TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 280
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....es of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 5,95,00,000/- received as unsecured loan without appreciating the fact that same is accommodation entry received from hawala operator Sh. Bhanwarlal Jain. 4. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the disallowance of interest paid of Rs. 8,88,000/- without appreciating the fact that interest bearing fund has been diverted for non business purpose. 5. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 26,17,60,000/- received as investment from bogus parties under Joint Venture agreement without appreciating the fact that same was received from bogus parties without any commercial expediency. 6. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 26,17,60,000/- received by assessee under Joint Venture agreement without appreciating the fact that same was received from 3. Brief facts of the case are that that the appellant company is engaged in the real estate and construction business. The appellant filed its return of income u/s. 139(1) on 30....
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....d there after relying on certain judicial pronouncements, the AO treated this share application as unexplained and made an addition of Rs. 2,35,00,000/- u/s 68 of I.T. Act, 1961. 5. Before the ld.CIT(A) assessee submitted that these share application money were received in earlier year. That on the touchstone of several case laws, these can not to be taxed in the present assessment year. The ld.CIT(A) accepted the submissions and held as under:- "I have considered the facts of the case, submissions and contentions of the assessee as also the order of the AO. I have also perused the material on record as also legal and factual matrix. On perusal of the documents submitted by the assessee, it is seen that the disputed share applications monies of Rs. 2,35,00,000/-, in respect of which addition is made u/s 68, had not been received during impugned year (A.Y.2012-13). On the contrary such share applications monies had been received in earlier years viz. A.Y.2010-11. The copies of ledger accounts and bank statements fortify the fact that such share applications monies had been received during A.Y.2010-11. The audited balance sheet of earlier year of the assessee also show such share ....
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....ucture Pvt Ltd and M/s., Green Infra Ltd cited supra and by Hon'ble Apex Court in the case of M/s G. S. Homes & Hotels Pvt Ltd (7 Taxmann.com 120 ) wherein it is held that the share premium is a Capita receipt. Also in the present case, on forfeiture the share application money ha, been credited to the capital reserve account and not in profit and loss account. Hon'ble Jurisdictional High Court of Bombay in the case of Vodafone India Service Pvt Ltd vs. Addl. CIT reported in 368 ITR 1 has decided that "the amounts received on issue of share capital including the premium are undoubtedly on capital account". The CBDT vide Circular No.02/2015 dated 29/01/2015 decided not to file the SLP before Hon'ble Supreme Court of India as a result of which such decision of Jurisdictional High Court of Bombay has reached to finality. The judicial decisions relied by Ld. AR also support the case of the appellant wherein it has been decided that forfeiture of shares cannot be brought to tax since is of capital account. Accordingly, respectfully following the judicial decisions cited supra, I hold that AO is not justified in making the addition u/s.68 of the share applications monies re....
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....paid to the concerns/ entities belonging to Shri Bhanwarlal Jain of Rs. 52,85,664/-/ 10. Upon assessees appeal, ld.CIT(A) noted the assessees submissions and reliance upon case laws. He noted that, the appellant disputed the addition made by the AO. That the appellant in this regard had furnished the documents such as PAN of lenders, confirmation of account, own bank statement disclosing receipt and repayment of loans through A/c payee cheques/RTGS, IT acknowledgment receipt, Balance sheet and Bank statement of the lenders, TDS certificates of interest paid on such loans to prove the identity and credit worthiness of the lenders and genuineness of loan transactions. That the AO had not pointed any defects in such documentary evidences filed on record. That it is observed that such loans had been received through banking channel by A/c payee cheques/RTGS and thereafter had been subsequently repaid through banking channel by A/c payee cheques/RTGS. That the appellant had paid the interest on such loans and in support had filed the copies of own bank statements and bank statements of the lenders and also filed the copies of TDS certificates of interest paid on the disputed loans. Tha....
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....enders and genuineness of the loans, then the addition made by the AO u/s 68 deserves to be deleted." 13. He further found that assessees own group concern case and in assessees own case. Tribunal has decided in favour of assessee, he concluded as under:- " From the above discussion, it is crystal clear that this issue has been decided in favour of the assessee, by the Hon'ble ITAT Mumbai in assesee's own case for AY 2013-14 and 2014-15 vide order dated 08.07.2019. Further my ld. Predecessor has also decided this issue in assessee's own case, for AY 2010-11, 2011-12, following above order of the ITAT and the present year is the only year which is pending. Further, it is observed that the facts of the presents year are identical to the appeals decided by the Hon'ble ITAT, Mumbai and my Id. Predecessor in the case of the assesses for A.Y. 2010-11 to2014-15 and there is no variation in facts. Therefore on adopting the consistent approach, the addition made u/s.68 is liable to be deleted, in the present year as well. In view of the above discussion, I direct the AO to delete the addition unsecured loans of Rs. 5,95,00,000/- made u/s 68 of I.T Act, 1961. Consequently, the dis....
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....e loans which had not been discharged by the appellant. Thus, I hold that AO is justified in making the disallowance of interest @ 12 % of interest free loans given of Rs. 8,88,000/-. However, it is also true that the appellant had not claimed the interest paid on loans as deductible expense, rather the appellant had capitalised the entire finance cost to Capital Work in progress (WIP) account since its project was not completed. Thus, the addition of unclaimed interest made by the AO is not justified. It is true that the entire finance cost had been transferred by the appellant to Capital Work in progress (WIP), accordingly, I direct the AO to reduce the Capital Work in progress (WTP) by Rs. 8,88,000/- on Account of disallowance of such interest. This will result into addition in the hands of the assessee in subsequent years." 16. Apropos issue of addition us. 68 of the investment in joint ventures. On this issue the AO noticed that the appellant had disclosed the investment in Joint Venture of Rs. 26,17,60,000/- under "Current Liabilities", The notes attached along with audited balance sheet also disclosed that the appellant had received the amounts under Joint venture agreeme....
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....owards investment in JV' on the same day. e) The replies were filed directly in the Tapal not received through 'post'. f) Cross-holdings were observed. One company is holding investments in other-companies in the aforesaid set of 17 companies and the other in other company of the set of 17 companies, and so on. g) Most of the companies are newly registered. Some of the companies were found to be registered as latest as in F.Y.2011-12 h) In some of the companies, it is noticed that there is a 'change in name of the company' from one name to another. Similar feature is also observed in the case of assesses company as well. It means these entities are in the habit of changing their frequently. i) In some cases, there is a mismatch of balance outstanding as on 31/03/2012 as per the assessee's books and as per the ledger a/c furnished by these investors in response to notice u/s.l33(6). j) In some of the cases, for example, Hunger Real Estate Pvt Ltd, there are no commercial activities or receipts from business. k) Most of the concerns are not making substantial profits, so as to support their creditworthiness to invest huge amounts. l) In some of....
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....and also they have agreed on certain terms and conditions which they desirous to reduce in writing which is in fact these present. That further the Joint Venture would be carried out in the name and style of Orbit Construction and its address would be 115, 4th floor, Crawford Market, Mumbai. That further, the profit sharing ratios of various Joint Venture partners and the assessee company were mentioned in clause no.9 of Joint Venture agreement. That it was also agreed upon, as per clause no.8 that development shall be completed within eighteen months. That however, it appears that this project went into difficulty and could not be started, because of various problems, despite the fact that the assessee had paid a sum of Rs. 28.31 crores to MHADA and Bank Guarantee worth Rs. 3 crores to the Housing Society. That it is in these circumstances that the investors lost patience and started demanding refund of their investment. That though the assessee tried to pursuade the investors to stay put but he failed to do so and ultimately had to refund the investments. That it is seen that the investors have also furnished the documents; such as PAN and CIN of investors, Confirmation of accou....
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.... I.T acknowledgment receipt, Balance sheet and Bank of the investors to prove the identity and credit worthiness of the genuineness of the transactions. That evidently the AO had, not pointed any defect in such documentary evidences filed which are placed on record. 18. Thereafter, ld.CIT(A) referred to the documents submitted by the parties. These included PAN card, CIN master data, confirmation, join-venture agreement, reply to notice under section 133(6), IT acknowledgment receipts, bank statement, balance sheet of the parties. 19. The ld.CIT(A) gave further finding as under:- 'Coming to the reply filed by various investors, in response to the notices issued by the AO u/s.133(6) of the Act, it may be mentioned that Anikesh Trading Pvt. Ltd, filed a letter dated 07.03.2015 to the AO, which has been duly received by the AO himself as on 13.03.2015 and his signature and seal is clearly visible. Further, the AO also asked the investor to furnish Balance Sheet and Profit & Loss a/c. It is mentioned that the investor had submitted copy of bank statement, copy of ledger account, copy of Income Tax acknowledgement and confirmation that they had invested a sum of Rs. 50 lacs in the J....
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....ly dated 16.02.2015 and submitted their ITR which shows returned income at Rs. 7,61,81,313/-. Similarly, Synazzy Exports Ltd. which has invested a sum of Rs. 30 lacs, filed is reply with the AO as on 05.03.2015 and as per the ITR their returned income is Rs. 40,59,550/-. Similarly, Victory Sales Pvt.Ltd. made an investment of Rs. 25 lacs submitted its reply to the AO vide letter dated 26.02.2015 which is duly received in the office of the AO as on 10.03.2015. Their return of income for the year is Rs. 11,08,393. Further, status of all these companies on ROC website shown as active and they have been filing their return of income regularly." 20. Thereafter, he mentioned the net worth of the parties as under: Net worth of the Joint Venture Investors Sr. No. Name of Joint Venture Investors Amount received Net Worth (in Lakhs) Returned Income 1 Anikesh Trading Pvt. Ltd. 1,00,00,000 1014.46 2,65,613 2 Conart Securities Ltd. 1,00,00,000 3198.53 22,05,106 0.00 3 Dolex Commercial Pvt. Ltd. 1,45,00,000 266.22 12,930 4 Hetu Investment & Trading Ltd. 50,00,000 58.40 34,64,500 5 HPL MuIti Trade Pvt. Ltd. 2,25,00,000 1028.17 4,29,0....
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....ompany. As regards finding of the AO stated in assessment order, it is observed that the appellant had proved the identity, genuineness and creditworthiness of the investors since had filed the documents such as PAN, CIN master data, own bank statements, Joint venture agreement, I.T acknowledgment receipt, confirmation of account, balance sheet, bank statements of the investors on assessment record. The AO's finding that appellant had not initially responded to notice u/s 133(6) is not of much relevance since the erstwhile name of the appellant M/s. Orbit Heights Pvt Ltd was changed to M/s Neminath Homes Pvt Ltd and, in any case, all investors had subsequently filed their respective replies in response to notice u/s 133(6) and acknowledged copies of such replies is filed on record. The AO, in assessment order, has also accepted that the replies from these parties had been filed in tapal. The AO's finding that certain investors were holding bank accounts in same bank account, similarity of auditor, cross share-holding, etc. would not disprove the transaction since the funds are stated to have been received from group/related entities of the investors, which would natural....
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.... vs. Jai kumar Bakliwal reported in 366 ITR 217 viii)Hon'ble Punjab & Haryana High court in the case of CIT vs VArinder Rawlley reported in 366 ITR 232 ix) Hon'ble Gujarat High Court in the case of CIT vs Patel Ramniklal Hirji reported in 41 taxmann.com 493 x) Hon'ble Gujarat High Court in the case of DCIT vs. Rohini Builders reported in 256 ITR 360. 23. He concluded as under:- "The other judicial decisions relied by Ld. AR also support the case / of the appellant. The appellant had furnished the documents such as PAN and CIN of investors, Confirmation of account, own bank statement disclosing receipt and repayment of funds through A/c payee cheques/RTGS, Joint venture agreement, I.T acknowledgment receipt, Balance sheet and Bank statements of the investors and replies furnished by the investors in response to notice u/s 133(6) to prove the identity and credit worthiness of lenders and genuineness of transactions and AO had not found any defect in such documents filed on record and had not brought any contrary material on record to disprove the transaction. The judicial decisions relied by Ld. AR also supports the case of the appellant. The appellant had discharged its onu....
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....us, since CIT(A) had upheld the disallowance of interest (para 7.4) 5&6 Addition u/s.68 of Rs. 26,17,60,000/- of monies received under Joint Venture housing project from 17 contributors. a) Assessee had proved the complete, identity, genuineness and credit-worthiness of all Joint Venture Contributors; b) Replies to notice u/s.133(6) had been responded by all 17 Joint Venture Contributors with supporting documents filed on record; c) Joint Venture Contributors are not related to any tainted person/group; d) Assessee had repaid the Joint Venture Contributions to respective contributors in subsequent year; e) Hon'ble ITAT had deleted similar additions u/s 68 in assessee's own case for A.Y-2013-14 & 2014-15; f) CIT(A) had deleted similar addition in case of associate companies M/s Neminath Enterprises, M/s Nemichand Associates and Star One Realcon Pvt Ltd. The Hon'ble ITAT had dismissed the Revenue's appeal. 27. Upon careful consideration, we note that in the present case, the fist issue is addition u/s. 68 of share application money amounting to Rs. 2.35 crores, which was received in the previous year. The fact that the amount involved was received in the pr....
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....ity in the order of ld.CIT(A) directing for deletion of addition of Rs. 2.35 crores, which was not received during the year. 29. Apropos, issue of unsecured loan. On this issue, the AO noted that assessee has disclosed unsecured loan in the balance sheet of Rs. 22.85 crores. He noted that Rs. 5.95 crores were received from six parties belonging to Shri Bhanwarlal Jain group of cases. The AO observed that in the case of Bhanwarlal Jain group investigation wing of income tax department had made search and survey, wherein it has found that companies controlled by Bhanwarlal Jain group were engaged in providing accommodation entry. On AO's enquiry, assessee provided all the necessary details including the income tax returns of the parties and it was submitted that the amounts were received through account pay cheque etc. However, AO was not satisfied, he did not even issue notices to the said parties and solely relying upon the examination done in the case of Bhanwralal Jain group made the disallowances. 30. Upon assessee's appeal, ld.CIT(A) has examined the issue thoroughly.He has noted that all the necessary documentary evidences, such as PAN, confirmation of account, own bank stat....
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....similar issue was decided in favour of the assessee. The decision in the said case cannot mandate us not follow decision of the ITAT in assessees sown case. It is also noted that the facts of the case clearly indicate that AO has not made any investigation of his own. He solely relied upon the examination by the investigation wing in the Bhanwaralal Jain case. Further, ld.CIT(A) has correctly observed that by not giving assessee the statements for rebuttal and an opportunity to cross examine coupled with the retraction by the party, the evidentiary value of the said statement is diminished. The AO has not even issued notice u/s. 133(6) to the parties. Once, it is undisputed that no independent verification was done by the AO and the assessee has provided all the basic documents, the onus upon the assessee stands discharged. Hence, we do not find any infirmity in the order of ld.CIT(A). Hence, we uphold the same. On the same reasoning, the disallowance of interest on these loans have been deleted by ld.CIT(A). We also uphold the said order. 33. Apropos issue of disallowance of interest for diversion for non-business purpose. On this issue the AO has found diversion of interest to t....
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.... that these transactions are not normal. He further made general statement that there are cross holdings in the company that most of the companies were newly registered that most of the companies are not maintain substantial profit. This was again without reference to specific facts and findings. The Ld.CIT(A) has given a finding that there is a proper joint venture agreement that assessee is not engaged into bogus activity, it is engaged into re-development project in the heart of Mumbai city. That AO has issued notice in the earlier name of the company. That after assessees request fresh notice in the new name of the company was not given by the AO. AO himself desired the documents to be submitted and the same may duly submitted to the AO. The Ld.CIT(A) has duly examined the documents and found that all the necessary details of the parties i.e PAN card, CIN master data, confirmation, joint venture agreement reply to notice u/s. 133(6), IT acknowledgment receipt, bank statement, balance sheet of the parties were all produced. Ld.CIT(A) has also given sequence of the events and examined and verified the financial worth of the parties by analyzing the net worth of the parties elabor....