TaxTMI 
TaxTMI 
2021 (10) TMI 499
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....noticed that assessee's name appeared in the 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 Assessi....
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....ermination of Creditworthiness of Lender / Party Name of the Lender Company / Party Total Turnover of the Lender Company as on 31-03-2012 Total 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....
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....ises (P.) Ltd. v. Income-tax Officer [2019] 104 taxmann.com 134 (Bombay) Section 68, read with sections 133 and 147, of the Income-tax Act, 1961 - Cash credit (Accommodation entries) - Assessment year 2013-14 - Assessing Officer received information from DDIT (Investigation) unit 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....
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....axmann.com 400 (Gujarat) Where Assessing Officer reopened assessment on ground that unsecured loans given to assessee company were subsequently converted into share capital with premium and, thus, provisions of section 68 were attracted, in view of fact that advances were squared up on same date 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 loan....
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....ruling: - * R.B. ShreeramDurga Prasad 176 ITR 169 (SC), * KishanChandChellaram Vs. C.I.T. (1980) 125 ITR 713 (SC) * Jindal Vegetable (order of Hon'ble Delhi High Court in ITA no. 428 of 2007, 174 Taxmann 440 (Raj.) * LaxmanBhai Patel (order of Hon'ble Gujarat High Court dated 22.07.2008 in ITR no. 41/1997). 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....
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....0 ITR 580 (SC) that where prima-facie the inference on facts is that the assessee's explanation is probable, dthe onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere surmises. Other similar judiciary rulling are as under: - * Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) * CIT v. Orissa corporation Pvt. Ltd., 158 ITR 78 (SC) * CIT v. Rohini 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 i....
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....rds unsecured loans received from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Put. Ltd on the basis of information received from Investigation Wing which revealed that the assessee is beneficiary of bogus accommodation entries provided by ShriPraveenkumar Jain through his bogus companies.................. The AO has brought out facts in the light of statement of ShriPravinkumar Jain deposed before the Investigation Wing to make addition. Except this there is no contrary evidence 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....
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....in law." It is not out of place to bring under your honours kind notice, that the assessee has discharged the onus cast upon it u/s 68 of the Act by submitting the number of documentary evidences during the course of assessment proceedings. The Ld. CIT (A) has failed to demonstrate and establish that how the impugned addition of Rs. 25,00,000/- was treated as Unexplained Cash Credit. In view of the above, the appeal of the assessee needs to be allowed." 4. Ld. DR appearing for the revenue also relied on written 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 ....
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...., ITA No. 2447/ Ahd/2016 dated 17/05/2017 which is confirmed by Gujrat High Court in (2018) 404 ITR 601/301 CTR 265/163 DTR 209 and SLP dismissed by the Supreme court as reported in 97 taxmann.com 398 (sc) Facts of the case cannot be considered in isolation with the ground realities. Modus operandi of shell companies explained: Loan transactions would not become genuine merely because assessee filed loan confirmations, copies of ledger account and other supporting evidences to justify transactions at fag end of assessment proceedings. The facts of the case cannot be considered in isolation with 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, f....
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.... 11. CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) 12. CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169. 252 CTR 187) 13. CIT vs. Ultra Modern Exports (P.) Ltd (40 taxmann.com 458, 220 Taxman (165) 14. CIT vs. Frostair (P.) Ltd. (26 taxmann.com 11, 210 Taxman 221) 15. CIT vs. N.R. Portfolio Pvt. Ltd. (2013) 29 taxmann.com 291 (Delhi)/(2013) 214 Taxman 408 (Delhi/(2013) 263 CTR 456 (Delhi). 16. CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) 17. CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/GBP2015] 228 Taxman I would also like to rely on the decision of Delhi High Court 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. ....
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.... persons on whose statements the Assessing Officer was relying on. The Assessing Officer also not issued any summons to the persons on whose statements he was relying on to enquire whether the evidences furnished by the assessee are genuine or not. He has simply gone by the statement of PKJ given before DDIT (Investigation), Mumbai. It is also observed that the assessee furnished retraction statement of PKJ before the Assessing Officer and also the Ld.CIT(A) which were completely ignored by the lower authorities. 6. In the case of M/s. Shree Laxmmi Estate Pvt. Ltd., v. ITO in ITA.No. 5954/Mum/2016 dated 29.12.2017 the Coordinate Bench considered the transaction with M/s. Josh Trading Private Limited and held as under: - "4. The first issue that came up for our consideration 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....
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....f transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished 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. 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 state....
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....igation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. 7. Coming to the case laws relied upon by 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 ITR 680 (Bom). We have gone through the case laws relied upon by the assessee in the light of the facts of the present case and find that the Hon'ble High Court categorically observed that the Proviso to section 68 has been inserted by the Finance Act, 2012 wef 01-04- 2013 is applicable from AY 2013-14 onwards. The Court further observed that the Parliament 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-....
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....so observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of share i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd (supra) would be applicable in the facts and circumstances of the present case." 9. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports 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,....
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....y of share capital and share application money. Hence, the Assessing Officer took the view that the share application money of Rs. 45 lakhs received by the assessee is assessable to tax and accordingly reopened the assessment by issuing notice u/s. 148 of the Act. Various evidences were furnished by the assessee were not accepted by the Assessing Officer and accordingly he added Rs. 45 lakhs to the total income of the assessee u/s. 68 of the Act. The learned CIT(A) deleted the same and hence the Revenue has filed this appeal before us. 3. It is pertinent to note that the Assessing Officer has assessed a sum of Rs. 45 lakhs, but according to the assessee it has received Rs. 40 lakhs only from the companies belonging to Shri Praveen Kumar Jain group as detailed below:- 1. Java India Impex Ltd - Rs. 15.00 lakhs 2. Kush Hindustan Entertainment - Rs. 10.00 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 Of....
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....Jain. Learned AR further submitted that all the share applicants have again confirmed the genuineness of the investments and said confirmation letters are placed at page No. 128 to 135 of the paper book. These confirmation letters were filed before the learned CIT(A). Learned AR further submitted that the learned CIT(A) has followed decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd. (2017) 394 ITR 680 in deciding the issue in favour of the assessee. Hon'ble Bombay High Court has also held in the case of Principal CIT Vs. Paradise Inland Shipping (P) Ltd. (84 taxamnn.com 58) that once the assessee had produced documentary evidence to establish the existence of share applicant companies, burden would shift on the Revenue to establish their cases. He further submitted that the identical addition made in the case of M/s. SDB Estate Private Limited (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.....
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....tted there is nothing incriminating that can be drawn to infer that the said transactions is merely accommodating entries and not genuine. More importantly there no direct evidence which has been brought on record by the AO. No nexus is established as to circulating of funds or that cash was paid by the appellant company to obtain the cheques for share application. 6.3.5. The appellant has provided the identification of the parties. The same is supported by the income tax returns filed by the respective parties. The allegation of the AO that PAN is issued without verification of the applicant is not correct. The AO could have verified the jurisdiction of the respective parties and could have made enquiries with the respective AO's about the said five parties from the PAN available with him. 6.3.6. The appellant has submitted balance sheet and details of the said five parties to prove credentials and genuineness of the transactions. 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....
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.... been granted. There is no mention in the assessment order that Shri Praveen Kumar Jain has categorically stated having provided accommodation entry to the appellant. (iv) In the case of M/s. SDB Estate Pvt. Ltd vs. ITO-(5)(3.(2) in ITA No. 584/Mum/2015 on similar ground it has been decided that:- "In view of the above stated legal position and in the light of reliable evidences brought on record by assessee to substantiate identity, genuineness and creditworthiness of shareholders, which have not been controverted by the Revenue, the additions made solely on the basis of general statement of Shri Mukesh Chokshi cannot be held to be justified and the same are accordingly ordered to be deleted" 6.3.8. As regards issue involving addition of share premium amount alongwith share application money/share capital money, the jurisdictional ITAT, Mumbai has decided in many cases that it cannot be added. Further, the Honble High court has also decided the issue that the addition of share premium amount 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 ....
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....red to by the .field officers in all cases where this issue is involved. This may also be brought to the notice of the ITAT, DRPs and CIT (Appeals)." (iii) In the case of ACIT vs. Gagandeep Infrastructure Pvt. Ltd bearing ITA No. 5784/Mum/20 11 dated 23/4/2014, Hon'ble Mumbai ITAT decided that "We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense....... The entire dispute revolves around the fact that the assessee has charged a premium of Rs. 190/- per share. No doubt a non-est company or a zero balance sheet company asking for Rs. I90/- per share defies all commercial 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....
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....'s income from other sources - Whether since expenditure and receipts directly relating to share capital of a company are of capital in nature, share premium collected by assessee could not be taxed under section 56(1) as income from other sources - Held, yes - Whether since entire transaction relating to allotment of shares had been done through banking channel and assessee had invested share premium in its three subsidiary companies, provisions of section 68 as suggested by revenue had also not applicable to instant case - field, yes.... No doubt a non est company or a zero balance company asking for a share premium of Rs. 490 per share defies all commercial prudence, but at the same time one cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a very premium. The revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land." (v) In the case of CIT vs. Goa Sponge and Power Ltd reported in Appeal No. 16 of 2012, Hon'ble Bombay High Court decided that :- ....
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....hen 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." (viii) In the case of CIT vs. Steller- Investment Ltd reported in 251 ITR 263, Hon'ble Apex court decided that "That the increase in subscribed capital of the respondentcompany 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, under no circumstances could the amount of share capital be regarded as undisclosed 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." (ix) In the case of CIT vs. Expo Globe India Ltd reported in 361 ITR 147, Hon'ble Delhi High Court decided that "It has been held by Hon'ble Supreme Court and various High Courts that no addition can be made on account of share application money once the names of the share applicants are given. In ....
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....her public or private -Held, no." 6.3.9. In the light of the above factual narration, various references and judicial propositions I reach to the,c,91.1thisn that the AO has erred in making addition u/s 68 of the Act on account of share application money. The appellant has established the genuineness of the transaction and that the same cannot be treated as unexplained credits. Therefore, the addition made by the AO of Rs. 45,00,000/- is deleted." 7. The assessing officer has made the impugned addition u/s 68 of the Act. Under the provisions of sec. 68 of the Act, the assessee is required to discharge initial burden of proof placed upon his shoulders, i.e., the assessee has to prove the identity of the creditor, the credit worthiness of the creditor and the genuineness of transactions. A perusal of documents filed before the tax authorities and also the observations made by Ld CIT(A) would show that the assessee has discharged the burden placed upon its shoulders. Once the assessee discharges its primary burden, then the burden to disprove the assessee's version would shift to the shoulders of the assessing officer. In the instant case, the assessing officer has s....
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....g accommodation entries to various beneficiary companies. He observed that the said companies have provided accommodation entries as these companies were managed by the Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group. The Assessing Officer required the assessee to prove the genuineness of the transactions and the assessee furnished copy of bank statements, Income Tax Returns of the lenders, copy of acknowledgments of the Income Tax Returns; copy of ledger accounts of the creditors, loan confirmations along with bank statements reflecting the receipts and payments of loans from the said parties. It was stated by the assessee that the loan was taken only for eight days and this will not serve any purpose of accommodation entries and therefore the transactions shall not be treated as accommodation entries at all. Assessee also requested the Assessing Officer to issue notice u/s. 133(6) of the Act to the above said parties for the further information. However, the Assessing Officer relying on the statements of Shri Praveen Kumar Jain and Shri Bhanwarlal Jain concluded that the companies have provided only accommodation bills to the assessee and therefore the assessee has n....
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....ubmitted before us that the Assessing Officer has not provided the cross examination of the persons who gave statements. Therefore, the Learned Counsel for the assessee submitted that the transactions are genuine, the identity and credit worthiness of the creditors have been proved and therefore no addition is warranted u/s. 68 of the Act. Ld. Counsel for the assessee referring to the Page No. 194 of the Paper Book which is the order of the Tribunal in the case of A.C.I.T v. M/s. Shreedham Builders in ITA.No. 5589/MUM/2017 dated 22.06.2018 considered M/s. J.P.K. Trading (I) (P.) Ltd. as genuine. Similarly, referring to the Page No. 122 of the Paper Book it is submitted that M/s. New Plant Trading Co. (P.) Ltd. was considered as genuine by the Tribunal in ITA.No. 2979 & 2980/Mum/2017 dated 31.08.2017. Therefore, it was submitted that since both these companies were considered by the Hon'ble Tribunal as genuine in the above said cases, it was submitted that the transaction cannot be treated as non-genuine and therefore the addition is liable to be deleted. 6. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition....
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....ted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.10. As far as the question of validity of the transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are found to be not genuine, it does not lead to the conclusion that all the transactions were non-genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusions drawn therein cannot be applied ipso facto to all other cases. Simply relying on the report of the DGIT(Inv), Mumbai and statement the AO cannot conclude that all transactions are accommodation ....
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.... the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances. 5.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is ....
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.... A.O. is directed to delete the addition of Rs. 1,27,50,000/-. This ground of appeal is allowed." 8. 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." 10. In the case of DCIT v. M/s. Manish Flour Mills Pvt. Ltd., in ITA.No. 6729/Mum/2016 dated 24.10.2018 the Coordinate Bench held as under: "3. Briefly stated the facts are that, the Assessing Officer noticed that assessee during the year under consideration received unsecured loan of Rs..40 lakhs from M/s. Meenaxi Diamonds Pvt. Ltd., Rs..25 lakhs from M/s. Roshan Gems Pvt. Ltd., and Rs..75 lakhs from M/s. Abhiman Gems Pvt. Ltd. A.O observed that there is a search and seizure operation in the case of Shri Bhanwarlal Jain Group by the Investigation wing of the Department and in the course of proceedings it was established that these persons are in the business of providing accommodation entries to various beneficiary companies. He observed that M/s. Meenaxi Diamonds Pvt. Ltd., M/s....
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....ter subjecting to TDS. Therefore, it was submitted that all these evidences goes to show that the transactions are genuine. The identify and credit worthiness of the creditors are proved and therefore simply based on the statements given by the Shri Bhanwarlal Jain Group addition cannot be made treating them as mere accommodation entries. It was also further submitted that the statements given by Shri Bhanwarlal Jain Group have subsequently retracted by themselves. It was further submitted before us that the Assessing Officer has not provided the cross examination of the persons who gave statements. It was also submitted that in the statements given by Shri Bhanwarlal Jain Group they have never mentioned assessee's name as the beneficiary of the accommodation bills. Therefore, the Learned Counsel for the assessee submitted that the transactions are genuine, the identity and credit worthiness of the creditors have been proved and therefore no addition is warranted u/s. 68 of the Act. 6. Ld. Counsel for the assessee placed reliance on the following decisions in support of his submissions: - a. ACIT vs. Sumit J. Jain (ITA No. 145/M/17) b. ACIT vs. Shri Vashu....
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.... addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the Ld.CIT(A) and deleted the addition observing as under: "4.2.2. In the instant case, however, as seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. Firstly, as regards the transaction, the same has rooted through the banking channels and the source cannot be doubted. Secondly, as was held in several cases that whatever maybe the strength of presumption it cannot replace evidence. Even though, the transaction is from a tainted group, the AO has not gathered any additional/independent evidence to show that the transaction with the appellant company was sham, fictitious or artificial except believing the statements given by the entry operators. He has failed to gather evidence to show that the unaccounted cash of the appellant had changed hands subsequently replacing the cheque payments. Thirdly, he has also not answered several valid points raised by the appel....
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....n 68 burden of proof cannot be discharged to the hilt -such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under Section 68. (v) Confirmatory letters or A/c payee cheques do not prove that the amount in question is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. Of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstan....
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....rm of investigation report, to begin with, but he could neither succeed to repudiate the evidences filed by the appellant nor he could gather independent evidence even to establish the surrounding circumstances not to speak of leading evidence to prove his hypothesis. In view of the above discussion I hold that the loan taken by the appellant from the above three parties cannot be doubted and the addition made by the AO u/s 68 of the Act cannot survive the test of appeal. I therefore, direct the AO to withdraw the addition. The ground is allowed. 5. The second issue is with regard to addition of Rs. 8,32,607/- on account of interest expenses u/s 69C of the Act. The AO has noticed payment of interest to the creditors from whom loan was taken. As the credits were disbelieved by the AO since the credits were given by the bogus concerns floated by Banwarlal Group who are the only entry operators, the AO has also disallowed interest claimed to have been paid to these creditors u/s 69C of the Act. 5.1 The appellant has objected for the disallowance of interest truly been paid to the creditors from whom loans were taken. He has further submitted that the payments were ma....
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....bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the parties. The Assessing Officer treated these loans to be non-genuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in his opinion the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act. It was also noted by the CIT(A) that the assessee has proved the identity, credit worthiness as well as genuineness of the transactions and, therefore, no addition u/s. 68 can be made. 7. The learned AR before us relied on the order of the CIT(A) and has also pointed out that the loan received by the assessee has been returned to the respective parties through cheques and in none....
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....cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case. 11. We have also gone through the decisions relied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures. ....