TaxTMI 
TaxTMI 
2022 (4) TMI 280
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....e I.T. Act, 1961. 3. Whether On the facts and circumstances 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 est....
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....the identity and credit-worthiness of the share applicants and genuineness of transactions and 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 receiv....
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....levant to A.Y.2012-13. The said view had bet adopted in the jurisdictional High Court decisions in the cases of M/s. Apeak Industies (397 ITR 148) Orchid Industries Pvt Ltd (397 ITR 136), Gagandeep Infrastructure 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 ....
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....r commission. Accordingly, AO made the addition u/s.68 of the unsecured loans received from the entities belonging to Shri Bhanwarlal Jain of Rs. 5,95,00,000/-. Consequently, AO also made the disallowance of interest 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 ....
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....nk statements of the lenders, TDS certificates of interest paid on such loans to prove the identity and credit worthiness of lenders and genuineness of loan transactions. Accordingly, the appellant had discharged its onus to prove the identity and credit-worthiness of the lenders 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. Therefo....
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....loans were given to the associate concerns. Also, appellant had not brought any evidence on record to prove that the interest free loans were given to the associate .for business purpose. The onus lies on the appellant to prove that non-interest bearing funds had been utilised for providing the interest free 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 ....
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....ue credits in the bank account and subsequent circular transactions between the related accounts and immediate withdrawals. c) These transactions do not appear to be in the normal course of business. d) The date of amount of deposits received into the bank accounts of the aforesaid party were diverted to the assessee "company towards 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....
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....oint Venture basis. Further, (e) the part of the Second Part have to give financial assistance to commence and complete the said project on Joint Venture basis. That further, (f) the Part of the First Part had other and Party of Second Part had agreed to jointly develop such property particularly described in the Schedule hereunder wherein on Joint Venture which is in the name and style of Orbit Construction 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 ....
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....arties had submitted detailed replies to the AO, confirming their investments in joint venture project as also furnishing their IT. Returns, Bank statements, financial accounts and other relevant details and also furnished the documents such as PAN and CIN of investors, Confirmation of account, Joint venture agreement, Own bank statements disclosing receipt and repayment of amounts through A/c payee cheques/RTGS, 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 ....
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....i Lease Financial & Investment Ltd. filed its reply dated nil with the AO as on 10.03.2015. As per their ITR its returned income is Rs. 21,19,100/- for A.Y.2012-13. The company has invested a sum of Rs. 25 lacs in the Joint Venture project. Similarly, Shipra Fabrics Pvt. Ltd. filed its reply dated 03.03.2015 on 09.03.2015 and it has shown return income of Rs. 17,48,038/- .Shivana Agriculture Marketing Pvt.Ltd. filed its reply 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 ....
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.... All the Joint venture investors had furnished their replies, in response to notice u/s 133(6), on assessment record along with supporting documents. As per the appellant, the said investors are not related to any accommodation entry providers. The AO had not proved that any unexplained funds of the appellant has been introduced in garb of joint venture investments. The appellant had furnished the copies of balance sheets of the investors and, as per the tabular chart, the net-worth of the investors is much more that the amounts invested by the investors in project of the appellant company. 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 ....
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.... i) Hon'ble Apex Court in the case of Pr.CIT vs. Vaishnodevi Refoils & Solvex 96 Taxmann.com 469(SC) ii)Hon'ble Bombay High Court in the case of Pr.CIT v. Veedhata Tower Pvt.Ltd. (ITA No.819 of 2015) iii) Hon'ble Mdhya Pradesh High Court in the cae of CIT vs. Mehrotra Brothers reported in 270 ITR 157 iv) Hon'ble Alahabad High Court in the case of CIT vs. S.Kamaljeet Singh reported in 73 CCH 134. v) Hon'ble Apex Court in the case of P.K.Noorjahan reported in 237 ITR 570 vi) Hon'ble Mumbai ITAT in the case of Pooja Bhatt v. ACIT reported in 73 ITD 205 vii)Hon'ble Rajasthan High court in the case of CIT 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 furn....
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....lenders of Rs. 5,95,00,000/- belonging to Bhanwarlal Jain group a) The Ld. CIT(A) deleted the addition on following Hon'ble ITAT order in assessee's own case for A.Y.2013-14 & 2014-15 since involve identical facts; b) CIT(A) had deleted same 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. c) Assessee had proved the complete identity, creditworthiness and genuineness of loan transactions; d) Assessee is not required to prove the source of lender's funds. 4 Disallowance of interest of Rs. 8,88,000/- on loan utilised for non-business purpose. This Ground is infructuous, 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 ....
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....ived during the year, the same cannot be added u/s. 68. 28. Once, the issue of addition u/s. 68 falls outside the scope of addition during the present assessment year, the adjudication on merits is only an academic interest ld.CIT(A) has adjudicated the same also and found that the same is also covered in favour of the assessee by various decisions of Hon'ble Bombay High court and that the amendment made in the Act u/s.68 providing for examination of the source of source is not applicable in the current assessment. He has also find that, these aspects are duly approved by Hon'ble Bombay High court in the case of M/s.Apek Infotech(supra) and M/s.Orchid Industries(supra) Ggandeep Infrastructure Pvt.Ltd. (Supra) and Green Infra Ltd.(supra). Accordingly, we do not find any infirmity 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 ....
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....has submitted all the necessary documents for the identity, genuineness and creditworthiness of the parties. It is not the case that any of the documents had any short comings. Ld.CIT(A) has been given a finding that assessee in such circumstances has duly discharged its onus. Apart from the above, it is noted that ld.DR has not controverted the finding of ld.CIT(A). He has only submitted that Shri Bhawarlal Jain case has come to the Tribunal and Tribunal has accepted and made addition of income in hands of Shri Bhanwarlal Jain as commission income for providing bogus accommodation entries. We note that the decision of ITAT in the case of Bhanwarlal Jain is on the facts of the specific case. In the present case, we are also having a decision of ITAT in assessee own group case, in which 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 observe....
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....mended name of the assessee i.e Neminath Homes Pvt.Ltd. Thereafter, replies of these parties were received along with the documentary evidences, which included PAN confirmation of the account, IT returns, bank statement, balance sheet, joint venture agreement. However, the AO has not accepted the same. His observation is that a number of parties are maintaining account in the same bank, which in AO's opinion is highly improbable. How, the same is not probable has not been mentioned by the AO. Further AO without any specific reference has in general observed about high value credits in the bank account and subsequent circular transactions between the related accounts and immediate withdrawals. These observations by the AO are dehors any actual figures or finding therein. Further, AO observed 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....
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.... vs. Orchid Industries ITA No. 1433/2014. We may gainfully refer the order of Hon'ble Bombay High Court decision in this case is as under:- "3] The learned counsel for the Assessee supports the order and submits that the Assessee had discharged its onus. The Assessee had produced the PAN of all the creditors along with the confirmation, Bank Statement showing payment of share application money and relevant record is produced with regard to the allotment of shares to those parties. The share application form, allotment letter, share certificate are also produced. Even the balancesheet, profit and loss account, the books of account of these creditors were produced on record showing that they had sufficient funds for investing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of Commissioner of Income Tax vs. Gagandeep Infrastructure (P.) Ltd., reported in [2017] 80 Taxmann 272 (Bombay) and the order of the Apex Court in case of Commissioner of Income Tax vs. Lovely Exports (P.) Ltd., reported in [2008] 216 CTR 195 (SC). 4] We have considered the submissions. 5] The Assessing Officer added R....