AI Drafter 
TaxTMI 
TaxTMI 
2019 (4) TMI 2060
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....2,11,72,250 2 M/s Xess Gems 30,27,675 3 M/s Namokar Impex Pvt Ltd 52,84,625 4 M/s Kothari Impex 77,04,187 5 M/s Mangalam Gems 35,95,287 6 M/s Ratan Gems 2,48,06,432 3. The notices sent to the parties in Sl.No. 1 to 5 were returned unserved from postal authorities and no reply was received from the party in Sl.No.6. The Assessing Officer issued show cause notice to assessee to explain as to why the said unsecured loans should not be added u/s.68 of the Act as unexplained cash credit. In response to the said show cause notice the assessee furnished the following information to prove the identity, creditworthiness of the creditors and the genuineness of the transactions: - (i) Dinesh Gupta Prop. Max India Diamond i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him. iii. Copy of ledger account of the lender in assessee books iv. Copy of PAN Card of the lender (ii) Sunil D Panwar Prop. Xess Gems i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of ....
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....d bank statements which throw no light on sources, no proof filed to show that the individual is the proprietor of his concerns. With these observations the Assessing Officer concluded that it is not possible to arrive at positive satisfaction about the essential ingredients of identity, genuineness and creditworthiness of the loan transactions from the evidences filed by the assessee. 5. Before the Ld.CIT(A) the assessee furnished following further information under Rule 46A of the I.T. Rules. (i) Dinesh Gupta Prop. Max India Diamond i. Copy of confirmation of the lender as per his books of account ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier iii. Copy of Audited schedule of loans & advances in the books of the above lender given by him (ii) Sunil D Panwar Prop. Xess Gems i. Copy of PAN Card of the lender (additional evidence submitted on 04.03.2014) ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the de....
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....s to advance loans to assessee from explained sources and therefore creditworthiness of the lenders is proved. It was also submitted that it is well settled principle that assessee need not prove the source of the source. 7. The Assessing Officer, however, in his remand report rejected the contentions of the assessee stating that the creditors were not produced, notices u/s. 133(6) of the Act were returned unserved. He also stated that sufficient opportunity was given to assessee to produce the evidences and therefore the additional evidences filed by assessee should not be admitted. 8. The Ld.CIT(A) considering the submissions of the assessee, evidences furnished, remand report of the Assessing Officer and reply to remand report by the assessee deleted the addition made u/s. 68 of the Act. 9. Ld. DR vehemently supported the orders of the Assessing Officer. He further submitted that, the notices issued to the parties have come back without service and the assessee could not produce the parties for verification and thus the assessee has not proved the identity, creditworthiness and genuineness of the transaction hence the Assessing Officer is quite justified in treating the....
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....d the genuineness of the transactions of loans from all the six lenders by furnishing bank statements of all lenders evidencing payments to the assessee. The lenders have given loans by crossed account-payee cheques and they are reflected in their audited books of account for which they have filed their respective returns of income. The Assessee has also deducted TDS on interest, assessee also proved the genuineness by proving that the interest received by the lenders were offered to taxation for the relevant year. Ld. Counsel for the assessee further in respect of creditworthiness of the lender submitted that the assessee has proved the creditworthiness of all the lenders who lent amounts to the assessee by furnishing Part B of Tax Audit Report, giving summary of Balance Sheet and Profit and Loss Account filed with Revenue along with schedules of loans granted containing name of assessee. The transactions appear in the books of lender and loans are reflected in the tax audit reports filed by the lenders. Therefore, it has been argued that the assessee has established the identity, genuineness and creditworthiness of the creditors and primary onus cast on the assessee has been disc....
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....uncated bank statements were filed and assessee has not proved that the lender is proprietor of the concern from which loan has been taken by the assessee. 16. In the course of the assessment and Appellate Proceedings the assessee furnished the following details in respect of the creditors: i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of ledger account of the lender in assessee books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender vi. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier vii. Copy of audited schedule of loans & advances in the books of the above lender 17. The Assessing Officer not convinced with all the above evidences furnished by the assessee treated the loan transactions as non-genuine simply stating that creditors have not responded, creditors have shown less incomes in their returns, no proof filed to show that the ....
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....he same. The AO has merely come to the conclusion that the parties had no capacity to lend the amounts as they had filed their return of income with a small amount of income as discussed in para 6 of the assessment order. It may be noted that the declaration of annual nominal income does not in any way indicate that the party had no capacity to lend the amount particularly when the balance sheet was filed and the transactions was confirmed by the creditors by filing the same with the authorities." 19. The Hon'ble Supreme Court in the case of CIT v. Orissa Corporation reported in 159 ITR 78 has held as under: - "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so-called alleged creditors....
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....copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 21. In the case of CIT v. Orchid Industries Pvt. Ltd. (ITA No.1433 of 2014) (Bom.), Hon'ble jurisdictional High Court held as under: "The Revenue has filed the appeal on following questions: "6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs. 95,00,000/- made u/s. 68 of the Act, relying only on the documentary evidence produced ....
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....see. The learned counsel relies on the judgment of the Division Bench of this Court in case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) and the order of the Apex Court in case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195. 4. We have considered the submissions. 5. The Assessing Officer added Rs. 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regardin....
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....ansactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can 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 be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned 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 the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gat....
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....nuine and therefore he has added the unsecured loans as unexplained income of the assessee. Correspondingly he has also disallowed the interest thereon. Before the Ld.CIT(A) assessee furnished all the information regarding the unsecured loans as mentioned above. The Ld.CIT(A) considering the submissions and the findings furnished by the assessee deleted the additions observing as under: - "6.2 HELD: - I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit International amount to Rs..10,00,000/- and (2) Natsha Enterprises amounting to Rs.10,00,000/- aggregating at Rs. 20,00,000/-. I find force in the argument of the Ld. AR. It is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has mere....
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....hat had been given to him by the appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The assessing officer never asked for any further material. This leads to the inescapable conclusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant's claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied. 6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued only bogus bills/accommodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating t....
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....on by the entities. The Assessing Officer has not made any efforts to make independent enquiries with the lender companies. We also observe from the Assessment Order that the Assessing Officer has not provided the statements of Shri Pravin Kumar Jain to the assessee for its rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and repayment in subsequent years to establish the genuineness of the transactions copy of ITR -V filed establishing creditworthiness of the lender are non-genuine. It was also noted by the Ld.CIT(A) that the assessee has provided the identity creditworthiness as well as the genuineness of the transactions. The Ld.CIT(A) also elaborately considered the submissions and the averments made by the Assessing Officer in the Assessment Order and the evidence furnished by the assessee and concluded that the assessee has discharged its primary onus on providing complete details in respect of the ....
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.... did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO in the assessment order has admitted existence of these details. 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 transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. 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. 5.10. As far as the question of validity of the transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are foun....
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.... 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 creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Cr....
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....d 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. 5.16. 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.1,27,50,000/-. This ground of appeal is allowed." 8. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue." 25. We also find that identical issue came up in the case of DCIT v. Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA. No. 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: - "6. We have heard the rival submissions a....
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....vs. ITO [ITA No.5849/Mum/2011 dated 06.09.2013 (Mumbai)] * Aim Properties & Investments Pvt. Ltd vs. Income Tax Officer [ITA No.7426/Mum/2012 dated 04.12.2013 (Mumbai] He further placed reliance on the following judgments: Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 (Gau) Vijay Kumar Talwar vs. CIT [2011]330 ITR 1 (SC) 8. The learned DR, on the other hand, relied on the decisions of the Hon'ble Delhi High Court in the case of Principal CIT vs. Bikram Singh ITA.No. 55/2017 & CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014. 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the busine....
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.... in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal. 13. In the result, the appeals filed by the Revenue are dismissed." 26. Similarly, we find that in the case of M/s. Shree Laxmi Estate Pvt ltd., v. ITO in ITA.No. 5954/Mum/2016 and M/s. Shree Laxmi Developers v. ITO in ITA.No. 2562/Mum/2017 dated 29.12.2017, the Bench held that once the assessee has discharged his initial burden the burden shifts to the Assessing Officer to prove otherwise. The Coordinate Bench considered the submissions as well as the material placed before the lower authorities and concluded that when once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. While holding so, it has been observed as under: - "4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towa....
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....neficiary of bogus accommodation entries provided by Shri Praveenkumar Jain through his bogus companies. The AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has furnished necessary evidences to prove identity of the parties, but failed to establish genuineness of transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various detail....
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....rged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis of information received from Investigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. ..... .... 11. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there is no reason for the AO to make addition towards loan u/s 68 of the Act. Hence, we direct the AO to delete addition made towards loans alongwith interest u/s 68 of the Act." 27. Similar view has been taken by the Coordinate Bench in the case of M/s. Shree Laxmi Developers v. JCIT in ITA.No. 6090/Mum/2017 dated 07.03.2018, wherein it has been h....