income chargeable to tax had escaped assessment -Whether initiation of reassessment was unjustified - Held, yes [Paras 5 and 6] [In favour of assessee] 3. Nu Power Renewables (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle 1(2) (a) [2018] 94 taxmann.com 29 (Bombay) Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credits (Shell entity) - Assessment year 2010-2011 - Whether information received has to be examined in context of facts on record before coming to a view that income chargeable to tax has escaped assessment on account of failure to disclose fully and truly all relevant facts and in absence of above, it amounts to outsourcing of reasons to believe - Held, yes - Whether where there had been no independent ap....
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.... and nothing remained outstanding at end of day, much less at end of financial year, impugned reassessment proceedings deserved to be quashed 7. Income tax Officer 20(2)(5), vs. Smt. PratimaAshar [2019] 107 taxmann.com 135 (Mumbai - Trib.) Where assessee had taken loan from several companies and placed on record substantial supporting material to prove that loan transactions were genuine such as confirmations of lender companies, copies of financial statements of lender companies, copies of bank statements evidencing advancing of loan by lender companies to assessee through proper banking channels, etc., additions under section 68 on account of bogus loan was unjustified 8. Income-tax Officer, Ward 15(2)(1), v. Iraisaa Hotels (P.) Ltd[2018] 97 taxmann.com 623 (Mumbai -Trib.) Where assessee had furnished several documentary evidences to prove genuineness of unsecured loans and share capital investment and creditworthiness of parties, no additions under section 68 was to be made in respect of such loan and share capital relying upon order of SEBI that some of shareholders of assessee were part of several entities who were linked to money laundering 9. Elder IT Solutions ....
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....). Further, following legal position/ judicial rulings on the subject under consideration must be considered before arriving at any conclusion:- a. It is also settled law that where the assessee provides identity and details pertaining to the lenders/ creditors/ investor of share application money and is unable to produce them and requests the AO to issue summons u/s 131 for their attendance, it is the duty of the AO to issue such summons, failing which the addition would get deleted. Reference in this regard can be made from the decisions made in the following judiciary ruling:- * N.P. Garodia (order dated 13.01.2009 of Hon'ble P fit H High Court in ITA no. 808 of 2008) * Brij Pal Sharma (order dated 17.02.2009 in ITA no. 685 of 2008 of Hon'ble P & H High Court) b. Similarly as held in the case of CIT v. Metachem Industries (2000) 245 ITR 160 (MP) where a credit is shown to have come from a person other than the assessee, there is no further responsibility of the assessee to show that it has come from accounted source of the lender, as long as the fact that the had made the advance and was capable of making the advance are established. c. It was held by the Hon....
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....ini Builders 256 ITR 360 (Guj.). * Jurisdictional Hon'ble ITAT, Mumbai for an identical case i.e. Arceli Realty Limited Vs. The Income Tax Officer 15(1) (1), Mumbai pronounced on 21.04.2017 ITA-6492/Mum/2016-17, the summary of the case is outlined as under:- "........A.O. merely relied upon the information provided by the office of DGIT (Investigation), Mumbai and did not made any independent enquiry. The papers filed by the assesse do demonstrate the identity, credit worthiness, genuineness, Source of Source of the transaction. AO did not provide Opportunity to Cross Examine the concerned person and also the department has not provided authenticity of the information to the person against whom such information is used. The addition is made merely on surmises and conjectures. The statement recorded at the back of the Respondent cannot be utilized ignoring other verifiable evidences. The Id. Assessing officer has made the addition of Rs. 20,00,000/- disregarding the evidences on record and without discharging her onus and without establishing anything contrary to the agreement of the Respondent and without verifying the Bank Account, existence of Investor and without making ....
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....e in the possession of the AO to disprove the loan transaction from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd. On the other hand, the assessee has furnished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details" "............It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden to disprove the said claim shifts upon the AO" "Coming to the case laws relied upon the assessee, the assessee has relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt. Ltd (2017) 394 ITR680 (Bom). We have gone through the case laws relied upon by the assessee in the light of ....
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....ten submissions filed by her which are as under: - "With reference to the above, I am submitting the case laws relied by me in the above-mentioned appeal filed by the assessee. In this case, loan from one Josh Trading Pvt. Ltd. was added u/s 68 by the assessing officer, on the ground that this company is a shell company and not involved in any genuine business activity but engaged in providing accommodation entry in form of loans, share capital and bogus purchases. This company was floated by Praveen Kumar Jain, who in the sworn statement u/s 132(4) has admitted before the department that all the 70 concerns are shell entities and are not doing any business. All the directors of these companies were found to be the the dummy directors and also admitted before the department that they use to sign the documents for nominal consideration given by Shri Praveen Kumar Jain. Books of accounts of all such shell companies are under the control of Shri Praveen Kumar Jain. The assessee has submitted that the loan has been raised through banking channels and interest was also paid. Also, it was contended that all the documentary evidence to prove the identity, genuineness and creditworthin....
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....h the ground realties. It will, therefore, be useful to understand as to how the shell entities function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it colour of a normal business entity, used as a vehicle for various financial manoeuvres. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial manoeuvring to legitimise illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or, with ....
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.... in the case of Jan Sampark Advertising & Marketing Pvt. Ltd. (2015) 231 Taxman 384 (Delhi) wherein Hon'ble High Court has held that " though it is the obligation of the Assessing officer to conduct proper scrutiny of material in the event of AO failing to discharge his function properly , obligation to conduct proper enquiry shifts to CIT(A) and on Tribunal and cannot delete the addition made by AO on the ground of lack of inquiry. * On the issue of retraction statement filed by the PKJ group of companies. The DDIT (Inv.) has promptly acted on the retraction statemnt filed by the directors of PKJ group of companies. The point wise reply of the assertion made by PKJ and the common reading of all the affidavits filed, clearly go to establish that it is an afterthought given by PKJ, when the information pertaining to A.Y 2007-08 was disseminated to the field , such affidavits have been filed. The findings of the search have already established that all such associates who have now filed affidavits along with PKJ are his dummy directors/associates who work only his instructions and the affidavits so filed on this stage is baseless. Reliance placed on the following decisions:- ....
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....is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assess....
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....parties have responded to the notices issued u/s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that the said unsecured loans have been repaid in the subsequent financial years. Therefore, we are of the view that there is no reason for the AO to doubt the genuineness of transactions despite furnishing necessary evidences including their financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredien....
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....t did not introduce the proviso to section 68 with retrospective effect nor does the Proviso introduced states that it was introduced for removal of doubts. Therefore, it is not open to give retrospective effect. The relevant portion of the order of High Court is extracted below:- "The proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1-4-2013. Thus, it would be effective only from the assessment year 2013-14 onwards and not for the subject assessment year. In fact, before the Tribunal, it was not even the case of the Revenue that section 68 as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1-42013 was its normal meaning. The Parliament did not introduced to proviso of section 68, with retrospective effect nor does the proviso to introduced states that it was introduced 'for removal of doubts' or that it is 'declaratory'. Therefore, it is not open to give it retrospective effect, by proceeding the basis that the addition of the proviso to section 68is immaterial and does not change the interpretation of section 68 both before and after the adding of the prov....
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....rts Pvt Ltd (2008) 216 CTR 195 (SC). The Hon'ble Apex Court while deleting the addition made u/s 68 observed that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but this amount of share application money cannot be regarded as undisclosed income u/s 68 of the Income-tax Act, 1961." 7. The Coordinate Bench of the Tribunal in the case of ITO v. M/s.Viswa Vyapar Trading Pvt. Ltd., in ITA No. 2888/Mum/2017 dated 05.04.2019 also considered the transaction by the assessee with the lender M/s. Josh Trading Pvt. Ltd., and held as under: - "29. In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged its onus of proving the identity, genuineness and creditworthiness of the creditors/shareholders and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act which is purely based on the investigation reports and statements recorded from PKJ and whose statements were not p....
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....0.00 lakhs 3. Lexus Infotech Ltd - Rs. 5.00 lakhs 4. Vanguard Jewels Ltd - Rs. 5.00 lakhs 5. Yash V Jewels Ltd - Rs. 5.00 lakhs - Rs. 40.00 lakhs 4. Learned Departmental Representative submitted that the impugned addition has been made by the Assessing Officer on the basis of admission made by Shri Praveen Kumar Jain in his sworn statement. Though the assessee has furnished details of annual accounts of share applicants, perusal of the income tax return would show that they are declaring only minimal income. The admission of Shri Praveen Kumar Jain would show that these companies have been used to launder the money. Learned AR placed reliance on the decision rendered by the Indore Bench of the ITAT in the case of Agrawal Coal Corporation (P) Ltd. (19 taxmann.com 209), wherein the Tribunal had confirmed the addition of share applications money made u/s. 68 of the Act by distinguishing decision rendered by Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. (Application No. 11993 of 2007 dated 11.1.2008). 5. On the contrary, learned AR submitted that the assessee has raised share capital of Rs. 90 lakhs during the instant year, which c....
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....mited (ITA No. 584/Mum/2015) has been deleted by the Mumbai Tribunal vide its order dated 15.4.2015 6. I have heard the rival contentions and perused the record. I noticed that the learned CIT(A) ahs deleted the addition by making following observations :- "6.3.1. I have considered the entire facts and circumstances of the case and have carefully considered the finding of AO, rival submission of the appellant and evidence on record. During the year the appellant in the process of expansion of its business and facilitation working capital in furtherance of its business has issued equity share capital amounting to Rs. 18,00,000/- of face value of Rs. 100/- each at a premium of Rs. 400/- each amounting to Rs. 72,00,000/-, thus aggregating to sum of Rs. 90,0,000/-. The funds raised by issue of equity shares at premium were utilized for expansion of business which is evident from the balance sheet submitted that there has been increase in capital work in progress reflected under the head fixed assets amounting to Rs. 1.07 crores. 6.3.2. Of the said sum of Rs. 90,00,000/-, the appellant has issued equity capital including premium amounting to Rs. 40,00,000/- to the above mentioned ....
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.... The three ingredients viz. identity, credentials and genuineness cannot be doubted. 6.3.7. The AO has heavily relied on information received from DDIT (Inv), Mumbai and that of the statement of Mr. Pravin Kumar Jain. The AO has not carried out independent enquiries to prove the case. On reading from the assessment order there is nothing corroborative brought on record to prove that the share application money received are accommodating entries or received from bogus share holders. (i) It is submitted by the applicant that on giving the names of the share holders than the onus on the part of the applicant is discharged and that addition, if any to be made is to be in the hands of the investor and not applicant. In the case of CIT v. Lovely Exports (P) Ltd [2008] 216 CTR 195 it has been held that; "If share application money is received by assessee-company from alleged bogus shareholders, whose names are given to Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of assessee-company (ii) In the case of CIT vs. Creative Worl....
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....ount cannot be made in earlier years prior to amendment in the relevant provisions in the I.T.Act, 1961. In this regard, reference is made and reliance is placed 'to the various Judicial Pronouncements on the issue related to additions for share premium amount included in the share application money/share capital money. These are as under: (i) In the case of M/s. Vodafone India Services Pvt. Ltd vs. Addl. CIT reported in 368 ITR 001, Hon'ble Bombay High Court decided that : 'The amounts received on issue of share capital including the premium are undoubtedly on capital account. Share premium have been made taxable by a legal fiction under Section 562)(viib)of the Act and the same is enumerated as Income in Section 2(24)('xvi) of the Ac!. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received an application of ALP. Therefore, absent express legislation, no amount received, accrued or arising on capital account transaction can be subjected to tax as Income. ....
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....ial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head "Income from other sources" by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision applicable w.e.f.1.4.2013 i.e. on and from A. Y. 201 Insofar as the year under consideration is consideration is concerned, the transaction has to be considered in the light of the provision of Sec. 68 of the Act. There is no dispute that the assessee has given details of names and addresses of the share holders, their PAN Nos, the bank details and th....
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....onge and Power Ltd reported in Appeal No. 16 of 2012, Hon'ble Bombay High Court decided that :- "Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as "bogus". The controversy is covered by the judgements rendered b y the Hon'ble Supreme Court in the case of Lovely Exports Pvt Lid, vs. CIT, (2008) 216 CTR (SC) 195, as also by this Court in CIT vs. Creative World Telefilms Ltd, (2011) 333 ITR 100 (Born). In such circumstances, we are of the view that the Tribunal 's finding that there is no Justification in the addition made under Section 68 of the Income Tax Act, 1961 neither suffers from any perversity nor gives rise to any substantial question of law." (vi) In the case of CIT vs. Creative World Telefilms Ltd reported in 333 ITR 100. Hon'ble Bombay High Court decided that :- "......the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P) Lid. (2008) 216 CTR (SC) 195: (2008) 6 DTR (SC) 308: (2009) 319 ITR 5 (St.) whe....
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....names of the share applicants are given. In the instant case, identity of these persons are not or doubt and assessment particulars of all the persons are on record and there is no material to hold that creditworthiness of these persons are not established. The judgment of Hon'ble Supreme Court in the case of Lovely Export 216 CTR 195 and also the judgment of Hon'ble Delhi High Court in the case of CIT vs. Value Capital Services Pvt Ltd 307 ITR 334 are relevant on this issue. It was held by Hon'ble Madras High Court in the case of CIT vs. Electro Polychem Ltd. 294 ITR 661 and Hon'ble Allahabad High Court in the case of Jaya Securities Ltd 166 Taxman 7 that no addition can be made on account of share application money even if subscriber to capital are not genuine. The above said judgements were challenged by the Department by way of SLP before Supreme Court of India and SLP has been dismissed by Supreme Court in both the cases. In view of above said facts of case and position of law, I hereby direct the AO to delete the addition of Rs. 69,75,000/-. (x) In the case of CIT v. Vacmet Packaging (India) Pvt Ltd reported in 88 CCH 065, Hon'ble Allahabad High Court de....
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.... simply relied upon the general statement given by Shri Praveen Kumar Jain. As contended by Ld A.R, it was not shown that the transactions of the assessee with the above said companies have been declared as accommodation entries. On the contrary, the assessee has furnished confirmation letters obtained from the share applicant companies before the Ld CIT(A), after the sworn statement was given by Shri Praveen Kumar Jain. In my considered view, the AO has failed to discharge the burden shifted to his shoulders. The decision rendered by the Indore bench of ITAT in the case of Agrawal Coal Corporation (P) Ltd, in my view, has been rightly distinguished by Ld A.R. On the contrary, I notice that the Ld CIT(A) has followed the decision rendered by the jurisdictional Hon'ble Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd (supra). The Ld A.R also placed reliance on the decision rendered by Hon'ble Bombay High Court in another case named Paradise Inland shipping (P) Ltd (supra). In these cases, it was held that once the assessee has discharged the initial burden of proof placed upon him u/s 68 of the Act, no addition could be made. It was further held that if the revenue'....
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....nature and source of the transactions. Accordingly, he made addition u/s. 68 of the Act treating them as unexplained credits. On appeal Ld.CIT(A) deleted the addition based on the submissions and information/evidences furnished by the assessee against which the Revenue is in appeal before us. 4. Ld. DR strongly supported the orders of the Assessing Officer and submitted that transactions between the assessee and the companies operated by Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group are all paper transactions and the transactions are non-genuine. In the statements recorded by the Investigation Department the persons of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group have categorically stated that they have provided only accommodation entries through various companies and these companies where the assessee has made transactions are all the companies which are run by Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group and therefore the Assessing Officer has rightly treated the transaction as only accommodation entries and rightly made addition u/s.68 of the Act. 5. Ld. Counsel for the assessee strongly placed reliance on the orders of the Ld.C....
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....statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the....
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...., T Bench, Mumbai, in the case of Satish N. Doshi HUF Vs. ITO, Ward 21(2)(4), Mumbai in ITA No-2329/Mum/2009 and the decision of ITAT, 'E' Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/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. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, th....
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....ers 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 proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. 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 assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfact....
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....enuineness of the transactions Assessing Officer issued notices u/s.133(6) of the Act to the above parties and all the companies responded to the notices and filed necessary information regarding transactions made with the assessee. However, the Assessing Officer relying on the statements of Shri Bhanwarlal Jain Group concluded that the companies have provided only accommodation bills to the assessee and therefore the assessee has not proved the nature and source of the transactions. Accordingly, he made addition u/s. 68 of the Act treating them as unexplained credits. On appeal Ld.CIT(A) deleted the addition based on the submissions and information/ evidences furnished by the assessee against which the Revenue is in appeal before us. 4. Ld. DR strongly supported the orders of the Assessing Officer and submitted that transactions between the assessee and the companies operated by Shri Bhanwarlal Jain Group are all paper transactions and the transactions are non-genuine. In the statements recorded by the Investigation Department the persons of Shri Bhanwarlal Jain Group have categorically stated that they have provided only accommodation entries through various companies and these....
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.... M. Shah HUF (ITA No. 7079/M/16) g. DCIT vs Meridian Chem Bond P. Ltd (ITA No. 7385/M/16) h. M/s Reliance Corporation vs. ITO (ITA No. 1069 to 1071/M/17) 7. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee.: (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. (4) Audited Balance sheet & P & L A/c of the creditors along with the schedule wherein credit in the name of the assessee is outstanding in their books. (5) Reply given by the parties to the notice issued by the AO u/s 133(6) confirming the transaction with the assesse....
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....8 which the AO is bound to follow. They are reproduced as under(para-7)- (i) Section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by the assessee (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is found un....
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....entity, genuineness and creditworthiness is not proved. The AO should have made efforts to assess the amounts in the hands of the creditors at least on protective basis. Lastly, even if the creditworthiness of the creditors is not proved it will not automatically give license to the AO to make additions in the hands of the assessee u/s 68 unless it is proved that it is the unexplained money of the assessee which has been introduced in its books of account in the names of bogus/non-existent entities. In the instant case the AO has not made any dent in these lines. On the other hand, the appellant has filed the following details in the case of all the three creditors to prove the identity, genuineness and creditworthiness of the creditors. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. (4) Audited Balance sheet & P & L A/c of the creditors along with the schedule wherein credit in the name of the assessee is outstanding in their books. (5) Reply given by the parties to the notice issued by the AO u/s 133(6) confirming the transaction with the assessee. (6) Pa....
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.....Ltd. 25 lacs 12,705 1,270 11,435 Abhiman Gems Pvt.Ltd. 75 lacs 35,245 3,525 31,720 Madhur Gems Pvt.Ltd. 75 lacs cl.bal. (Outstanding amount-no borrowing during the year.) 60,000 6,000 54,000 Total 8,32,607/- Since the loan given by the above parties were treated as genuine, in this order earlier paragraphs, the interest paid to those parties is also treated as genuine. Accordingly, the interest paid is allowed as expenditure and AO is directed to withdraw the addition made u/s 69C of the Act. The ground is allowed." 9. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue." 11. An identical issue came up in the case of DCIT v. Bairagra Builders P. Ltd reported in [2017] 51 CCH 0107 in ITA.No. 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: - "6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned a....
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....wing judgments: Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 (Gau) Vijay Kumar Talwar vs. CIT [2011]330 ITR 1 (SC) 8. The learned DR, on the other hand, relied on the decisions of the Hon'ble Delhi High Court in the case of Principal CIT vs. Bikram Singh ITA.No. 55/2017 & CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014. 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the asse....
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.... Pravin Kumar Jain who said to have been deposed that he is only providing accommodation entries and no real business is carried on by the entities. The Assessing Officer has not made any efforts to make independent enquiries with the lender company. We also observe from the Assessment Order that the Assessing Officer has not provided the statements of Shri Pravin Kumar Jain to the assessee for his rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and repayment in subsequent years to establish the genuineness of the transactions copy of ITR-V filed establishing creditworthiness of the lender are non-genuine. The assessee has discharged his primary onus on providing complete details in respect of the loan transaction and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loan. 13. The case laws relied on by the Ld.DR are of....