TaxTMI 
TaxTMI 
2023 (6) TMI 512
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.... 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 due compliance to the notice issued. The assessee has requested fo....
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....nd 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, Landmark Building, 1st Floor, 150 Pali Road, Nr. HDFC Bank, Bandra (West), Mumbai-400050. 2.....
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.... 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. 15. The Ld. A.O. failed to appreciate the overwhelming evidences produced in support of the claim and passed an order u/s. 143(3) making an addition of Rs. 4,69,57,455/-....
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.... 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 Confirmation Letters, Bank Statements showing Credit entries as well as repayment by Cheques encashed through Banking Channel. Besides, the assessee produced the Income tax Return as well as the Bank Statements and ledger extract of the parties concerned. Besides, the A.O. issued s....
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....ich 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, much less to the loan which was shown to have been advanced by that person to the respondent, in the first ground the live link or close nexus which should be there between the materials before the Income tax officer and the belief which he has to form as missing or in any event too tenuous to provide legally ....
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.... 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 regularly filing their Return of Income. Capacity of the person is also proved beyond doubt as the Loanee had given the Loans through Banking Channel and the repayment is also made through Banking Channel. Besides, Copy of Bank Passbooks of both the parties also available as it has been produced by the assessee before the A.O., the Creditors have confirmed....
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....d 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 information received from the DGIT (Inv.). The AO only considered the statement given by Shri Bhanwarlal Jain at the time of search proceedings at their premises, without considering the fact that such statement was later on retracted by him. The AO has given the detailed analysis of the Balance sheet of the three firm and came to the conclusion that they are having very low net prof it and they use their business fund to ....
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....s 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 simply filled up a proforma mentioning the information received. Therefore, the notice u/s. 148 is patently illegal Reasons do not satisfy the requirements of s. 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement. Further, it is apparent that the AO did not apply his own mind to the information and examine the basis and material of the information. The AO accepted the ....
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....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 the claim. The Assessing Officer had raised demands which were not possible to meet with. - Decided against revenue. The ITO, Mumbai vs. Shri Subodh R. Nemlekar 2016 (7) TMI 534, ITAT Mumbai Addition u/s 68 - Held that:- CIT(A) has rightly deleted the addition of 15,00,000/- on the basis of this fact that the HUF has given loan to one Shri Bhushan Nemlekar in A.Y.2003-04 and 2004-05 of 15,00,000/- which were reflected in balance sheet. The bank statement also speaks about the entry on various dates. Mr....
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....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 payee cheques and the same were actually credited in their bank accounts, even though they were not maintaining books of account- Proprietors of BE and SS have confirmed that they had received the payments by means of account payee cheques and specifically affirmed that they had been supplying goods/raw material to the appellant-Appellant produced the bank statements of these parties which clearly show that the payments made by the appellant were duly credited in the bank accounts of the said suppliers-Thus, these two cases are at par with those in which the payments have been allowed a....
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....lls 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 occasion before the AO to deny the claimed purchases, especially when the genuineness of the export of those goods by the assessee had been accepted by the AO. The Commissioner (Appeals) had, thus, rightly deleted the addition." In nutshell, the AO did not make any proper investigations and did not disprove the evidences given by the assessee. The AO could have make inquiry from the bank records also. Details of the purchase parties are available on various websites being Private Limited Companies, the detailed investigation could have been carried out on the basis of those details also. But AO simply choose to add th....
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....ies 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 response, Natwar Singh demanded that the Adjudicating Authority furnish "copies of all documents in possession in respect of the instant case, including the 83000 documents allegedly procured by one Virender Dayal". The Adjudicating Authority furnished copies of the documents as were relied upon by it but declined to furnish copies of other document and decided to hold an inquiry in accordance with FEMA. This non- furnishing of "all documents" was challenged by Natwar Singh in the Delhi High Court which dismissed the challenge. Natwar Singh challenged the decision of the High Court in the Supreme Court. HELD, dismissing the appeal: The extent of applicability of pr....
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....ssed 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 assessee-Assessee challenging the said report as incorrect and requested the AO on several occasions for giving opportunity to cross examine the analyst-Assessee even offer to pay necessary expenses for the purpose-AO not allowing opportunity of cross examination-There was clear violation of principles of natural justice-CIT(A) and Tribunal were justified in setting aside the assessment on that ground no substantial question of law arises. > High Court Of Kerala Commissioner Of Income Tax Vs. C. F.Thomas (2006) 204 Ctr (Ker) 21 Capital gains-Transfer-Lease of property under unregistered lease deed-Any transaction by way of any agreement or arrangement which has the effect of transferring or enabling the enjoyment of any immovable ....
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....lation 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 Administrative Officer was obtained by the assessing authority-Recording of such a statement without giving the petitioner an opportunity to cross-examine the Village Administrative Officer amounted to glaring violation of the principles of natural justice- Therefore, writ petition could not be dismissed on the ground of availability of alternative remedy-Impugned assessment order quashed. > High court of Rajasthan Commissioner Of Income Tax Vs. Geetanjali Education Society 174 taxman 440 Appellant, registered under s. 12A, could not be denied exemption under s. 11 on the ground that donations were bogus without examining the donors and subjecting those donors to cross-examination who had been examined. > High court of Delhi Genesis Commet (P). Ltd. 163 Taxman 482 (Del.....
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....ion 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 statements were recorded by the search and survey team of the Income Tax and not by the Ld. A.O. himself. Further these statements were forwarded to the Ld. A.O. of your appellant with a direction to treat the transaction in question as nongenuine transaction. The Ld. A.O. did not himself investigate the facts and did not ascertain the genuineness of the transactions. The Ld. A.O. only relied on the information received from the DGIT (Inv.) and formed an opinion against the appellant company. It was the primary duty of the Ld. A.O. to investigate the facts and to put them before the appellant for crossexamination. The Ld. A.O. thus failing to do so, made an addition to the purchases of the appellant on the basis of surmises and conjectures and by violating the principles of natural justice. Your honour may note that the Ld. A.O. blindly relied on the information provided by the DGIT (Inv.....
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....lying 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 prime importance-It cannot be substituted by the satisfaction of someone else-Appellant has discharged the primary onus cast on him by showing the purchases in the books of accounts, payment by way of account payee cheques and producing the vouchers of sale of goods- AO did not make requisite investigations against the said sellers- Moreover, no opportunity was given to the appellant to confront the sellers-Addition rightly deleted. > Jagdamba trading company vs ITO ITAT Jodhpur SMC bench 2007 Where it was held that the averment of the seller in his affidavit in sales tax proceedings that he has not made any sales during the relevant year, same cannot be relied upon, particularly when no opportunity of cross examination was given to the appellant. > CIT VS. Leaders Valves P Ltd High Court Of Punjab And Hariyana 2006 It was held that there is no basis for treating the purchases made by the appellant from seven scrap dealers as ....
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....ained 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 69 made solely on the basis of statement of assessee's partner recorded by the Central Excise authorities, without any supporting evidence whatsoever is invalid." >ITO VS. Arora Alloys Limited 12 ITR 263 " Addition made of unexplained expenses on sole basis of information received from Central Excise department was held not to be justified." > N. K. Proteins Ltd. Vs. DCIT (2004) 83 TTJ 904 It was held by the Hon'ble Ahmadabad ITAT that - "the entire findings given in the assessment order are based on affidavits and statements obtained by Addl. DIT under Section 131(1A). The AO has simply placed reliance on appraisal report sent by Addl. DIT/Dy. DIT and has reproduced the affidavits/statements of the alleged bogus suppliers. The AO has not made any independent examination in the course of assessment proceedings. The assessment proceedings are quasi- judicial proceedings. The burden lies on the AO to prove by bringing positive material and evidence on records to prove that the purchases made by the ....
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....ther observed by the Tribunal that there is no evidence anywhere that these concerns gave vouchers to the appellant. Even the two statements do not implicate the transactions with the appellant in any way. With these observations, the Tribunal ultimately has observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the appellant from these parties were bogus. 5. Interest income claimed as income by alleged parties: Your honour may note from the attached annexures that the alleged parties that were considered to be bogus by the Ld. AO at the time of assessment have filed their return of income and maintained proper records. They have shown interest paid to them by the appellant as income in their books of accounts and filed their return. If the disallowance of interest is confirmed by your honour and added to the income of the appellant, the same shall be taxed twice. On the first part it has been offered as income by the alleged parties and again in the hands of the appellant. Also where the loan are considered as genuine, the interest paid on it cannot be considered bogus and added to the income of the appellan....
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.... > Ratan Muhury vs. ITO ITA No. 1812/Kol/2009 After hearing the rival submissions and on careful perusal of material available on record, keeping in view of the fact that all the loan creditors have shown the transactions in their books of accounts and offered interest income on the same in their respective returns of income which were evident from the paper book filed by the assessee. We find no justification on the part of the Revenue to disbelieve the same based on the Inspectors report only. Therefore we delete the additions of Rs.3,65,110/- made u/s 68 of the IT Act and consequential disallowance of Rs.65,72/- on account of interest. The case laws referred by the LD AO: > NANAKCHANDRA LAXMANDAS VS CIT > In this case, only confirmation letter has been given and no other details were given, hence this case is not applicable to the case of the assessee. > CIT VS PRECISION FINANCE PVT. LTD. The fact of this case is totally different and not applicable to our case. > NIZAM WOOLS AGNECY VS CIT > In this case, the payments has been made by crossed cheques and was encashed in partners account. In our case all payments are by account payee cheques. > DCIT VS PH....
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....ant does not know is considered to be not proper even without giving the appellant a chance to cross-examine the persons who had given such adverse statements. She further argued that addition was made without providing the appellant the corroborative evidence in the possession of the AO to prove that the appellant has paid the cash, as alleged, against the receipt of cheques. On the other hand the Id AO has believed the documents) submitted before him was engineered to explain bogus i that the those who involved in accommodation entries in an evidence (supporting investment saying organized way are meticulous in arranging the make-believe documents. He further believed that the said key-persons of Pravin Kumar Jain group have given categorical statements stating that they have involved only in bogus transactions by giving accommodation entries by giving cheques in exchange of cash through their group entities. The Id AR on the other hand argued that the AO has ignored the fact that all the statements were retracted by Bhawarlal Jain and all his associates. It is alleged that the failed to collect further information and not made any efforts to disprove the genuineness of the trans....
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....pting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is found unbelievable or false the Assessing Officer is not required to bring positive evidence on record to treat amount in question as income of the assessee. While considering the explanation of the assessee, the Assessing Officer has to act reasonably-application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits - should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. (iv) In the....
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.... and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these three unsecured loan parties. As seen from the above, the appellant has furnished all the documents and details proving conclusively the three ingredients of identity, creditworthiness of the share-applicants and the genuineness of the transaction. The amounts were paid by investors from their running bank accounts which were duly accounted in the books of the appellant as well as the investors as evident from the audited financial statements filed. These three unsecured loan lender companies have confirmed the transaction. In view of the above discussion, I hold that the unsecured loan received from these three concerns can not be doubted and addition made by the AO u/s 68 of the Act cannot survive the test of appeal. therefore direct the AO to withdraw the addition. This ground is allowed. Ground No. 2 is connected with the ground No.1 and raised against the addition of Rs.29,57,455/- being interest paid on the above unsecured loans of Rs. 4,40,00,000/-. Since Ground no. 1 of the appellant is allowed in its favour, this ground deemed to be automatically allowed. Aggrieve....
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....cial decisions as under: 1. DCIT(CC) vs. Jainam Investments (ITAT, Mumbai) [I.T.A. No. 6099/Mum/2016; order dated 10.08.2018] 2. ACIT vs. Sumit S. Jain (ITAT, Mumbai) [ ITA No.: 145/Mum/2017; order dated 12.03.2018] 3. DCIT vs. Manish Flour Mills Pvt. Ltd (ITAT, Mumbai) [ITA No.: 6729/Mum/2016; Order dated 24.10.2018] 4. Indravadan Hanjarimal Jain vs. ACIT ( ITAT, Mumbai) [ITA Nos.278/Mum/2020; Order dated 08.9.2021] 5. ACIT vs. Neminath Associates ( ITAT, Mumbai) [ITA No.: 8034/Mum/2019; Order dated 14.06.2021] 6. Nadiadwala Grandson Entertainment Pvt. Ltd. Vs. DCIT (ITAT, Mumbai) [ITA No.: 1492/Mum/2021] (relevant extract) 7. PCIT vs. Ambe Tradecorp (P.) Ltd [2022] 145 taxmann.com 27 (Gujarat) 8. CIT vs. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat) 9. JCIT vs. Shalimar Housing & Finance Ltd (ITAT, Mumbai) [I.T.A. No. 4079/Mum/2019; order dated 01.06.2021] 10. Manibhadra Securities Services P.Ltd. vs. ITO (ITAT, Ahemdabad) [ITA NO.: 2507/Adh/2018; order dated 24.08.2022] 11. Shree Samruddhi Overseas Trading Co vs. DCIT (ITAT, Ahmedabad) [ITA 909/Adh/2018; order dated 19.04.2021) 9. We find in spite of filing all the details,....