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2023 (6) TMI 512
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....on entries? 3. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the A.O be restored. 4. The appellant craves leave to add, delete, alter, amend and modify or all grounds of appeal. 2. The brief facts of the case are that the assessee is a partnership firm and is engaged in the business of construction of housing projects. The assessee has filed the return of income for the A.Y 2013-14 on 08.01.2014 disclosing a total income of Rs. Nil and the return of income was processed u/s 143(1) of the Act. There was a search and seizure operations conducted in the case of Shri Bhanwarlal Jain & group/concerns which are providing accommodation entries. The Assessing Officer (A.O) has received the information that the assessee is one of the beneficiaries of the accommodation entries provided by the group concerns. Therefore the AO has reason to believe that the income has escaped assessment and after recording reasons for reopening of assessment, the AO has issued notice u/s 148 of the Act. In compliance to notice, the assessee has filed a letter dated 04.08.2015 to treat the original return of income filed on 08.01.2014 as d....
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.....4.40crores and disallowance of interest on loans of Rs.29,57,455/- and assessed the total income of Rs.4,69,57,460/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 21.03.2016. 5. Aggrieved by the order the assessee has filed an appeal before the CIT(A). The appellate authority has considered the grounds of appeal, statement of facts, findings of the AO, written submissions and the judicial decisions. The CIT(A) has observed that the assessee has discharged the burden by submitting the requisite information and the onus lies on the AO to make enquires and deleted the addition. The CIT(A) has considered the submissions of the assessee referred at Page 3 Para 2.3 of the order as under: THE APPELLANT'S CONTENTIONS & SUBMISSIONS: Submission of facts of the case vis a vis relevant judicial pronouncements will assist immensely to your goodselves in arriving at reasonable & judicious conclusion. Taking into consideration significance of this aspect, the fact of the case is narrated in nutshell along with judicial dictums herein under, FACTS OF THE CASE: 1. The appellant is a partnership firm having its registered office at 101, B- Wing, Lan....
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.... had proved the transaction of loan as genuine. It becomes crystal clear that the appellant had discharged its primary onus establish the to genuineness of the transaction by producing details of the parties. 12. One more point on facts was explained by the appellant to the Ld. A.O. that the appellant had never agreed before the Ld. A.O. that the said loan was not genuine. 13. Since all the primary facts and details were made available on record, the Ld. A.O. had to draw a reasonable inference on merit of the case depending upon the details filed by the Appellant and not mechanically add the loan amount declaring as bogus merely on certain information received and without verifying the same. 14. The Appellant had discharged its onus of proving the transaction as genuine with all sorts of evidences and then the responsibility to prove the transactions otherwise shifts on the shoulder of the Assessing Officer. Thus, without establishing the loan is bogus with corroborative independent evidences and findings, and not controverting the evidences and details filed, by assessing the alleged addition made in the hands of the Appellant is liable to be deleted. ....
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....ogus he made additions as above, without adducing any - evidence other than some information received from the investigation wing which information have not been supplied to the assessee at any stage The facts of the case of the assessee is that the assessee company took genuine loan from the aforesaid companies. The acceptance of loans and the repayment of loans are through A/c payee cheques. Interest have been paid regularly after deducting T.D.S The assessee had filed Quarterly Returns of T.D.S. Besides the assessee has produced the following details before the A.O.: 1. Loan Confirmation from the above parties. 2. PAN No. of them. 3. Ledger extract. 4. Copy of the Return of Income of the Firm/ Company who advanced the loan. 5. Copy of Bank accounts. The aforesaid details have been filed before the A.O. However, the Assessing Officer throughout the assessment order is making the assessment of Bhanwarlal Jain Group and he has nothing to say about the onus of the assessee or the fulfillment of the condition precedent for charge of any amount u/s 68 of the I.T. Act, 1961. The assessee has produced the Confirmati....
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....was doing only name-lending; and (ii) that N.M., D.K.N., B.S. and others, whose names too were mentioned in the list of the creditors of the respondent, were known name-lenders. The respondent thereupon filed a writ petition claiming that there was no material before the Income tax officer on which he could have reason to believe that income chargeable to assessment for the year had escaped assessment by reason of the respondent's failure to disclose material facts, and stated that he had produced all books of account, bank statements and other necessary documents in connection with his return. The High Court, by a majority held that the pre-conditions for the exercise of jurisdiction under section 147 were not fulfilled. On appeal: Held, affirming the decision of the High Court, on the facts. i. That the second ground could not have led to the formation of the belief that the income of the respondent chargeable to tax has escaped assessment for the assessment year 1958-59 because of failure of the assessee to disclose fully and truly all material facts. ii. That since there was nothing to show that the confession of M.K. related to a loan to the assessee, muc....
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.... the file of the Revenue. The Revenue, apart from issuing notices 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 were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case. In view of all these facts, what is required is to prove 3 things as held by the Courts in case of Cash Credits u/s. 68 of the I.T. Act, 1961. In the case of the assessee, Identity of the person is proved beyond doubt as the persons have been borne on the Register of Income-tax Department as their permanent A/c No. is filed before the Assessing Officer and they are re....
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.... 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 can 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 a/c payee cheque. Creditworthiness of the lender can be established by attending circumstances. The only base on which the ld AO made addition is the statement given by Shri bhanwarlal jain. The statement given by Shri Bhanwarlal Jain at the time of search was given under stress and mental pressure as stated in the retraction statement given by him. But the Ld. AO did not consider the fact of retraction by Shri Bhanwarlal Jain and merely added the sum. The loans are genuine and we do not agree with the stand taken by the Ld. AO. Point wise submission with case laws is as under: 1. Onus Discharged By The Appellant: For making the aforesaid addition the AO has discussed the reasons in the assessment order. The AO disregarded our contention made during the course of assessment proceedings and merely relied on the informatio....
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....rtfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. were also engaged in providing accommodation entries, particularly when no evidence was brought on record in support of the said presumption. In the present case, as we have already noted that the assessee discharged the onus cast upon it to prove the identity of the share applicants, their creditworthiness and genuineness of the transaction. Therefore, the addition made by the AO u/s 68 of the Act was rightly deleted by the ld. CIT(A). In that view of the matter we do not see any merit in this appeal of the department. - Decided in favour of assessee. > Gurmeet Singh c/o. JS Kochar & Associates vs. ITO 2016(6) TMI 839-ITAT Delhi Reopening of assessment - accommodation entry received - information received from the DIT (Inv.) - Held that:- Notice u/s 148 has been issued in a mechanical manner on the basis of vague information from Directorate of Inspection (Inv.). The AO did not dwell upon the veracity and the basis of information received. He has not mentioned any material which has led him to believe that the amount deposited in the bank account represented accommodation entry which has escaped assessment. He has s....
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.... provided the entries to the assessee after receiving the amount in cash, however, nothing was brought on record that how and in what manner the persons from whom the assessee received the loans were entry operator and that as to how the cash was paid by the assessee. In fact the aforesaid conclusion of the A.O. is unhelpful in understanding as to whether the AO applied his mind to the material, particularly when he did not describe how and in what manner it came to his knowledge that the assessee received the accommodation entries. Thus the reopening done by the AO u/s 147 of the Act was not valid and accordingly the subsequent assessment framed by the AO was void-ab-initio and therefore the same is quashed - Decided in favour of assessee. > Pr. CIT vs. Shankar U. Jatwani 2016(8) TMI 108 Gujarat High Court Addition on account of unverifiable and bogus liability- ITAT deleted the addition stating that the same can't be added u/s. 41(1) or Sec. 68- Held that:- As the entire issue is based on appreciation of evidence on record. CIT (Appeals) as well as the Tribunal both concurrently found that the assessee had produced sufficient material to establish t....
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....e. > U.M. Shah, Propreitor, Shrenik Trading Co. 90 ITR 396 (Bom.) It was held that it was not for the assessee to produce the witness without summons. The assessee having discharged the initial onus of giving complete name and address of bankers and confirmation letters it was for the Income-Tax Officer to show that the explanation rendered by the assessee was untrue. Brij Pal Sharma, 333 ITR 229 (P & H), It was held that it was not open to the A.O. to determine the matter without any further investigation so as to be able to repudiate the material relied upon by the assessee. It was open to the A. O. to exercise authority vested in him u/s. 131 of the Act, to determine the veracity of the material relied upon by the respondent assessee. Having not taken the aforesaid imperative procedural requirement, it was not open to the A.O. to reject the material produced by the respondent-assessee. > Hi Lux Automotive (P.) Ltd, 183 Taxman 260 (Del.) Business expenditure-Allowability-Genuineness of purchases-AO initially-AO has allowed the payments made to two parties on the basis that the payments were made to them by means of account pay....
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....s of the suppliers, supported with documents which was expected from a prudent purchaser to establish the genuineness of claimed transaction; besides the payments had been made through account payee cheques and goods purchased from the four parties had been exported by the assessee in the same size, shape and weight, duly verified by the Customs Authorities. The AO was not justified in doubting the genuineness of the claimed purchases made by the assessee from the occasion the parties were not found on the given addresses or in some other cases some connected person to the supplier stated that they were only issuing bills without supplying goods or that the money paid by the assessee against purchases was withdrawn by those parties. Undisputedly, after completion of a transaction a purchaser cannot have control over the suppliers and suppliers are always at liberty to use the money paid to them against the goods sold by them. Thus, in the absence of any positive evidence that the goods were not purchased from the above parties but from some named person or that the money paid by the assessee against the goods was ultimately returned to the assessee by the suppliers, there was no oc....
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....ation. The Ld. A.O. failed to provide any such opportunity to the appellant to confront and cross-examine the purchase parties. The legal effect of the statement or affidavits recorded behind the back of the appellant and without furnishing the copy thereof to the appellant or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice. Your honour's kind attention is invited to the following cases supporting the submission that no addition can be made when the A.O. does not provide any opportunity to confront the parties and cross-examine the evidence obtained by him: Kanwar Natwar Singh vs. Directorate of Enforcement (Supreme Court (October 8th, 2010):- Non-furnishing of "all documents" does not violate principles of natural justice. Natwar Singh & Jagat Singh ("Natwar Singh") were alleged to have dealt in and acquired Foreign Exchange totalling US $ 8,98,027 in respect of some Iraq oil contracts in contravention of FEMA. A notice was issued asking Natwar Singh to sow-cause why an inquiry should not be held against them. In re....
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....R was liable to be set aside for violation of principles of natural justice. The High Court of Calcutta Eastern Commercial Enterprises, 210 ITR 0103 It was held that the right to cross-examine a witness adverse to the assessee is an indispensable right and opportunity of such cross- examination is one of the cornerstones of natural justice. High Court Of Calcutta. Bangodaya Cotton Mills Ltd. Vs. Commissioner Of Income Tax 224 CTR 62 AO having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross-examination, the order passed by the Tribunal upholding the addition is set aside and the matter is remanded back to the AO to consider the matter afresh. >High Court Of Delhi Commissioner Of Income Tax Vs. Dharam Pal Prem Chand Ltd (2007) 212 CTR (Del) 253 "Assessment-Validity-Opportunity of being heard-AO making assessment on the basis of report obtained from an institute as regards percentage of silver contents in different brands of chewing tobacco manufactured by assess....
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....ssment under s. 153A the addition is liable to be deleted- Addition cannot be made on the basis of documents found from the residential premises of a third person (employee of company) unless positive material is brought on record by the Revenue that the assessee in fact had received any extra money on account of overbilling- Further, assessee having denied under-billing and receipt of extra consideration and having furnished in support comparable sales and details of parties with whom transactions were made, no addition under s. 153A could be made by AO without making any attempt at verification and without bringing any positive material on record. High Court Of Madras M. Pirai Choodi Vs. Income Tax Officer (2008) 302 ITR 40 (Mad) "Writ-Alternative remedy-Violation of principles of natural justice vis-à- vis assessment-Respondent Department refused to agriculture income shown by the petitioner (assessee) by placing accept the reliance on the statement of the Village Administrative Officer, overlooking the materials furnished by the petitioner to substantiate his agriculture activity-Admittedly, petitioner was not present when the statement of the Village A....
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..... In case the AO was relying on the statements of a person then the assessee would have to be given an opportunity to cross examine. > DCIT vs. Mahendra Ambalal Patel, 40 DTR 243 (Guj.) It was held that no addition can be made merely on the basis of a bald statement of a third party without there being any corroborative evidence particularly when the assessee was not allowed to cross examine. Hence, from the analysis of these judgments, one thing is clear that the appellant was not given proper opportunity to prove the claim and the affidavit has been used against the appellant which is against the rule of natural justice. The department has not made any special investigation to prove the transaction bogus; the addition is just on the basis of the list provided by Shri Bhanwarlal Jain in his statement at the time of search and the information received from the DGIT (Inv.). We would request your honour for giving us a chance for cross examination before making any conclusion in our case. 3. Ld. A.O. Relied On Information from DGIT (Inv.) Blindly And Did Not Conduct Any Independent Inquiry: Your appellant submits that the statemen....
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.....e. person who issued a bill for purchase of goods without delivery) by the Maharashtra VAT department. On appeal, the CIT(A) deleted the addition. On appeal by the department to the Tribunal HELD dismissing the appeal. > High Court Of Mumbai - Nikunj Eximp Enterprises Pvt Ltd Vs CIT Where in it was held that the respondent appellant having been filed the confirmation letters of suppliers, copies of bank statement showing entries of payment, copies of invoices and stock statement giving complete details of movements of the stocks and the books of account not rejected and the sales not being doubted-the purchases cannot be treated as bogus. > Permanand Vs. Income Tax Officer 107 TTJ 395 (Jodh.) Income from undisclosed sources-Addition under s. 69- Alleged bogus purchases-AO received information from the Sales-tax Department that the purchases made by the appellant from two parties were bogus- Solely relying on the same, AO made addition under s. 69-Not justified-No addition can be made in the hands of the appellant merely on the basis of observations made by a third party-While making the assessment, it is the satisfaction of the AO which is of pr....
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....said imperative procedural requirement, it was not open to the > R.K. Synthetics Vs. Income Tax Officer [2003] 81 TTJ (Jd) 909 "This is an undeniable fact that the addition in question under section 69 has been made on the sole basis of the statement of the partner K recorded by the Central Excise authorities the fact of which has been incorporated by the CIT (A) in his order. This is also an undeniable fact that the AO never recorded any further statements of K or anybody else. A copy of the statements recorded by the Central Excise authorities was never provided to the assessee. No independent investigation was carried out by AO, though he proposed to make addition under section 69 in the hands of the assessee. There were no evidences of suppressed sales and sales declared by the assessee were fully accepted by the AO and no action was taken by the Sales Tax Department despite there being information from the Central Excise authorities regarding statement of the partner. The assessee had maintained complete financial and quantitative records and no specific defect were pointed out by the AO in the books of accounts. It was thus held that Addition under section 6....
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.... where there is no evidence to show that money which seller party withdrew reached back to appellant, addition cannot be made. > ITO VS. Sunsteel 92 TTJ (Ahd) 1126: Income from undisclosed sources- addition u/s 69Cunaccounted purchases- Appellant was not able to prove the existence of certain suppliers from whom purchases were said to be made- However, AO had no material to prove that payments of purchases came back to the appellant-If addition made by AO is sustained GP would come to 100.6 percent which is not possible-since suppliers were not produced it is possible that appellant has made purchases from unregistered dealer to get benefits of margin of purchases- hence addition is restricted to Rs. 50,000. > Commissioner Of Income Tax Vs. M.K. Brothers. (1987) 163 ITR 249 (Guj "Whether the said transactions were bogus or not was a question of fact. The Tribunal has also pointed out that nothing is shown to indicate that any part of the fund given by the appellant to these parties came back to the appellant in any form. It is further observed by the Tribunal that there is no evidence anywhere that these concerns gave vouchers to the appellant. E....
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....the Tribunal no evidence anywhere concerns vouchers the appellant. the two statements do not implicate any way. the Tribunal the evidence is 5. Interest income claimed as income Your honour note from the attached annexures that the alleged parties of income books accounts disallowance of interest confirmed by your honour added the hands appellant. Also where the interest paid cannot be considered bogus added to the income the appellant. appellant has relied following case laws 269 273/Kol/2011 The said loan creditor companies were regularly taxed on their income particularly they shown the interest accrued them. The Assessing Officer returns of it should mean that the amounts given these creditors creditors return wherein income. for the business have decided the of addition on account bogus loan against Department favour of assessee. This which was the above loan and the commission paid on the alleged loan which are of consequent in nature and has to be decided in favour of the assessee and against the Department. Therefore, this interest can not be taken as undisclosed income of the assessee > Ratan Muhury vs. ITO ITA No. 1812/Kol/2009....
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....inal Gems 2,40,00,000/- 3 Naman exports 68,00,000/- During the appellate proceedings, the Id AR has filed detailed submissions and other relevant documents in a paper book. She has also refereed to several case laws on which they rely in support of the ground of appeal. I have carefully considered the facts of the case and submissions of the Id AR. I have also gone through the decisions relied on by the AO and Id AR. It is observed that during the assessment proceedings the appellant has filed relevant details required to prove the identity and creditworthiness of the investing companies and the genuineness of the transactions in the form of PAN, incorporation certificate, memorandum of associate, IT return copies, confirmations, bank statements, audited accounts etc as evident from the record. The Id AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of the investment can not be doubted. Hence the AR argued that appellant has discharged its onus and the identity, - genuineness and creditworthiness of the four companies were proved beyond doubt. The excessive reliance on the statements given by the third-....
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....roborative evidence or document which he relied on to the appellant and also failed to prove how the details like PAN, IT returns, audited financials, incorporation certificates, bank statements etc can not be taken note of in this regard. The Honble Mumbai ITAT in the case of Anant shelters P Itd 20 Taxmann.com 153(2012) has laid down certain principles with regard to section 68 which the AO is bound to follow. It has observed as under: "(i) section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by the assessee. (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the Assessing Off icer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credi....
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....ty of the creditors by either furnishing their PANS or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Creditworthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and creditworthiness of the lender onus of proof shifts to the revenue." 2.4.8 The Honble Apex Court in the case of Lovely Exports Pvt Ltd. 216 CTR 195(SC) 2008 held that the AO is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. The AO should have made efforts to assess the amounts in the hands of the investors at least on protective basis. Even in case, the creditworthiness of the investors is not proved it will not automatically give license to the assessing authority to make additions in the hands of the recipient u/s '68 unless it is proved that it is the unexplained and unaccounted money of the appellant which has been introduced in its books of account in the name of bogus/non-existent entities. As it is observed that,....
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...., whereas the A.O has ignored the information, evidences and Audited financial statements and unilaterally made addition u/sec68 of the Act and disallowed the interest payments. The Ld. AR emphasized that the assessee has discharged its burden by submitting the financial statements of the lenders where the payment is made through banking channel and identity, creditworthiness and genuineness of the lenders were proved in the assessment proceedings. Further the assessee has submitted the Audited financial statements, confirmations, Bank statements, copy of the income tax returns and TDS was deducted on the interest payments. Whereas the A.O has disbelieved the fact of identity, creditworthiness and genuineness of the transaction. Further to substantiate the identity of lenders, the assessee has filed the income tax PAN and return of income on the genuineness of the transaction, the assessee has submitted the bank statements and also credit worthiness is substantiated with the Audited financial statements. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act. The Ld.AR submitted that the assessee has substantiated the stand by ....