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TaxTMI 
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2021 (9) TMI 1396
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....the case and in law the Hon'ble CIT(A) erred in upholding the addition of Rs. 1,00,00,000/- made by the Ld AO on account of unsecured loan as unexplained cash credit u/s. 68 and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under. 3. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the addition of Rs.6,55,834/- made by the Ld. AO on account of interest paid on unsecured loan as non-genuine and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under. 4. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the penalty u/s. 271(1)(c) levied by the Ld AO and the reasons assigned for doing so are wrong and contrary to the provision of the Income Tax Act and rules made there under. 5. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in upholding the interest u/s. 234B levied by the Ld AO and the reasons assigned for doing so are wrong and contrary to the provision of the Income Tax Act and rules made there und....
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....nts of section 68 of the Act. The AO, however, rejected all these evidences by harping on the report of DGIT (Inv.), Mumbai that all these parties were hawala parties related to Bhanwarlal Jain group which were engaged in giving accommodation entries and finally added the same under section 68 of the Act as unexplained cash credit by holding that these are only accommodation entries and assessee has failed to establish the genuineness of these transactions by framing assessment under section 143(3) read with section 147 of the Act vide order dated 19.03.2016. 6. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by observing that mere furnishing of documents quashed lenders and paying the interest after deduction of TDS at source do not ipso facto proof prove the genuineness of the transactions. The Ld. CIT(A) while dismissing the appeal primarily relied on the statement given during the course of search on Bhanwarlal Jain and related entities that all these were engaged in advancing accommodation entries and therefore any subsequent retraction would not serve the purpose. The Ld. CIT(A) noted that assessee has been found to be beneficiary of accommo....
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.... the AO has not made any further investigations or enquiries or brought on record any other evidences which proved otherwise. The operative part of the decision is as under: "11. We have heard both the parties, perused the material available on record and gone ground through the orders of authorities below. 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.10,45,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain u/s 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 the parties. The AO 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's group concern. Accordingly, the AO, opined that although the assessee....
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....d 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 normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of accounts of the assessee are hit by the provisions of section 68 of the Act or not. The sole basis for the AO to make additions is statement of Shri Bhanwarlal Jain recor....
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....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 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. 14. Coming to the cases relied upon by the as....
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....w taken by the Tribunal cannot be faulted." CIT vs. Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC) "If the share application money is received by the assessee 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 assessee 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 into white with the help of formation 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 be regarded as un disclosed 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 conclusion on facts and no interference was called for." CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com289 (All-High Court) "We have considered the arguments of the counsel for the parties.....
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....undisclosed income of the assessee." Mod Creations Pvt Ltd vs. /TO (2013) 354 ITR 282 (Del-High Court) "Held, allowing the appeal, (i) that the assessee had discharged the initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as 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 assessee to plough back its own undisclosed income into its accounts, could be of n o 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 be 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 assessee as being mala fide. The Tribunal ought to have analysed the material rather than be bu....
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....als , that it the assessee 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 shareholders were benamidars or fictitious persons or that any part o f the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non-existent 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 an d 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 be seen. Thus, the addition was rightly deleted." CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com177 (Guj-HC) "It is noted that Commissioner (Appeals) as well as the Tribunal have duly consider....
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.... cannot befaulted." 15. The assessee has also relied upon various decision of the Co-ordinate 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 Bhanwarlal Jain came to the conclusion that one documents filed by the assessee to prove the identity, genuineness of transactions and creditworthiness 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. 16. 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/s 68 of the Act. We further noted that the Coordinate Bench of ITAT, Mumbai, in the case of Shri Sumit J. Ja....
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....onfirming 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 duly 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 assessee 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 / reason to disbelieve 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 Jain. 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 wherein it has been tendered t....
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.... and gone through the fact and circumstances of the case. The assessee has complied with the basic conditions of the provision of 68 by submitting the confirmations of loan, copies of the Bank Statements and Copies of Income Tax Return of these four loan creditors. We noted from the assessment order that although the Assessing Officer has written a very elaborate order but he has missed the basic three ingredients of the provision of section 68 of the Act. Hence, not carried any enquiry qua these three conditions rather he mainly relied on the search conducted in the case of Bhawarlal Jain Group of cases. It is also not clear from the assessment order whether these loan parties are genuine or non-genuine and the amount received are unexplained but how. It is a fact that the assessee has discharged its primary onus by filing all these documents which the Assessing Officer should have verified and examined these parties. Even now before us, the learned Sr. DR could not controvert the basic facts of the case except relying on the case law of Pawankumer M Sanghvi vs. ITdo in ITA No. 2447/Ahd/2016 and Pr. CIT vs. NRA Iron & Steel (P) Ltd. (2019) 110 taxmann.com 491 (SC). Without pointin....
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....he various evidences furnished by the assessee are not reliable and instead rested fully upon the Sworn Statements and the alleged incriminating materials. Hence, in our view, the question of deficiency in the enquiry of the AO does not arise in the instant case. 19. The Ld DR also placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Sumati Dayal (supra) and Durgaprasad More (supra) to contend that the surrounding circumstances and human probabilities should also be taken into consideration by the tax authorities. He contended that these loan transactions are deceptive transactions. There should not be any doubt with this proposition of law. In the instant case, the Ld CIT(A), as well as the Tribunal in the case of Vama International (supra) has observed that the sworn statements given by Shri Bhanwarlal Jain and others have been retracted. The question whether the revenue is entitled to place reliance on the retracted statements remains unanswered. Further, the assessing officer has placed reliance on the various observations made by the search officials like, sharing of common address by various concerns, inducting employees as directors etc., to com....
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....o evidence to show that the cash equivalent to the loan transactions has been given by the assessee to various lenders. 21. The Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra) in order to contend that the AO could not have used the materials, which were not put to the assessee. In the instant case, we notice that the assessee has specifically requested the AO twice to give the materials that were relied upon by the assessing officer to take adverse view. Despite the request so made, the AO has not furnished copies of materials to the assessee. Hence, as per the decision rendered by Hon'ble Supreme Court in the above said case, the AO could not have placed his reliance on those materials, which were not confronted with the assessee. 22. The assessee has also asked for copies of sworn statements given by Shri Bhanwarlal Jain and others. The assessee also asked for an opportunity to cross examine them. However, the AO has failed to furnish copies of sworn statements and also did not afford opportunity to cross examine the deponents. Hence the decision rendered by Hon'ble Supreme Court in the case of Andaman ....
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.... by the search officials. Hence, in our view, the decision rendered by Hon'ble Supreme Court in the case of Orissa Corporation (P) Ltd (supra) will also come to the support of the assessee. 24. We notice from the operative portion of the order passed by Ld CIT(A) that the first appellate authority has placed reliance on various other case laws also. In effect, the Ld CIT(A) has examined the documents furnished by the assessee and has held that the assessee has discharged the initial burden of proof placed upon it u/s 68 of the Act. He has also held that the non-furnishing of documents relied upon by the AO and non-providing of opportunity to cross examine the Shri Bhanwarlal Jain and others would make the addition to fail. Even in respect of documents relied upon by the AO, the Ld CIT(A) has found the same to be inadequate to warrant the additions made u/s 68 of the Act. Hence, we are of the view that the Ld CIT(A) has passed a reasoned order by considering the facts of the case, applicable case laws and has taken a justifiable view in this matter. Hence we do not find any infirmity in the order passed by Ld CIT(A). Accordingly we confirm the order passed by Ld CIT(A) in deleting....