TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 1893
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....ment by way of issue of notice u/s.148 dated 14.11.2014 after duly recording the reasons. During the course of reassessment proceedings the A.O. has observed that assessee has taken loan of Rs. 1,75,00,000/- from the following persons:- Sr.No. Name PAN Amount 1 Duke Business P. Ltd. (JPK Trading I Pvt.Ltd) AABCJ6245N 50,00,000/- 2 Duke Business P. Ltd. (JPK Trading I Pvt.Ltd) AABO6245N . 35,00,000/- 3 Casper Enterprises P. Ltd. (Ostwal Trading I P. Ltd.) AAAC07955M 40,00,000/- 4 Sumukh Commercial Pvt.Ltd. (CapstownMer.P.Ltd.) AACCC400M 50,00,000/- Total Rs. 1,75, 00,000/- 5. The A.O. has not accepted the transactions as genuine. Accordingly, the loan of Rs. 1,75,00,000/- treated as unexplained and added to the total income of the assessee. 6. By the impugned order CIT(A) deleted the addition after observing as under:- "5. I have carefully gone through the assessment order passed by the A.O, written submissions filed by the appellant and relevant case laws cited by the appellant during the appellate proceedings. 5.1 All the grounds of appeal are related with addition of Rs. 1,75,00,000/- u/s.68 of IT.Act on account of accommodation entries....
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....rce" has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Hon'ble Supreme Court, in Kale Khan Mohd. Hanif vs. CIT, pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are / produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to prove the matter further. 5.5 Element of credit worthiness and satisfaction of AO thereafter is subjective and requires more efforts/inquiry on the part of ....
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....ted to the extent of proving the source from which he received the cash credit. The credit worthiness of the creditor has to be judged vis-avis the transaction which had taken place between the assessee and the creditor, and it is not the burden of the assessee to find out the source of creditworthiness of the lender to prove the genialness of the transaction. This is held by the Gauhati High Court in the case of CIT v. Smt. SanghamitraBharali (2014) 361 ITR 481 (Gau) at page 482.(Copy enclosed)The aforesaid points were also affirmed in the past by the Appex Court in the case of CIT v. Orissa Corporation P, Ltd reported in (1986) 159 , ITR 78 (SC). In the case of CIT v. Varinder Rawley (2014) 366 ITR 232 (P & H) the court held that "where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he discharges the onus. In that case, the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to assessee", particularly in a case where no summons u/s 131 is issued against the third party. 5.8 Further, in the case of Namichand Kothari vs CIT - [....
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.... the onus. In that case, the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to assessee", particularly in a case where no summons u/s 131 is issued against the third party. 5.10 The Bombay High Court has recently decided the case of Rushabh Enterprises vs ACIT, 24(3), Mumbai in Writ Petition no. 167 of 2015. In this case assessee had taken loans from 45 parties and out them 4 parties belonging to the same group of Bhanwarlal Jain were considered non genuine by the AO. It was pointed out that aforesaid 4 parties had advanced loans from through account paying cheques which were encased in the petitioner's Dank account used for business transactions. Interest is also paid on these loans and at the time of payment of interest, tax was deducted at source and TD5 returns were filed. It was contended by the department that they have received information from DGIT (InvJ that assessee had taken unsecured loans from the above parties by way of unaccounted cash / accommodation entries. High Court observed that there is a bald statement on the part of the department there is no tangible material to re-open the assessment. The....
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....e had discharged his burden of proof. AO did not make any attempt to discharge his burden of proof to rebut the evidences produced by assessee. No addition u/s.68 can be sustained 5.12 From the assessment order, it transpires that the AO has solely relied upon the statement did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transactions cannot be doubted. Once evidences related to a transaction is submitted before the A.O., tne onus shifts on him to prove these as non-genuine or bogus. 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. 5.13 As far as the que....
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.... were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vsAnand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evolved and has taken a definite shape. A few aspects of law u/s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by 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 cre....
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...."shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall .Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.17 After considering the totality of facts, the rival submissions, the applicable law and on the basis of discussions mentioned above, I have come to the conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of Rs. 1,75,00,000/-. This ground of appeal is allowed. 5.18 The other ground is related with addition of Rs. 3,50,000/- on account of alleged commission paid in cash@ 2% of Rs. 1,75,00,000/-. These additions were made on the basis of cost of the accommodation entries. However, the above mentioned addition has clearly be....
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....he sources of the fund is the loans received back by Casper Enterprises P. Ltd., from: i)Kunal Gems Rs. 1400,000/- ii) Kush International Rs. 26,00,000/- iii) Kunal Gems Rs. 10,00,000/- iv) Natasha Enterprises Rs. 36,00,000/- e) Copy of PAN Card f) Copy of Income Tax Return. g) Copy of Annual Repon and Balance Sheet for the Y.GBP 31-03-2008. h) The identity, creditworthiness of the M/S. Casper Enterprises P. Lid. is proved and the genutnity of the loan transaction in also proved as required u/s 68. B. DUKE BUSINESS P. L TD. (formerly known as J P K TRADI.\G (INDIA) P. L TD,) a) Copy of Ledger Account of Duke Business P. Led. as it appears in the books of M/S. Shree Ganesh Developers for the period 03-04-2007 to 31-03-2010. b) Loan Confirmation for 'Me Period 2007-08, 2008-09 & 2009-10. c) Certificate of Incorporation from Registrar of Company. d) Copy of Bank Statement of Duke Business P. Ltd. highlighting the payment made to M.'S. Shree Ganesh Developers. The Sources of Fund is (he loan received back by Duke Business P. Lid. from : i) New Plane! Trading Co. P. Ltd. Rs. 17,00,000/ ii) Natasha Enterprises Rs. I3.80,000 e) Copy of PAN Card. ....
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....IT (Inv). Attention was invited to the copy of retraction by Pravin Kumar Jain. AR referred to the point no 7 and onwards of the retraction Affidavit, to show that the statement given to the DDIT (Inv) was under coercion, pressure and threat from the DDIT (Inv). The statement was recorded under the extenuating circumstances and Pravin Kumar Jain was not even aware of the content that was recorded by the DDIT(inv). The Search operation continued for 9 days and Pravin Kumar Jain in his Retraction affidavit has said that he signed the statement to ensure that the 9 days long search action ends. 16. Ld. AR relied on following judicial pronouncements in support of contention that the conditions of section 68 are proved with documentary evidences, where the AO has not investigated the loans receipts on his own and has just relied on the statement of an unknown person, where a statement of a person unknown to the assessee is used against the assessee and no opportunity is given to the assessee to cross examine such unknown person. Where the said unknown person RETRACTED from his statement given to the DDlT (inv) by giving the reason that the statement was obtained from him under coercion....