TaxTMI 
TaxTMI 
2022 (6) TMI 830
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.....s. 147 of the Act was completed on 13.03.2014 determining the total income of Rs..1,01,15,791/- which was then rectified by order u/s.154 of the Act dated 27.03.2014 determining revised total income at Rs..2,02,49,317/-. Subsequently, information received from the DGIT (Investigation), Mumbai [in short "the DGIT (Inv.)"] that a search and seizure action u/s. 132 of the Act was carried out in the case of Shri Bhanwarlal Jain and group concerns on 03.10.2013 where it was found that Shri Bhanwarlal Jain and his associates have floated various entities, which are engaged in the business of providing accommodation entries in the form of bogus unsecured loans, bogus purchases, bogus capital gain etc., and the Assessing Officer observed that assessee is one of the beneficiaries of bogus concerns operated and controlled by Shri Bhanwarlal Jain and associates. He observed that during the relevant previous year, assessee has taken unsecured loans of Rs..25 Lakhs from M/s. Navkar Diamonds which is one of the concerns controlled by Shri Bhanwarlal Jain. Accordingly, notice u/s. 148 was issued and served on the assessee. In response assessee filed letter dated 21.04.2015 and submitted that ret....
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.... is hardly any own capital in the balance sheet. f) A perusal of balance sheet shows that the source of loans and advances is from the funds due to sundry creditors. Advancing loans worth crores of Rupees for years together and that too, without any security, from the source of funds payable to creditors is very unlikely in normal course of business. Thus, from the returns of income and balance sheets of these parties, the creditworthiness of the parties is not proved." 5. Accordingly, Assessing Officer came to the conclusion that assessee has taken accommodation entries of unsecured loan and assessee has failed to establish the identity, genuineness and creditworthiness of the party. Accordingly, he invoked provisions of section 68 of the Act and disallowed Rs..25 Lakhs. Further, Assessing Officer observed that assessee has debited interest expenditure of Rs..64,932/- towards the above unsecured loan and accordingly, he disallowed the same. 6. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions wherein assessee has raised grounds of appeal objecting reopening of assessment u/s. 148 of the Act, addition made u/s.68 of t....
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.... 6.3.5 Hence, it is well settled that at the stage when reasons are recorded for reopening the assessment. .AO is not required to build a fool proof or a fort-like case for making addition to the assessee's income; all that he is required at that stage is to form a prima facie opinion or, belief that income has escaped assessment. The word 'reason" in the phrase "reason to believe' would mean cause or justification and the expression cannot be read to mean that the AC should have finally ascertained the fact by legal evidence or conclusion, as held by the Hon'ble jurisdictional High Court of Bombay in the judgement dated 18' June 2014 in the case or Nickunj Eximp Enterprises Pvt. Ltd. \/5. CIT in Writ Petition No. 2860 of 2012. The relevant extract of the decision is as under: As stated earlier that at the time of issuing a notice u/s 148 of the Act, it is not necessary for the Assessing Officer to conclusively arrive at a finding that there has been escapement of income. At the stage of issue of the notice the only requirement is to examine whether on the available material a reasonable person could form a reasonable view to believe that income charg....
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.... the same is necessarily to be the subject matter of enquiry during the reassessment proceedings. The relevant part of the decision (Para 8) is as under: "In case there is a prima facie doubt about the truthfulness and/or completeness of the disclosure at the time of original assessment in view of information obtained later the provisions cannot aid the petitioner at the stage of notice u/s148 of the Act. It is likely that during the assessment proceedings the assessee may be able to satisfy the Assessing Officer that there was a true and full disclosure. Once the Assessing Officer has received information that invoices issued by A/1/s. Rahul Industries are bogus then the same is necessarily to be the subject matter of engulf)/ during the reassessment proceedings. The information that bills produced were not genuine does give rise to a reasonable belief in the Mind of the Assessing Officer that income chargeable to tax has escaped assessment." 6.3.8 Further also, the reopening of assessment has been held to be permissible even when scrutiny u/s 143(3) was concluded earlier, where original assessment order passed is silent in respect of the issue/point on which re-....
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....connection with the search action u/s 132 of the Act, the AO found that Sh. Bhanwarlal Jain has admitted that through various dummy director/directors on papers, he had controlled, operated and managed large number of concerns which are not carrying out any genuine business activities but are engaged in providing accommodation entries through all the concerns managed by the group. The Hon'ble High Court of Delhi in the case of Seems Jain vs. Assistant Commissioner of Income Tax (2018) 406 1TR 0411 (Delhi) wherein it was claimed that name of the petitioner is not appearing in the statement of the person who would control and manage several companies which were paper and shell companies. - has upheld the order of the Hon'ble ITAT as quoted below: "28. When a final show cause notice was issued requiring the assessee to explain as to why a sum of Rs.1 crore received from PTU be not added to the income as it was a bogus loan received from a paper company, the assessee required cross-examination of Sh. Rajendra Bubna and stated that name of PTU was not appearing in the statement of Sh. Rajendra Bubna. In our considered opinion. the Assessing Officer has rightly rejected ....
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....he was justified in initiating reassessment proceeding in case of assessee. 6.3.15 Further, the Hon'ble Gujarat High Court in the case of Boghara Polyfab Pvt Ltd Vs DCIT: (Dated: February 26, 2018) [2018-TIOL-905-HC-AHM-IT ] wherein the AO referred to the materials available with him which prima facie suggested that the assessee company had received share capital and share premium from various companies which were proved to be bogus companies engaged in providing mere accommodation entries and after analysing such materials, he came to the conclusion that share capital/share premium received by the assessee during the financial year was bogus, following the judgement of the Hon'ble Supreme Court in case of Rajesh Jhayeri Stock Brokers P. Ltd. (supra) has held that, the sufficiency of reasons cannot be gone into at this stage Thus, the Hon'ble Court ruled that It cannot be stated that the Assessing Officer did not have tangible materials at his command to form such a belief. It was held in this case as under: 26. His reference to "materials on record" must be understood in the context of facts on record. The Assessing Officer was not writing a statute. ....
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..... 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 under. 6. Your appellant craves leave to add to, amend alter or delete any of the above grounds of appeal on or before the date of hearing." 10. At the time of hearing, Ld. AR of the assessee submitted that assessee has filed all the relevant information in the original assessment itself which was completed u/s. 143(3) of the Act and duly accepted by the Assessing Officer. He submitted that the Assessing Officer reopened the assessment u/s. 147 of the Act based on the information received from DGIT (Investigation) and relying on the statement given by the Shri Bhanwarlal Jain. He submitted that in order to verify the transactions....
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....ated to Bhanwarlal Jain group. The AO made the addition by doubting the genuineness of the loan transactions by citing the reason that a search on Bhanwarlal Jain and related parties has revealed that the entire group was engaged in advancing tax accommodation entries without doing any real business which has affirmed by Ld. CIT(A) by observing that retraction of statement recorded during the course under section 132(4) of the Act can not be sole basis to treat the transaction as genuine. Undisputedly, the assessee during the course of assessment proceedings filed copy of ITRs, balance sheet, profit and loss account, confirmations and proof of receipt of payment through banking channel along with the evidence of payment of interest at the rate of 12% after deduction of TDS at source. We observe from the records before us that AO has not carried out any further verification and relied on the report of the DGIT(Inv.), Mumbai that assessee is beneficiary of accommodation entries without carrying on any further investigation. We note that the statement taken during the course of search has been retracted in which it has been admitted that Bhanwarlal Jain and related entities were engag....
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....rther was of the opinion that mere furnishing certain paper documents is not sufficient enough in light of various facts gathered by the department during the course of search. The AO further was of the opinion that payment through proper banking channel and interest payment to those unsecured loans is not sacrosanct because all these shell companies/hawala operators would keep necessary paper document in order to give colour of genuineness to their transactions. Therefore, he opined that the transactions between the parties are failed to pass the test of genuineness and accordingly made additions u/s 68 of the Act. 12. The provisions of section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to e....
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....es. Therefore, there is no reason for the AO to go only on the basis of statement of Shri Bhanwarlal Jain so as to treat unsecured loan taken by the assessee from the firm and companies controlled and managed by Shri Bhanwarlal Jain and his associates. 13. Having said so, let us examine what is the basis for the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwaral Jain except statement of Shri Bhanwaral Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group Companies for arranging loans. The AO did not controvert this fact by bringing any other evidences. On th....
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....- CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay) "Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as "bogus". The controversy is covered by the judgements rendered b y the Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd, vs. CIT, (2008) 216 CTR (SC) 195, as also by this Court in CIT vs. Creative World Tele films Ltd, (2011) 333 ITR 100 (Bom). In such circumstances, we are of the view that the Tribunal's finding that there is no justification in the addition made under Section 68 of the Income Tax Act,, 1961 neither suffers from any perversity nor gives rise to any substantial question of law." CIT vs. Creative World Tele films Ltd (2011) 333 ITR 100 (Born-High Court) "The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 19....
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....ling receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme Court in the cases of CIT v. Steller Investments Ltd. [2001] 251 ITR 263 and Lovely Exports case (supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the assessee. We do not find any illegality in the judgment of the CIT(A) and the Tribunal." CIT vs. JayDee Securities & Finance Ltd (2013) 32 Taxmann.com91 (AllHigh Court) "The Tribunal recorded findings that the assessee had produced the return of income filed by the relevant shareholders who had paid share application money. The assessee had also produced the confirmation of share holders indicating the details of addresses, PAN and particulars of cheques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in CIT V. Lovely Exports (P.) Ltd wherein it was held that if the assessee produces the names, addresses, PAN detai....
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....r had any doubt about the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the nece sary information from the sources to which the information was attributable......If it had any doubts with regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the hands of the creditors or sub- creditors." CIT vs. Al Anam Agro Foods (P.) Ltd (2013) 38 Taxmann.corn 375 (All High Court) Tribunal, however, held that since identity of share holders stood proved on record, amount of share application money could not be added to income of assessee. According to Tribunal, in such a case amount could be taxed in hands of persons who had invested" CIT vs. Dwarkadhish Investment (P) Ltd (2011) 330 ITR 298 (Del-High Court) "Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68- Revenue has all the power and wherewithal to trace any person- Moreover, it is settled law that the assessee need not to prove the 'source of source'- In the instant case, the Tribunal has co....
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....n money, alongwith the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd to the case of the assessee. Therefore, no reason was found in absence of any illegality much less any perversity too to interfere with the order of the both these authorities, who had concurrently held the due details having been proved. The assessee company had presented the necessary worth proof before both the authorities and it was not expected by the assessee company to further prove the source of the deceased." CIT vs. Nikunj Eximp Enterprises (P.) Ltd (2013) 35 Taxrnann.com384 (Bom) "Whether merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it cou ld not be concluded that purchases were not made by assessee - Held, Yes.... Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers ha....
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....der identical issue in light of unsecured loans taken from companies controlled and managed by Shri Bhanwarlal Jain. The Coordinate Bench, after considering the relevant facts, has held that when assessee has filed various documents to prove three ingredients provided u/s 68 of the Act, there is no reason for the AO to make additions towards u/s 68 of the Act only on the basis of statement of Shri Bhanwarlal Jain. The relevant findings of the Tribunal are as under:- "3. I have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee an individual engaged in the business of builder and developer declared loss of Rs. 1,29,68,736 in his return on 15.09.2009. The assessment was completed u/s 143(3) of the Act on 30.11.2011 assessing the loss at Rs. 1,13,73,448. The assessee carried the matter in appeal before the learned CIT(A) wherein vide order dated 03.02.2014, part relief was granted to the assessee. Later on, the case of the assessee was reopened u/s 147 on the basis of information that the assessee has received accommodation entry of unsecured loan from M/s. Laxmi Trading Company, M/s. Mouli Gems, M/s. Minal ....
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....p.a. was charged. The name of the assessee is nowhere mentioned in the list of suspicious dealer / person. Thus, I find no infirmity in the conclusion of the learned CIT(A), resulting into dismissal of the impugned ground raised by the Revenue. 5. The next ground pertained to deletion of addition of Rs. 5,78,278, made on account of interest expenditure on alleged bogus loans. The learned D.R. defended the addition, whereas, the learned Counsel for the assessee invited my attention to the finding recorded in Para-6.1 of the impugned order. On a perusal of record and the assertions made by the respective Counsels. There is a finding in the impugned order that the assessee duly produced the bank statement from where interests were paid also copies of form no.16A evidencing the TDS made and deposited into the Government account with respect to payment of interest. Since in earlier paras of this order since I have upheld the order of the learned CIT(A), therefore, the issue of interest is consequential in nature, therefore, the conclusion drawn in the impugned order is upheld." 17. Coming to the cases relied upon by the Ld. DR in light of various case laws discussed by....
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....al aspect of this case, we cannot take it as legal proposition laid down in the given facts. Hence, we are of the view that there is no infirmity in the order of the CIT(A) and hence, we confirm the same. The appeal of Revenue on this issue is dismissed. (c) In the case of DCIT vs. 4. DCIT vs.M/s. Jainam Investments (ITA No.6099/M/2016)the Tribunal has held as under: "17. There should not be any dispute that the initial burden to prove the cash credits is placed upon the shoulders of the assessee. It has been held by Honourable Courts that the initial burden shall be discharged, if the assessee proves three main ingredients, viz., the identity of the creditor, the creditworthiness of the creditor and genuineness of the transactions. If the assessee has discharged the initial onus, then the onus to disprove the same is shifted to the shoulders of the assessing officer. These legal principles have been reiterated in the cases of Bhan & sons (supra) and M/s Precision Finance P Ltd (supra), which were referred to by Ld CIT-DR. In the instant case, there is no dispute that the assessee has discharged the initial burden of proof placed upon it by furnishing all the mate....
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.... etc., to come to the conclusion that these transactions are bogus in nature. We notice that the search officials have only drawn adverse inferences on the basis of information gathered by them and it is the duty of the assessing officer to substantiate those inferences by bringing corroborative materials. The Ld CIT-DR has reiterated these inferences as surrounding circumstances. However the moot point that remains is whether the assessing officer could disprove the material evidences furnished by the assessee to prove the cash credits? The various evidences furnished by the assessee, in fact, disprove the inferences drawn by the search officials. When the assessing officer could not disprove the material evidences furnished by the assessee, in our view, he is not entitled to place full reliance on the inferences drawn by the search officials, particularly the assessee could rebut those presumptions drawn by the search officials. Though the sworn statement given by Shri Bhanwarlal Jain may be a relevant piece of evidence, yet it is stated that the said statement has been retracted. Further the AO has not shown that the transactions entered by the assessee with the group of Shri Bh....
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....ourt in the case of Andaman Timer Industries (supra) goes in favour of the assessee and accordingly the Ld CIT(A) was justified in placing reliance on the same and holding that the impugned additions are not justified. 23. We notice that the assessee has specifically asked the AO to issue summons to the loan creditors, but the assessing officer has failed to do the same. It is pertinent to note that the assessee has so requested the AO, even after discharging the initial burden of proof by furnishing all the relevant details available with it. In the case of Orissa Corporation P Ltd (supra), the assessee furnished available details and then requested the AO to issue summons to the creditors, since it could not collect further details from them. The AO failed to do so and hence the Hon'ble Supreme Court held that the addition made u/s 68 is not justified. The assessee herein, in our view, stand on a stronger footing. The assessee has furnished all the relevant details, which has been summarized by the Ld CIT(A) in paragraph 6.3.31 of his order as under:- "6.3.31 In the case before me, the record also shows that to prove the genuineness of the impugned loan entries ....