TaxTMI 
TaxTMI 
2022 (10) TMI 593
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the transactions were not established. 2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of Assessing officer be restored." 3. The only grievance of the Revenue, in its appeal, is against deletion of addition made on account of unexplained cash credit under section 68 of the Act. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is running proprietary concern in the name and style of M/s. Krushy Trading Company and is engaged in the business of trading of aluminium material and copper ingots. During the year under consideration, the assessee has shown income from business and profession and income from other sources. The assessee filed the return of income on 30/09/2012 declaring total income at Rs. 54,89,832. The said return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS and accordingly notice under section 143(2) was issued and duly served on the assessee. Thereafter, notice under section 142(1) of the Act was issued and certain details were called. Upon verification of details filed by the assessee and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eto. Accordingly, the AO made an addition of entire amount of Rs. 10,12,91,595, to the total income of the assessee under section 68 of the Act. 5. In appeal before the learned CIT(A), assessee submitted that the notices were issued under section 133(6) on 20/03/2015 and the assessment order was passed on 31/03/2015, therefore, there was no reasonable time to reply to the aforesaid notices and submit the details. Accordingly, the assessee filed additional evidences before the learned CIT(A) under Rule 46A of the Income Tax Rules, in respect of its loan transactions. The said additional evidences filed by the assessee were forwarded to the concerned AO for seeking remand report on admissibility of the additional evidence as well as on merits of the case, after necessary examination. During the remand proceedings, the concerned AO asked the assessee to produce Ledger copy of the loan confirmation along with copy of return of income for the relevant period, bank statement for the relevant period and audit report (Form 3CD) of all the entities. The AO vide letter dated 26/07/2017, submitted the remand report as per the directions of learned CIT(A). The assessee also submitted its re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....notice of the assessee and reply has sought. As per the assessee, the loan confirmation of the parties along with the bank statement and return of income was submitted to justify the genuineness of the transaction. Further, assessee submitted that it has paid interest and deducted TDS on loans taken. However, the AO disagreeing with the submissions of the assessee and made addition of the entire amount of loan of Rs. 10,12,91,595 under section 68 of the Act. In its appeal before the learned CIT(A), the assessee filed additional evidence in respect of the loan transaction with aforesaid parties on the basis that the said information could not be filed in response to notices issued under section 133(6) due to paucity of time. The learned CIT(A) forwarded the additional evidence filed by the assessee to the concerned AO and sought its report both on admissibility of the evidence as well as on merits of the case. We find from the remand report dated 26/07/2017, of the AO, which forms part of the record, that the AO made detailed enquiry and sought various information from the assessee viz. Ledger copy of the loan confirmation, return of income, profit and loss account, balance sheet, b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... providing accommodation entries in lieu of cash. The AO further noted that this entity has filed return of income at Rs. 2,47,508, for assessment year 2012-13 and before the issuance of cheque to the assessee funds were received on immediately preceding day itself. Accordingly, the AO made the addition under section 68 of the Act. 10. Before the learned CIT(A), assessee submitted that the turnover of Little Diam is Rs. 1,09,57,01,945, with gross profit of Rs. Rs.1,95,41,416. Further, the assessee also submitted that this entity is Income Tax assessee and audited under the Act and bank statement reflected the loan creditor has provided funds to the assessee through proper banking channels, therefore, genuineness of the transaction is proved. In its remand report, filed before the learned CIT(A), AO made reference to the statement recorded during the search conducted under section 132 in the case of Shri Bhanwarlal Jain group, wherein statement of Shri Bhanwarlal Jain, and various other persons were recorded in which provision of bogus loans and advances was admitted and revealed. The AO, in its remand report, further submitted that the proprietor of this entity has accepted in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ri Rohit Birawat, proprietor of this entity, was recorded, however, the AO again placed reliance on the search conducted under section 132 on 03/10/2013, in the case of Shri Bhanwarlal Jain group to justify the addition under section 68 of the Act. As noted above statement recorded during the search under section 132 in the case of Shri Bhanwarlal Jain group was also relied upon by the AO in its remand report before the learned CIT(A). We find that even in the latest submission dated 12/07/2022, filed by the learned DR, statement recorded under section 131 is stated to be self-serving in nature, which is not corroborated with balance sheet and profit and loss account. However, nothing has brought on record to contradict the factual findings of learned CIT(A) and the initial reliance on the statement recorded during the search under section 132 has also found to be superseded by the recording of statement section 131 during the remand proceedings. Merely because the statement recorded under section 131 is not in favour of the Revenue, the same cannot be disregarded without any material on record. Therefore, we find no infirmity in the aforesaid findings of the learned CIT(A). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... transaction, even in this case also, from the submission dated 06/08/2019 filed by the AO, through office of learned DR, we find that though the AO accepted the fact that pursuant to summons issued under section 131 statement of Director of the Company, proprietor of this entity, was recorded, however, the AO again placed reliance on the search conducted under section 132 on 03/10/2013, in the case of Shri Bhanwarlal Jain group to justify the addition under section 68 of the Act. As noted above statement recorded during the search under section 132 in the case of Shri Bhanwarlal Jain group was also relied upon by the Assessing Officer in its remand report before the learned CIT(A). We find that even in the latest submission dated 12/07/2022, filed by the learned DR, statement recorded under section 131 is stated to be self-serving in nature, which is not corroborated with balance sheet and profit and loss account. However, nothing has brought on record to contradict the factual findings of learned CIT(A) and the initial reliance on the statement recorded during the search under section 132 has also been superseded by the recording of statement section 131 during the remand proceed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lender had enough fund to extend the loan. So here as lender had enough fund to extend the loans, lender's creditworthiness cannot be doubted. Appellant had paid the interest and also TDS was deducted." 18. Similar to the aforesaid loan transaction, even in this case also, from the submission dated 06/08/2019 filed by the AO, through office of learned DR, we find that though the AO accepted the fact that pursuant to summons issued under section 131 statement of loan lender was recorded, however, the AO again placed reliance on the search conducted under section 132 on 03/10/2013 in the case of Shri Bhanwarlal Jain group to justify the addition under section 68 of the Act. As noted above statement recorded during the search under section 132 in the case of Shri Bhanwarlal Jain group was also relied upon by the AO in its remand report before the learned CIT(A). We find that the latest submission dated 12/07/2022, filed by the learned DR, is silent regarding loan from Ashok Kumar Jain. We find that the learned CIT(A) vide impugned order mentions that the net worth of Varsha Gems, wherein Ashok Kumar Jain is the proprietor, is Rs. 1,43,85,552. However, from the perusal of balanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hiness, lender's balance sheet is examined and lender has net worth of Rs.5,54,12.269/- and bank statement of the lender has various transaction which shows debit and credit entries, receipts received from business during the year. From these business receipts lender had lended the money to the appellant. As here the newworth of the lender and also bank statement shows that lender has enough funds to extend loan to the appellant, so by the above details lender's creditworthiness cannot be doubted. So it is clear here also lender has identified himself, genuineness and creditworthiness was also established. So as all the amount was repaid during the year, AO's addition u/s 68 cannot be sustained." 21. From the submission dated 06/08/2019 filed by the AO, through office of learned DR, we find that the AO accepted the fact that pursuant to summons issued under section 131 statement of Paresh Babulal Patel. In the latest written submission dated 12/07/2022 filed by the learned DR, creditworthiness of the lender is doubted on the basis that Paresh Babulal Patel, has major income from salary, which is around Rs. 9,00,000 and has given interest-free loan of Rs. 87,50,000. F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intained for any previous year and offers no explanation for the nature and source of the credit. The sum so credited may be charged to income tax of the assessee of that previous year. It is clear from the section that sum credited in the previous year can be added u/s 68 if the assessee's explanation was satisfactory. However, in this case Rs.3,71,95,540/- is previous year balance. This amount cannot be added in this year in view of the above section and also Supreme Court case in CIT vs Noorjahan 237 ITR 570. Hence, this addition of Rs.3,71,95,540/- has to be deleted. With respect to balance amount as here statement was recorded u/s 131 and lender has also submitted Income tax return which proves identity of the lender and all these transaction of lending and repaying are carried through banking channels and reflected in the bank statement of the lender and creditor, so genuineness of the transaction is established. With respect to source through which the amount was extended to the appellant by the lender, they have explained in the statement that they have credit worth Rs.79 Crs from Karnataka Bank from which they extended the loan and this was also trade advance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....As regards, the other loan transactions, the learned CIT(A) vide impugned order observed as under: "All the above mentioned lenders are from Delhi. They all have submitted confirmation under section 133(6), Income tax return copy, bank statements, ledger statements, source of funds and all the loan interest was paid and TDS was also deducted. Here also AO had doubted their creditworthiness in extending their loan. I had examined bank statement, source of funds and net worth of above persons. Networth of the above persons is as under: Ram Avatar Paper Pvt. Ltd. - Rs.68,17,941/- Parul Mittal - Rs.59,04,304/- Sanjay Mittal & Sons Rs.24,03,896/- Shivkumar & Sons HUF-Rs. 23,59,835/- Suyash Mittal Family- Receipts of repayment of earlier loans Vikas Mittal & Sons Rs. 25,57,454/- Ram Avatar Mittal HUF Rs.23,44,760/- Here except for Suyash Mittal family when we examine the bank statement and net worth, all the above lenders have enough funds to lend the amount and their networth is more than twice the amount lend by the lenders. If the networth is twice the amount lend by the lenders, here it should be conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omplete adjudication of this issue. Needless to mention that no order shall be passed without affording opportunity of being heard to both the sides. 31. In the result, appeal by the Revenue is partly allowed for statistical purpose in view of our aforesaid findings. C.O. no.115/Mum./2019 (Arising out of Revenue's Appeal being ITA no...697/Mum./2018) 32. While, assessee, in its cross objection, has raised following grounds: "1. AO's claim to set aside the order of the ld. CIT(A)-45, Mumbai and to restore his order taking the ground that the creditworthiness and the genuineness of the transactions were not been established for the addition made u/s.68 for a sum of Rs.10,12,91,595/- is being frivolous one for the want of application of mind hence, appeal filed may be held as not admissible. 2. Assessment completed was without jurisdiction as assessment was completed, by the different ward then where ROI was filed and assessment was initiated, without issuing the notice u/s.143(2) of the Act hence, assessment is bad in law being void ab initio. 3. Assessment completed was merged with the reassessment proceeding which itself was also withou....