TaxTMI 
TaxTMI 
2021 (11) TMI 145
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....rvey and post survey proceedings in the case of the assessee group wherein it was clearly established that the assessee had availed accommodation entry of bogus unsecured loan from the Bhanwarlal Jain Group when statement of Shri Bhanwarlal Join recorded u/s 132(4) of the Act clearly falls under the provisions of section 115 of the India Evidence Act and hence, the case is hit by provision of section 115 of the Indian Evidence Act? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not appreciating the fact that the Assessing Officer had brought sufficient evidence on record to establish that the identity, genuineness and creditworthiness of the lenders have remained unexplained? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not upholding the addition made by the A.O. even though it is well established that the modus operandi of obtaining accommodation entries of unsecured loan had to be considered in the light of surrounding circumstances, normal course of human conduct and preponderance of probability?" 4. Whether on the facts and in the circumstances of the case....
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....d been disposed by Assessing Officer by a separate speaking order. Thereafter, Assessing Officer issued the notices under section 143(2) and 142(1) of the Act and show cause notice on directing the assessee to justify the genuineness of the unsecured loans received from the parties belonging to Shri Bhanwarlal Jain group. In response, the assessee filed written submissions and documentary evidence to justify the identity and creditworthiness of the lenders and genuineness of loan transactions. However, the Assessing Officer rejected the submissions and documents furnished by assessee and relying on survey report and statements of Shri Bhanwarlal Jain and his related persons held the loans as non-genuine. The Assessing Officer also considered the statement recorded during survey of Shri Nemichand Jain and held that the assessee has failed to prove the identity, genuineness and creditworthiness of the entities which had to provided unsecured loans to various group concerns of Shri Nemichand Jain. Finally, the Assessing Officer passed the assessment order where in the addition has been made under section 68 on account of bogus loans from the various entities belonging to Shri Bhanwarl....
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....held that the identity, genuineness and credit-worthiness of the lender had not been substantiated. The AU observed that Shri Nemmchand P. Jain had not furnished the copies of loan agreement, collateral security, etc and had merely stated that the unsecured loans were taken through proper banking channel. The AO further observed that the rate of interest corresponding to the disputed loans is paid 9% p.a. which is less than the interest paid on secured loans to the banks. Finally, the AU has made the assessment wherein the addition has been made u/s 68 on account of bogus loans taken from the various entities of Bhanwarlal Jain group. Also, the AO disallowed the corresponding interest paid on such loans and also made an estimated addition on account at commission expense. 7.2 On the other hand, the Ui AR submitted that the issues involved in the appeal are covered by the decision of Hon'ble ITAT in various cases of Neminath Group and the appellant is one of the entity belonging to the same group (Neminath Group). The Ld. AR further submitted that my Id. predecessor had passed the similar appeal orders in the case of M/s Neminath Homes Pvt Ltd related to A.Y-2010-11 and 2011-1....
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....s have already been paid during the financial year 2013-14 and before the survey action u/s 133A was carried out in their case or even before the search & seizure action in case of Shri Bhanwrlal Jain Group. The assessee also argued that during the course of survey at point of time they admitted that this loan is bogus or non-genuine and it was also mentioned that even Jhanwarlal Jain retracted his statement and such retraction was accepted by the Hon'ble ITAT in the appellate proceedings in his case and relief was granted to him. The Ld. AR drawn my attention to the appellate order passed by my Ld. Predecessor in its case for A.Y. 2010-11 and also the Hon'ble ITAT decision which was relied upon by my Ld. Predecessor. 7.4 I have considered the facts of the case and arguments of the assesse. First of all it is very important to mention over here that impugned loans were already repaid by the assessee during the financial year 2013-14 through banking channels. Further, the repayment has taken place much before the survey action u/s 133A was carried out in the case of the assessee. Moreover, the repayment has taken place even before search and seizure action in case of Bhariwarl....
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....onths for financing Chaitanya and Nerninath Park projects. However, due to resource constraints, these loans continues and were repaid in subsequent period depending on availability, of funds. Ans to Q 21: 1 have nothing to say except that these loans have been extended without any security, collateral or a guarantee based on my track record and financial worth. Ans to Q 22: These unsecured loans were arranged by Shri Ratanlalji Sankhla and I did not meet any of the lenders personally, interest has been paid through banking channels after deducting TDS thereon. Ans to Q 23: All the above loans stand repaid as on date. There is no outstanding loan from the above parties now." 7.7 From the above statement of the assessee it is quite clear that at no point of time, he accepted that these loans were nongenuine in fact in response to question no. 23 he very clearly mentioned that all the above loans stand repaid and there was no outstanding. Prior to that the assessee clearly mentioned in response to question no 19, as to for what purposes these loans were taken and the rate of interest. The assessee also clearly mentioned that interest at the rate of 9% paid on these loans. It ....
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....olitary issue that needs to be resolved under given facts and circumstances of this case is whether unsecured loans taken from certain companies controlled and managed by Shri Bharnvarial 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. 15,00,000/- towards unsecured loans taken from cc rraTh companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act, on the ground that the assesse has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of' the parties. The AG 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 group concern. Accordingly, the AO, opined that although the assesse 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....
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....were involved in providing accommodation entries and the assesse 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 AU has taken note to survey proceedings conducted in the group cases of assesse and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidences has been brought on record by the AU to disprove the claim of the assesse that the such 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 assesse are hit by the provisions of section 68 of the Act or not. The sole basis for the no to make additions is statement of Shri Bhanwarlal fain recorded u/s 32(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 Bhanwarlal fain has been retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the AU to go only on the ba....
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.... 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 fain to make additions u/s 68 of the Act. No doubt, the AO is having every right to suspect the transactions hut, that by itself would not give rise an occasion for the O to make additions u/s 68 of the Act, when the evidences filed by the assesse 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 assesse 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 assesse has been dealt as under:- CIT vs. Goa Sponge and Power Ltd(13/02/2012)Tax Appeal No.16 of 2012 (High Co....
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....ot be regarded as undisclosed income of assesse 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 in to white with the help offormation 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 he 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 conclusionon facts and no interference was called for. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com 289 (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 of the share applicant companies and purchase of share had been proved by the assessee. Supreme court in the cases of CIT vs. Steller Investments ....
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....ad 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 assesse to plough hack its own undisclosed income in to 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 he 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 assesse 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 the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the necessary information from the sources to which the information was attributable....
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....he share capital represented the company' sown in come from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or nonexistent 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 and 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 he seen. Thus, the addition was rightly deleted. CIT vs. Shree Rania Multi Tech Ltd. 2013) 34 Taxnmann.com 177(Guj HC) "It is noted that Commissioner (Appeals) as well as the Tribunal have - duly considered issue and having found complete details of the receipts of share application money, along with the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd. to the case of the assessee. Therefore, no....
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....ch u/s 132(4) of the Act. The Tribunal after considering the relevant facts and also considering the retracted statements filed by Shri Bhanwarlai Jain came to the Conclusion that one documents filed by the assesse to prove the identity, genuineness of transactions and credit worthiness 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 made by the AO to make addition u/s68 of the Act. We further noted that the Coordinate Bench of ITAT, Mumbai, in the case of Shri Sumit J. Jain v/s ACIT, in ITA no.145/Mum./2017 had an occasion to consider identical issue in light of unsecured loans taken from corn panics controlled and managed by Shri Bhanwarlal Jain. The Coordinate Bench, after considering the relevant facts has held that when assessee has filed various documents to prove three ingredients provided uls 68 of the Act, there is no reason for the AO to make add....
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.... any cash deposit nor any withdrawal in any bank account castigating the same as accommodation entries. It is further noted that the assesse 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/reasoned is believe 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 Jam. The statement was also recorded wherein there is no mention that any accommodation entry was obtained. Rather, the case of the assessee is fortified by the reply to question no. 40 and 41 where in it has been tendered that the loan was advanced and interest@ 9% p.a. was charged. The name of the assesse is nowhere mentioned in the list of suspicious dealer/person. Thus, I find no infirmity in the conclusion of the learned CIT(A), resulting into dismissal of the impugned ground raised by the Revenue. 5. The next ground pertained to deletion of addition of 5,78,278, made on account of interest expenditure on all....
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....oonam Shanri Developers in ITA No. 2690/Mum/2018 13. Order dared 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Mega Developers in ITA No.2691/Mum/2018 14. We have also considered the following judgments relied upon by the learned D.R. 1. Principal Commission of Income Tax vs. NRA Iron & Steel (P.) Ltd. (2019) 103 taxmann.com 48 (SC) 2. Principal commission of Income Tax vs. A\DR Promoters(R) Ltd. (2019)1 02 taxmann.com 282 (Del.) 3. PeeAar Securities Ltd. vs. DCIT (2018) 96 taxmann.com 602 (Delhi Trib.) 4. Pavan kumar M. Sunghvi v. Income Tax Officer (2018) 97 taxmann.com 398 (SC) After considering the case law relied upon by the learned D.R. i.e. the case of NRA Iron & Steel (P.) Ltd. We note certain distinguishing features vis-à-vis factual matrix of the present case. Upon perusal of paras .3.7 & 3.8 of the said judgment, it is noted that the Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. Submissions were received through DAK only which created a doubt about the identity of the investor company. Further the AO independent/v got field inquiries conducted at th....
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....s of transactions and creditworthiness of the parties. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan under Section 68 of the Act. The Ld. (IT'A) without appreciating these facts simply confirmed the addition made by the AC. Hence, we reverse the findings of the Ld. CI (A) and direct the AO to delete the additions made towards unsecured loans under Section 68 of the Act. Ground Nos. 2 to 5 are in relation to confirming the action of the AO in making notional addition on account of alleged commission by invoking section 69C of the Act. The AO has disallowed interest paid on unsecured loans on the ground that once the loans have been treated as bogus accommodation entries, then any interest paid on such unsecured loans also need to be treated as bogus and accordingly disallowed total interest paid on unsecured loans. Similarly, the AO has estimated 0.2% commission on total unsecured loans taken from the companies on the basis of statement of Shri Bhanwarlal fain where 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 par....
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....ted 08.707/2019 and my predecessor's order dated 23.10.19, the additions/disallowance made in the assessment order in the appellant's case cannot he sustained and are hereby deleted. 7.12 The Ld. AR relied on the decisions of Hon'ble Apex Court and submitted that e decision of Hon'ble ITAT is binding on the 1" appellate authority in particularly when the facts of the case decided by higher authority are identical and similar to the case of the appellant and in this respect relied on several judicial decisions. The Hon'ble Supreme Court in the case of Union of India and others v. Kamlakshi Finance Corporation AIR 1992 SC 711 1994 (46)ECC129,1991 ECR486SC,had decided that utmost regard should be provided by the adjudicating authorities and the appellate authorities to the requirements of Judicial discipline and the need forgiving effect to the orders of the higher appellate authorities, which are binding on them. The principles of judicial discipline require that the orders of the higher authorities should he followed unreservedly by the subordinate authorities. If this healthy rule is not followed, the result will only be undue harassment to the assesse and cha....
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.... is further more destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate tribunal refuses to carryout directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned judicial Commissioner while roundly condemning the respondent for refusing to carryout the directions of the superior tribunal, yet held that nomanifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner, That order had become final and binding on the parties, and he respondent could not question it in anyway. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of the Tribunal w....
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....lar to that of the A.Y. 2013-14 & A.Y.2014-15 in Appellant's own case. This issue is not new in the case of the Appellant and the same has travelled to the Hon'ble ITAT, Mumbai "B" Bench. Further, this issue has been decided by the Hon'ble ITAT in their order dated 08.07.2019 in ITA Nos. 2641, 2480, 2388, 2360, 2501, 3018, 2436, 2591, 2661 & 2718/Mum/2018. The Hon'ble ITAT has, after detailed discussion, deleted the addition made on account of unsecured loans and consequent additions on account of interest and commission with the following observations: "7. The solitary issue that needs to be resolved under given facts 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..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 th....
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....o prove identity of the loan creditors. The AO has categorically admitted that the assessee has filed various details including PAN Card, ITR acknowledgment, financial statements, bank statements, confirmation letters and affidavit from the parties from whom loan has been taken. The AO has disputed the genuineness of transactions and creditworthiness of the parties. The sole basis for the AO to doubt the genuineness of transaction is search conducted in the cases of Bhanwarlal Jain by the DGIT(Inv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal Jain and 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 nor....
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....e documents are part of assessment proceedings. The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 132(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the 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....