AI Drafter 
TaxTMI 
TaxTMI 
2021 (11) TMI 145
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....nature of unsecured loans and the findings of the survey 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 probabilit....
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....ed a copy of recorded reasons to the assessee. The assessee filed the objections which had 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 ....
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.... not disclosed adequate taxable income. The AO also analyzed the statement of Shri Nemichand P. Jain and 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 ....
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...., bank statements, balance sheet, P & L A/c and other relevant details. The assessee has also submitted that these loans 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 i....
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.... the rate of 9% per annum. Ans to Q 19: Loans were initially raised in financial year 2008-09 to 2010-11. Loans were initially raised for period of 18 months 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 resp....
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....ssion, had deleted the entire additions made on account of unsecured loans and consequent additions/disallowances 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 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, b....
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....ineness of transaction is search conducted in the cases of Bhanwarlal fain by the DGIT (lnv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal fain and his associates 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 vari....
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....d admitted in his statement u/s 32(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 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 Su....
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....TR 195 (SC) "If the share application money is received by the assesse 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 it cannot 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 ....
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....ons Pvt Ltd vs. ITO(201 3)354 ITR 282(DeI-High Court) "Held, allowing the appeal, 'I) that the assesse had discharged the Initial onus placed on it. In the even the Revenues till had a doubt with regard to the genuineness of the transactions in issue or regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the 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....
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....e appeals, that it the assesse had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made tinder section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the share holders were benarnidars or fictitious persons or that any part of the 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 ....
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.... Tribunal deleting the addition cannot be faulted." 11. The assesse has also relied upon various decision of the Coordinate Bench of ITAT, Mumbai. We find that the coordinate Bench of ITAT Mumbai, in number of cases has considered an identical issue in light of search and seizure operations as well as survey conducted by the department in light of statement of Shri Bhanwarlal Jain recorded during the course of search u/s 132(4) of the Act. The Tribunal after considering the relevant facts and also considering the retracted statements filed by Shri 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 IT....
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....d responded to notices issued u/s 33(6) of the Act confirming the transaction. The learned Assessing Officer did not controvert the claim of the assessee. The loans were taken through banking channel and the receipt of taking the loan has been duty examined in Para-5.3 (Page-13) of the impugned order. The loans were duly reflected in the loans and advances column in the Balance Sheet and there is further factual recording that there was neither any cash deposit nor any withdrawal in any bank account castigating the same as accommodation entries. It is further noted that the 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 quest....
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....M/ 2016 9. Order dared 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Pabal Housing Pvt. Ltd. In ITA Nos.2687 to 2689/Mum./2018 10. Order dated 03.05.2019 passed by Hon'ble ITAT,Mumbai the in the case of M/s. Poonam Skyline Construction in 1114 Abs. 2692 (02 694/Mum/2018 11. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. PS Construction in ITA No.3226 to 3229/Mum/2018 12. Order doted 03.05.201 9 passed by Hon'ble ITAT, Mumbai the in the case of Ails. Poonam 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 ta....
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....ould not be made merely on the basis of doubts, conjectures or surmises. After considering the entire case law as discussed above we find that the case law considered by the Revenue authorities were rendered under different set off acts which cannot be applied to the facts of the present case. Accordingly, the case law relied upon by the learned D.R. are rejected. In this view of the matter and considering the ratio of case laws discussed here in above, we are of the considered view that the assessee has discharged initial burden by filing various documents to prove identity, genuineness 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 6....
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....ppellant's associate company namely M/s. Neminath Homes Pvt Ltd for A.Y.201011 & 2011-12 had followed the above stated decisions of Hon'ble ITAT in appellant's associate companies/concerns and its director and had deleted the identical addition of unsecured loans obtained from Shri Bhanwarlal Jain and also had deleted the addition of interest/commission thereon. 7.11 1 find that the facts of the case decided by Hon'ble ITAT and my predecessor in cases of appellant's companies/concern and its director are similar to the facts of appellant's case and thus respectfully following the decision of Hon'ble ITAT dated 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&....
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....of judicial discipline. This aspect has also been highlighted by Hon'ble Apex Court in the case of Bhopal Sugar Industries vs Income Tax Officer, Bhopal(AIR 1961SC 1821 in understated manner the following terms:- "... We think that the learned judicial Commissioner was clearly in error in holding that no manifest in justice resulted from the order of the respondent conveyed in his letter dated March 24,1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and 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....
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....nue is aggrieved with the order of the learned CIT(A) and is in appeal before the Tribunal. 6. After hearing both the learned Counsel appearing for the parties and on a perusal of the material available on record, we find that the issue for our adjudication has been decided by the Co-ordinate Bench of this Tribunal in assessee's own case in assessment years 2011-12, 2013-14 and 2014-15, in ACIT v/s M/s. Neminath Homes Pvt. Ltd., ITA no.8028, 8061 & 8062/Mum./2019, the details of which are listed above, wherein the Tribunal has deleted the addition for the reasons stated therein as below : "22.3 I have noted that the facts and circumstances of the present case at hand are exactly similar 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 a....
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....y credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided under Section 68 of the Act, then the onus shifts to the AO to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings recorded by the AO in his assessment order, one has to examine whether the assessee has discharged burden caste upon it u/s 68 of the Act in respect of unsecured loan received from certain companies controlled and managed by Shri Bhanwarlal Jain. The AO never disputed the fact that the assessee furnished various evidences to 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 ....
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.... arranging loans. The AO did not controvert this fact by bringing any other evidences. On the other hand, the assessee has filed complete details including confirmations from loan creditors, their PAN details, master data, affidavit from the directors/partners/proprietors of those companies, income tax acknowledgments receipts along with financial statements, bank statements of loan creditors in order to prove the identity, genuineness of transaction and creditworthiness of the parties.. We, further, noted that all these loans have been taken through proper banking channels. The assessee has paid interest after deducting applicable TDS as per the law. These loans have been repaid during next financial year, All these 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 th....