TaxTMI 
TaxTMI 
2024 (3) TMI 710
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.... act and accordingly Treated the same as unexplained credits and added the same to the income of assessee under section 68 R.W.S. 115BBE of The act. 2) On the facts & circumstances of the case the Ld CIT erred in making an addition of Rs. 1,25,00,000 an treated as unsecured loan u/s 68 of the income tax act 1961 3) On the facts & circumstances of the case the Ld CIT erred in making an addition of Rs. 62,81,903 an treated as interest expenditure u/s 57 of the income tax act 1961 3. We proceed to adjudicate the issues raised by the assessee ground wise. 4. Brief facts of the case are, assessee is an individual earns income from salary, income from business, income from capital gain arising out of investment in securities and income from other sources. Assessee has filed his return of income for A.Y. 2015-16 on 27.08.2015 declaring total income at Rs..93,31,370/-. The return of income was selected under scrutiny and accordingly statutory notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (in short "Act") were issued and served on the assessee. 5. The case has been brought under scrutiny assessment based the on the information received from DDIT (Inv.) Unit Kolk....
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....n gathered u/s 133(6) of the I.T. Act. The assessee's contention that the evidence cited by the revenue could not be cross examined lacks force. The assessee has not brought out any facts which are different from the findings narrated in the show cause notice dated 16.12.2016. Reliance in this regard is placed on the decision of ITAT Mumbai in the case of M/s. Golden Tobacco Ltd. V/s CIT(65 ITD 380) wherein it had held as under: "we have taken a view that adverse evidence and material, relied upon in the order, to reach the finality should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. We have also taken a view that right to cross-examine the witness, who made adverse reports is not an invariable attribute of the requirement of the dictum, "audi alterant partem". More ever, all the exit providers and operators are Kolkata based and the assessee has raised issue of cross examination only at the fag end, in the submission filled on 15.12.2017. The assessee in his reply dated 15.12.2017 stuck to his point regarding the genuineness of trade and long term capital gain. However, in the....
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....in Vs. PCIT-1, Nagpur on the issue of Bogus LTCG from Penny stocks had held as under "The assessee has not tendered cogent evidence to explain how the shares in an unknown company worth Rs. 5 had jumped to Rs. 485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise, the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit u/s 68. The assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain." The Income Tax Appellate Tribunal had earlier dismissed the appeal file by Sanjay Bimalchand Jain. B. In the case of Sumati Dayal reported in 214 ITR 801 the Hon'ble Supreme Court had held that matter had to be considered by applying the test of human probabilities. Having regard to the facts and circumstances as elaborately discussed in this order and inference could reasonably drawn that by all human probabilities, it is very difficult to accept that the assessee has done a genuine transact....
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....tisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The plain and simple reading of the section 68 unambiguously demonstrate that the section is applicable only in the circumstances where the assessee maintains books of accounts, amount is credited in such accounts and either the explanation about the source and nature of income is not given by the assessee or the explanation is not satisfactory. It is submitted that the assessee is under no legal obligation to maintain books of accounts and nothing has been brought on record by the AO to establish that the assessee had maintained books and the credit was found in the books maintained by the assessee. However, the assessee submits that the assessee not only explained that the sum credited in his bank account was out of sale consideration received on account of sale of shares but also identified the parties from who the amounts were received and the entire trail of transfer of funds and transfer of share through the Demat Account. The assessee also explained the acquisition of shares and the source of payment towards their purchase. None of these facts have been controver....
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....t found any fault with it. The fact that the Investigation Dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated. Smt. Nirmala Yadav vs Ito (2017)183TTJ 769 (Jodh) Held before invoking section 68, maintenance of the accounts by the assessee itself and finding credit of the subjected amount therein are the conditions precedents and without satisfying them, the Assessing Officer cannot invoke section68. No addition could be made under sec.68 where the assessee did not maintain any books of accounts and the subject amount was not found in her books of accounts which was precondition and amount was found deposited in assessee's bank account. Submissions of merits The assessee had purchased two lakhs equity shares of M/s. Marigold Glass Industries Ltd under a preferential allotment for a price of Rs. 24,00,000/- having face value of Rs. 10 with premium of Rs. 2 per equity shares. The purchase consideration was paid by account payee cheques drawn on HDFC bank. There is no dispute with regard to purchase of the said shares. Later on due to split inface value 2,00,000 shares were converted into twenty lakhs shares. The....
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....lready been decided in favour of the assessee by the plethora of decisions passed by the Hon'ble Supreme Court & Hon'ble High Courts and ITAT wherein, similar views of lower authorities on basis of probabilities and stated investigation wing information, have been consistently overruled and exemption claimed u/s 10(38) of the Act has been restored once basic documents relating to transaction are put in place and same remained thoroughly undoubted by any direct enquiry on part of AO. Reliance is placed on the following judicial pronouncement amongst others 1. PREM PAL GANDHI (2018)401 ITR 253 (P&H) 2. Principal CIT vs Rungta Properties in ITA No.105 of 2016 dated 08 May, 2017 (Calcutta High Court) 3. M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 4. M/s. GTC Industries 164 ITD Page 1(ITA No.5996/Mum/1993) "E", BENCH MUMBAI (SPECIAL BENCH) 5. Navneet Agarwal, Legal Heir of Late Kiran Agarwal(I.T.A No. 2281/Kol/2017) "C" BENCH : KOLKATA 6. Jagmohan Agarwal I.T.A. No. 604/Kol/2018 "D" BENCH , KOLKATA 7. CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009 8. CIT vs. Vishal Holding and Capital Pvt. Ltd v....
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....O.to help the assessee by issuing Summons to the depositors to justify or otherwise confirm the creditworthiness of depositors. (4) It is the duty of the Assessing Officer and the authorities up to and including the hon'ble Tribunal to consider all the facts and record which is before them and which is in its command (which can be made available by him by exercising his authority) and then record its findings on all contentions. The enquiry too must be conducted in accordance with the rules of natural justice. (5) As held in Jalan Timbers vs. CIT (1997) 223 ITR 11 (Gauhati)- cogent reasons are necessary for rejection of evidence. (6) Even if assessee requests for confrontation of back material and AO do not provide so, said back material will become unreliable and consequential addition will be not tenable at law. Submission on the addition of Rs. 1,25,00,000 under section 68 and disallowance on interest of Rs. 62,81,903 under section 57. The assessee had taken various loans totally amounting to Rs. 11,47,54,556/- out of the total loans , loans amounting to Rs. 1,25,00,000/- were taken from three companies namely JMD Telefilms Industries, Blue circles services Ltd and....
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....n deserves to be deleted. With regard to the disallowance of the interest of Rs. 62,81,903/- the learned AO has stated that the interest paid to those parties who have been charged with alleged fraudulent and manipulative activities and hence the loans were treated as unexplained cash credits. Therefore the interest, according to the AO was not allowable. It is submitted that the total loans were not restricted to Rs. 1,25,00,000/- but the assessee had obtained a total loan of Rs. 11,47,00,000/- and had earned an income of Rs. 1,42,59,612/- and paid interest of Rs. 1,08,59,003/- on the loans taken and therefore a net income of Rs. 34,00,609/- was offered for taxation. At the cost of repetition it is once again submitted that the TDS provisions were applicable on the interest transactions whether received or paid and hence there is no chance to question or guess or make suspicions on these transactions and therefore the disallowance of interest is totally arbitrary , unjustified and without any basis and hence the addition made under this head also deserves to be deleted. In view of above submissions, evidences and various judicial pronouncement relied upon by the assessee it is p....
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....e assessee has selected the shares of M/s.Greencrest Financial Services Ltd. (earlier known as M/s. Marigold Glass Industries Ltd.)for the purpose of converting his unaccounted income into tax exempt LTCG. This particular modus operandi adopted by the assessee has been subject matter of investigation by various authorities, including Income Tax Department, SEBI etc., In respect of income tax cases, various Courts have held in favour of the Department observing that penny stock transactions should be judged by applying the theory of preponderance of probabilities in place of paper evidence furnished by the assessee. 7.7 In the instant case also, the assessee has tried to put across his view point by way of producing paper evidence which cannot be accepted on face of it without considering the exact nature of transactions and the purpose for which the assessee indulged in such transactions. In view of this, it is imperative to analyze whether the assessee has adduced adequate evidence to prove the genuineness of the transactions with regard to trading in shares of penny stock company which resulted in conversion of unaccounted income of the assessee into tax exempt LTCG. 7.8 At t....
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.... work/documentation, the assessee cannot hide the real intention behind indulging in such transactions. Judicial Precedents on penny stocks: 7.12 In this regard, I would like to rely upon various case laws on the subject, wherein Hon'ble ITAT and various High Courts/ Supreme Court have consistently held that transactions in penny stock companies wherein the assessees have claimed exemption of LTCG u/s. 10(38) of the Act, cannot be considered as genuine transactions. A list of such cases is given as under: 1). ITO Vs. Shamim M Bharwani (2016) 69 Taxmann.com 65 (Hon'ble ITAT B-Bench, Mumbai): In this case, on similar set of facts and circumstances involving transactions in penny stocks, the Hon'ble Jurisdictional ITAT Mumbai made an observation that the share which was traded in the range of Rs. 21/- to Rs. 22/- in May 2005 witnessed a sudden spurt and rose to Rs. 465/- and registered a peak of Rs. 490/-, all this within a couple of months. The assessee sold the shares at Rs. 487/- per share on 22.07.2005. In view of this, the Hon'ble ITAT observed that there are serious doubts about the genuineness of the sale price and the resultant gain. Further, the Tribunal held that mer....
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....hat the explanation offered by the assessee and corresponding evidence produced to support the same are not reliable and, therefore, devoid of merits. Thus, the same cannot be considered as admissible evidence in the eye of the law. Under the circumstances, on an objective analysis and appreciation of all the facts and surrounding circumstances of the case, I would like to apply the ' Theory of Human Probabilities' and 'Theory of Preponderance of Probabilities' in precedence over unreliable and inconsistent direct evidence filed by the assessee. In this regard, reliance is placed on the following decisions of Hon'ble Supreme Court and Delhi High Court wherein it was held that apparent was not real in all the cases and emphasized the importance of the surrounding circumstances and application of the test of 'Human Probabilities' to prove that the apparent was not real. * Sumati Dayal Vs CIT [1995] 214 ITR 801(SC) * CIT Vs. Durga Prasad More [1971] 82 ITR 540 (SC) * CIT Vs. P. Mohana Kala & others [2007] 291 ITR 278 (SC) * CIT Vs. Ms. Mayawati [2011] 338 ITR 563 (Del.) * Sarita Aggarwal Vs. ITO [2015] 373 ITR 586 (Del.) 7.17 Further, in support of circumstantial evidence ....
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....No. of shares Purchased Date of split of shares Ratio of split of shares No. of shares after split 07.09.2012 2,00,000 05.06.2014 1:10 20,00,000 Particulars Amount / Value / Dates Date of Sale 21.08.2014 to 18.12.2014 Sale Consideration 4,59,10,500/- Cost of Purchase 8,31,000/- Less: Tax 1,04,513/- Long Term Capital Gain exempt under section 10(38) of the IT Act 4,49,74,987/- Share Demat A/c was at India Advantage Securities Ltd. Shares sold through India Advantage Securities Ltd. STT was paid. * It is pertinent to not that the Ld. Assessing Officer has been very imprecise about naming the operator (s) basis whom the investigation was carried out. Para 9 of the Assessment Order states that - During the course of Investigation of LTCG Scam, the investigation wing, Kolkata has covered more than 25 Entry operators. These operators have formed a group of Jamakharchi companies, for facilitating bogus LTCG/STCG. Many entry operators have been covered U/S 133A and 132 of the Income Tax Act. One of the operator Shri Devesh Upadhayay whose statement was recorded on oath u/s 131 of the I.T. Act on 01.05.2015. As per the statement the following companie....
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....igation report prepared and disseminated by the Kolkata Directorate. Similar investigations were also conducted by the Directorate of Investigation at Mumbai and Ahmedabad. 17.2 The basic aim of this dubious scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gain. This entry of LTCG is taken by selling the shares on the stock exchange and registering the proceeds arising out of the sale of shares into the books as LTCG. For implementing this scheme, shares of some Penny Stock Companies were used. The same modus is adopted for providing accommodation entry of bogus Loss. 17.3 Once the period of 1 year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at the inflated prices on the Stock Exchange. A point worth noticing here is that the purchase of the shares is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator which are referred to as "Exit Providers". The unaccounted money of the beneficiaries is routed to these bogus entities "Exit Providers" and the shares held by the beneficiari....
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....not match with the operator mentioned in Para 15 of the Assessment Order under 'Findings of Investigation wing'. The entire assessment is based on the statements and oath of the operators who are nowhere related to the Company in which the assessee has invested. The Ld. Assessing Officer has vaguely mentioned operators who are nowhere related to the assessee's case. The Ld. Assessing Officer mentions about connivance of assessee with the operators Para 18 of the Assessment Order .....it was found that long term capital gain of Rs. 4,49,74,987/- shown in the return as the sale of shares of 'Greencrest Financial Services Ltd' was pre-arranged method employed by the assessee in connivance with operators ...... The Ld. Assessing Officer has not been able to provide any evidence about the mutual connivance of the assessee and the operators. We observe that the basis of assessment itself are unclear and the Ld. Assessing Officer is uncertain about the proofs that are relied upon. If the basis of the Assessment Order itself are not true or baseless the addition and the rejection of exemption are bad in law. As addition do not stand then there shall not be any demand. S....
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....er Book) vii. The assessee received a copy of allotment letter dated 15.09.2012 confirming allotment of 200000 shares. The shares were issued with a lock-in period of one year form the date of issue. The assessee has to compulsorily hold the Preferential Equity Shares from 14.09.2012 to 13.09.2013. (Pg No. 17 of Paper Book) viii. The assessee received a share certificate dated 14.09.2012 towards the purchase of Preferential Equity Shares. (Pg No. 44 of Paper Book) ix. The Appellant then dematerialized the shares and the same got credited in his demat account. (Pg No. 19-20 of Paper Book) x. On 02.05.2014, the Company M/s. Marigold Glass Industries Ltd. changed to M/s. Greencrest Financial Services Limited xi. M/s. Greencrest Financial Services Limited announced a split issue of shares. The face value of its shares were split from Rs 10 to Re 1 each in June 2014. part of paper book pg. 21-22. xii. The Appellant then, through his share broker, sold the Shares after holding for 22 months at the Bombay Stock Exchange and delivered the shares in demat form to the stock exchange clearing house and also received the sale consideration from the recognized stock exchange during ....
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....the Ld. AO has no knowledge about the share transactions. The Ld.AO has relied on mere information by Investigation Directorate wing. xxii. It is pertinent to mention that the Appellant sold the shares during the month of August 2014 to December 2014 in the FY. 2014-15 from a price range of Rs. 62/- to 68/- per share and the price of the shares were in the same range for next 34 month even after the shares were sold by the Appellant. In fact the price had gone to as high as Rs. 70/- during the month of September 2015, a year later. xxiii. The Appellant has purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers. The shares were received directly from the company and then dematerialized and on sale, the demat shares were delivered to the clearing corporation of BSE through its share broker. xxiv. The Ld. AO denied the claim of long-term capital gain on sale of shares under section 10(38) and made addition of LTCG under section 68. The shares had been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purcha....
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....curities [Genuineness of transactions] - Assessment year 2006- 07 - Assesse filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assesse claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those s....
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....lt 6. CIT vs. Mukesh Ratilal Marolia (Bombay High Court) INCOME TAX APPEAL NO. 456 OF 2007 7th September 2011 S. 10(38)/ 68: Long-term capital gains on sale of "penny" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity 7. Smt. Sunita Jain, V/s. Income Tax Officer, Ward10 (3), Ahmedabad ITA. Nos: 501 & 502/AHD/2016 Assessment Year: 2008-09 The claim of the assesse cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account 8. ITO-24(3)(1) V/s M/s Arvind Kumar Jain HUF ITA No. 4862/MUM/2014 Assessment Year: 2005-06 Where assesses broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assesses share transactions bogus. 9. Kamla Devi S. Doshi ....
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....k Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus 14. Meenu Goel vs. ITO (ITAT Delhi) Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated Reliance is also placed on following case laws where such purchase and sale were allowed. 1. C.I.T Vs. Mukesh Marolia ITA 456 of 2007-Bombay HC 2. Muksh R Morolia V/s Add CIT(2006)6 SOT 247 3. ITO V/s. Mrs. Rasila N Gala ITA No.1773/Mum/2010 4. CIT V/s Kan Singh Rathore ITA 192of 2014 (Rajasthan HC) 5. M/s SBD Estate P....
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.... vs DCIT & ITO Wd 3(2) Jaipur [Jaipur -Tribunal] 36. Shri Vivek Agarwal vs ITO Wd 1(2), Jaipur [Jaipur -Tribunal] 37. Mr Vimalchand Gulabchand ,Mr Praveen Chand , Mr.Gatraj Jain & Sons (HUF), Mr Mahendra Kumar Bhandari vs ITO Chennai , ITA No. 2003,1721,2293,2748/CHNY/2017 [Chennai - Tribunal] 38. Anand Paul vs ACIT Circle-50 ITA No.165/Kol/2015 [Kolkata -tribunal] 39. M/s Bhoruka Engineering Industries Ltd vs DCIT Bangalore, KARNATAKA HIGH COURT 40. CIT vs Pushpa Malpani ITA No.50 of 2010 Rajasthan HC 41. M/s Amit Rastogi HUF , Shilpa Rstogi, Sadhana Rastogi, Ajay Kumar Rastogi vs ITO wd1(1) wd-2(3), Meerut ITA No.2128/2129/2131/2132/Del/2018 [Delhi-Tribunal] 42. Smt Shikha Dhawan vs ITO, Wd-4(2) ITA No.3035/Del/2018 [Delhi-Tribunal] 43. Shamim Imtiaz Hingora, Parvez Hingora, Shabeena Irfan Hingora, Arif Abdul Razak Hingora vs ITO Wd-I Jalna, ITA No.1875,1876,1877,1878/Pun/2018 [Pune-Tribunal] 44. CIT (A)-45, MUMBAI order in case of Parul Hemant Patel 45. Mukesh B Sharma Vs ITO 11(3)(2) ITA No.6249/Mum/2018 46. Deepak Nagar Vs The ACIT-17 ITA No. 3212/Del/2019 47. Kaushalya Agarwal Vs ITO 35(3) ITA No.194/Kol/2018 48. Vijayrattan Balkrrishan Mittal Vs DCI....
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....ana M Ruia ITA 4130 and 4131/M/2015 (Mum-Trib) (b) CIT vs. Pinakin L Shah (ITA 3380 of 2010 dated 18-01-2012)(Bom) (c)Smita P Patil Vs. ACIT-CC-1 (ITA Nos. 1407, 1408 & 1409/PN/2012) (d) Arvind Asmal Mehta vs. ITO (ITA No.2799/Mum/2015)(Mum-Trib) (e) Smt. Sarita Devi vs. ITO (ITA No.1228/Hyd/2016)(Hyd-Trib) THE LD. AO HAVE NOTHING ON RECORD TO SUGGEST THAT:- (a) Traded Shares (Scrips) were not listed on stock exchange. b. Traded Shares (Scrips) are of bogus companies. (c) Demat /Bank account not in the name of assesse or do not exist. (d) Enquiry with Depository Participant ie NSDL/CDSL As share is purchased and sold through Stock Exchange. D. ASSESSMENT IS COMPLETED ON SUSPICION, WHIMS, ASSUMPTION AND SURMISES, WITHOUT PROVIDING COPIES OF MATERIAL RELIED UPON, WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE PERSON WHOSE STATEMENT RELIED UPON IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND LIABLE TO BE ANULLED: The Learned Assessing Officer from page 95 onwards in para 17 Under the Heading "Conclusion" repeated the same contentions in the report as his own reasoning for making the addition under the Summary of the Points of the discussion have been broadly give....
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....ing Officer which support such observation. This observation is made on the basis of suspicion, assumption and surmises. vi. During the course of assessment the appellant produced copies of contract notes in support of long term capital gains earned by him. He has also produced copies of bank statement to justify that all payments/receipts are made by account payee cheques as per provisions of Income Tax Act. Thus the appellant has complied with provisions of the Act and produced prime and vital document which is in his possession to substantiate the long term capital gain and to rebut that these are not in the nature of accommodation entries. vii. It is submitted that the learned Assessing Officer failed to collect and bring on record the evidences from operators. If at all said evidences are collected, copies of same have not been provided to the appellant before using the same against the appellant. The evidences which are collected back of the appellant and not provided copies thereof or not confronted with should not be admitted as evidence while framing assessment. viii. The learned Assessing Officer in assessment order relied upon statement of operators. According to h....
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....d a violation of the fundamental rules of justice and called for interference on our part. 4. SETH GURUMUKH SINGH v. CIT [1944] 12 ITR 393 The Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assesse what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assesse to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assesse wanted to produce in support of its case. The result was that the assesse had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, was based on surmises, suspicions and conjectures. 5. Jai Karan Sharma v/s DCIT [2012] 23 taxmann.com 300 (Delhi) It is a fundamental principle of natural justice that no material should be relied upon against a party without giving him an opportunity of explaining the same 6. Hamish Engineering Industries (P.) Ltd. V/s DCIT [2009] 120 ITD 166 (MUM. Trib.) Whether since statements recorded from three parties on which Assessing Officer relied for purpose of assessment, had not bee....
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....ar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC) 4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC) 5. Dr. Anita Sahai V/s DIT (266 ITR 597) (All) 6. MODI Creations Pvt. Ltd. V/s ITO [2011] 13 taxmann.com 114 (Delhi)-It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assesse. This burden, which is placed on the assesse, shifts as soon as the assesse establishes the authenticity of transactions as executed between the assesse and its creditors. 7. CIT- IV v. Shree Rama Multi Tech Ltd [2013] 34 taxmann.com 32 (Gujarat): Expenditure cannot be disallowed on account of 'bogus purchase' only on basis of assumption and presumption 8. View taken in Modi creation Pvt. Ltd. Is also taken in following decision. i. CIT v/s Divine Leasing & Finance Ltd. 158 Taxmann 440 (Delhi) (2007). ii. Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004). iii. CIT V/s Value Capital Services (P) Ltd. 307 ITR 334 (Delhi)(2008). Th....
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.... on record to show that what assessee had claimed as regards value of shares was factually incorrect. On an appeal by the Revenue, the Hon'ble Gauhati High Court held that the Tribunal had wrongly placed burden of proving correctness of return of income which assessee had filed on revenue, whereas it was for assessee to show, by placing all materials including profits of two companies that, if not arithmetically, there was, at least, reasonable possibility of value of shares having risen as high as had been shown by assessee. 4. The Mumbai Bench of ITAT has in the case of ITO v. Shamim M. Bharwani (ITA No. 4906/Mum/2011; AY 2006-07; Order dated 27.03.2015) held that despite documentary evidence and broker's confirmation, genuineness of penny stock. transactions has to be determined on the basis of prepo nderance of human probabilities. If the assessee is unable to explain intriguing' facts and circumstances, genuineness of transaction cannot be accepted. Based on these crucial facts, the Hon'ble Supreme Court and Hon'ble Gauhati High Court, the Hon'ble ITAT Delhi, the Hon'ble ITAT Mumbai rendered the decision in favour of the revenue. None of these factors are pres....
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....ions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. We observe that the Hon'ble Bombay High Court in the case of Pr. CIT v. Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 held as under: - "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off mar....
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....e companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it ....
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....o come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement be....
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....sion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed." 17. Even otherwise, the Coordinate Bench of the Tribunal in the case of Minkal K. Doshi v. ITO in ITA No.1093/MUM/2020 dated 24.02.2023 dealt with identical scrip wherein the assessees have also earned Long Term Capital Gain at the high volume and the Tribunal ultimately decided the issue in favour of assessee. For ready reference, the conclusion drawn by the ITAT is reproduced below: - "6. Having heard both the parties and after perusal of the records, it is noted that the assessee is a Chartered Accountant by profession and works in M/s. Shreepati Built Investment. And when summoned before the AO, he has submitted that he was a regular investor in shares like M/s. Power Grid, M/s. Adani Port, M/s. Coal India and M/s. Reliance Power etc. (supra). The assessee's statement has been recorded by the AO which has been reproduced by the AO from page....
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....nate bench decision of the Tribunal in similar cases (especially decision of the Hon'ble Mumbai Tribunal in the case of Shyam R Pawar v DCIT in ITA No. 5585/Mum/2011 dated 04.05.2012), wherein the Tribunal in that case noted that the shares were purchased by the assesse (Shyam R. Power), which continued to be with him till the end of the year. Further the assesse had sold the shares in first lot of 7500 on 19.02.200 for Rs. 10,00,000 and Rs. 6,83,125 on 05.03.2003 and 06.03.2003 for a total consideration of Rs. 9,10,025. Similarly the assesse sold 12,500 shares of Mantra Online Ltd. on 25.02.2003. Besides this, Demat account showed the transactions of credit of 20,000 shares of Mantra Online Ltd. on 31.01.2003 and sale of these shares on 20.02.2003 of 7,500 shares and on 22.02.2003 of 12,500 shares. And that assessee had also filed bill along with contract notes from the two brokers which gave details of transactions with the exact time of transaction depicting trade time. This Tribunal noted that at no point of time, the department had been able to pin point that there was an accommodation of cash getting converted into regular payment. The revenue, in that case, had heavily relie....
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....A copy of the DMAT account, placed at pages 36 and 37 of the appeal paper book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not 'vitiated by any error of law apparent on the fact of....
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....e floor of stock exchange and not form M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench wherein on similar facts and circumstances issue was decided in favour of the assessee came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT (A) at para 3 to 5 has not been controverted by the department by....
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....ndemning the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price had risen from Rs. 5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share price, then how can it be inferred that such a transaction entered into a sham transaction few years ago and prepared for getting the benefit after few years when share will start rising steeply. In the present case even there was no reason for such suspicion when the shares purchased years before the unusual fluctuation in the share price. Hence, the appeal of department dismissed CIT(A) and ITAT while allowing the appeal held as under; It is also not in dispute that assessee disclosed the shares in their possession in earlier return and statement of accounts and they are duly entered into the books of the accounts of the assessee which was duly proved by the bank statement." 11. I find that in the case at hand before me, relevant evidence were produced to suggest that the transactions (purchase and sale of shares) were undertaken and thereafter the same was reflected in the Demat Account; and the transactions have taken place thro....
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....outstanding as on 31.03.2015. Hence, vide notice u/s 142(1) dated 08.12.2017 the assessee was inter alia asked to furnish details of loans taken and interest paid thereon. On going through the submission made by the assessee in response to the above on 11.12.2017 it is observed that five of the said lenders were pertaining to the Jagdish Purohit Group which has been instrumental in providing accommodation entries on a mass scale through hundreds of shell companies. The transactions shown by the assessee with these parties have been tabulated hereunder: NO. Name of the Parties Outstanding as on 31-03-2015 Loan taken during the year Interest paid during the year 1 Blue Circle Services Ltd. (PAN: AAACB2131L) 31,91,071 30,00,000 2,12301 2 JMD Telefilms Industries Ltd (PAN: AAACA4340C) - 65,00,000 1,68,658 3 Global Infratech & Finance Ltd.(PAN: AAABCA4255H) 1,12,16,297 --- 9,33,827 4 Unisys Software Ltd (PAN: AABCC1191Q) 3,59,50,410 -- 48,79,740 5 JMD Sounds Ltd (PAN: AABCJ1907H) - 30,00,000 87,377 1,25,00,000 62,81,903 It was also found that two of the above parties, M/s. Blue Circle Services Ltd & M/s Global Infratech Finan....
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....ms Ltd etc. The relevant portion of the investigation report is reproduced below which clearly identifies the promoter/operator of the companies involved in providing accommodations entries: ----- Thus, the dummy companies have been clearly identified and the promoters are such companies have given statement that they have been managing these companies for providing accommodation entries. The assessee's contention that all these loans have been taken through account payee cheques and passed through banking channels is not sufficient to prove the genuineness of such transactions as the director of these companies has himself accepted that he was involved in various nefarious activities. Further, the assessee's contention that these loans were further lended to M/s Grover Metal Alloys Ltd does not in any way give it a color of genuineness. Along with submission made on 11.12.2017, copies of confirmation of these parties, a relevant part of their bank statements and acknowledgment of their return of income filed for A.Y. 2015-16 were also submitted. It is seen that M/s Blue Circle Services Ltd. (Shown to have given a loan of Rs. 30,00,000/-) had shown a loss of Rs. 16,16,4....
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....d submissions Ld.CIT(A) dismissed the ground raised by the assessee observing as under: - "8.0 GROUND NO. 2: ADDITION TOWARDS UNSECURED LOANS u/s. 68 OF THE ACT OF Rs. 1,25,00,000/-: 8.1 ... 8.2 Further, the AO identified three of the parties/lenders i.e., M/s. Blue Circle Services Ltd., M/s. Unisys Software Ltd. and M/s. Global Infratech Finance Ltd., as penny stock companies,and M/s. JMD Telefilms Industries Ltd. and M/s. JMD Sounds Ltd. were categorized by the Income Tax Department as shell companies. In view of this, the AO disbelieved the loan transactions and proposed to treat the same as accommodation entries availed through paper/shell companies in respect of the following three unsecured loan transactions: Sr. No. Name of the Party Loan taken during the year (In Rs. ) 1 Blue Circle Services Ltd. 30,00,000/- 2 JMD Telefilms Industries Ltd. 65,00,000/- 3 JMD Sounds Ltd. 30,00,000/- Total 1,25,00,000/- ......... DECISION-II: 8.5 I have given my thoughtful consideration to the submissions made by the assessee and examined the same in the light of the documentary evidence placed on record. At the outset, it is an admitted fact that, as per th....
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....ssee has failed to discharge the onus of proving the creditworthiness of the loan creditors and genuineness of the transactions. Under the circumstances, the Department need not prove such amount as forming part of income and the same would by default become income of the assessee u/s. 68/69 of the Act, as the case may be. 1. Sudhir Kumar Sharma (HUF) Vs. CIT [2014] 224 Taxman 128 (P & H HC) 2. Arun Kumar J Muchhala Vs. CIT [2017] 339 ITR 256 (Bom. HC) ...... Theory of human probabilities: 8.17 As such, a detailed analysis of the facts brought out on record would reveal the fact that the explanation offered by the assessee and corresponding evidence produced to support the same are not reliable and, therefore, devoid of merit. Thus, the same cannot be considered as admissible evidence in the eyes of the law. Under the circumstances, on an objective analysis and appreciation of all the facts and surrounding circumstances of the case, I would like to apply the 'Theory of Human Probabilities' and 'Theory of Preponderance of Probabilities' in precedence over unreliable and inconsistent direct evidence filed by the assessee. 8.18 `In this regard, reliance is placed on the fo....
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....on that the assessee has failed to discharge the onus cast on him with regard to creditworthiness of the loan creditors and genuineness of the transactions to the extent of Rs. 1,25,00,000/-. Accordingly, I don't find fault with the AO in treating the same as unexplained cash credits u/s. 68 of the Act. Thus, the ground of appeal raised by the assessee on this issue is dismissed. 21. Aggrieved with the above order, the assessee preferred an appeal before us. At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts relating to the above grounds of appeal and filed its written submissions. For the sake of clarity, it is reproduced below: - "Why the addition is not sustainable 1. Assessee took genuine loan for business. 2. The appellant requested the assessing officer to give the statement recorded u/s. 132(4) and further requested for cross examination. The assessing officer without considering any evidences and submissions made, treated the loan of Rs. 1,25,00,000/-, as unexplained cash credit. 3. During the course of assessment proceedings, all credible evidences were furnished before the Ld. AO establishing the case of the appellant on merits. Ho....
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....al facts outlined as under: a. The applicant had received short term loans of Rs. 1,25,00,000/- during the F.Y 2014-15 for running its business activities. Interest was paid to the lender for the time interval between receipt and re-payment of loan. b. The appellant had no business in past with Jagdish Purohit, whose statement has been made the basis of re-opening of completed assessment of Assessee u/s. 143(3). c. Interest was paid by the assessee to the said lenders and TDS was duly deducted. It was alleged that Mr. Jagdish Purohit has admitted before the I T authorities that he had been indulged in the Business of providing accommodation entries in the form of capital gain, loans, sale and purchases etc. d. Shri Jagdish Purohit has retracted the statement made. Copy of Re-traction statement filed by Shri Jagdish Purohit to the officer of Hon'ble CBDT, Delhi. e. The Respondent Company's books of Accounts are Audited and were submitted to the learned Assessing officer and there were no adverse remarks of the Auditors in the said Report. Therefore, the transaction entered into by the assessee company cannot be doubted. 2. The Learned Assessing Officer had heavily relied....
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....ed and verified. On appreciation of the fact and as per statement of various persons recorded it is quite clear that even without receiving cash beforehand the said lender companies were capable of advancing such amount. 8. Section 68 of the Act reads as under: - "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :" It is settled position that to prove the genuineness of the transaction, the burden lies on the assessee and to discharge the onus, the assessee must prove the following - I. Identity of the Creditor II. Capacity of the Creditor III. Genuineness of the Transaction Once the above conditions are proved prima facie by the assessee and the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the department. Three conditions enshrined in section 68 are clearly proved by the documents submitted during the assessme....
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.... were in contradiction of section 68 of the Act. By submitting the above details, the Respondent has discharged his primary onus of proving the unsecured loan as Genuine Transaction. However, the Ld. Assessing Officer without considering the facts and circumstances of the case erred in making addition of Rs. 1,25,00,000/- being the amount received towards loan u/s. 68 as Unexplained Cash Credit without having any jurisdiction. Thus all the ingredients of S.68 of the Act were fully proved and established before the learned Assessing Officer. However, the onus of the appellant is limited to the extent of proving the source from which he received the cash credit. The creditworthiness of the creditor has to be judged vis-à-vis the transaction which had taken place between the appellant and the creditor, and it is not the burden of the appellant to find out the source of creditworthy capacity in order to prove the genuineness of the transaction. As held by the Hon. Gauhati High Court in the case of C.I.T. v. Smt. Sanghamitra Bharali (2014) 361 ITR 481 (Gau). The aforesaid points were also affirmed in the past by the Apex Court in the case of C.I.T. v. Orissa Corporation P....
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....he AO to act judiciously in appreciating the explanation and evidence placed before him by the appellant. An approach of not considering the material and evidence would vitiate assessment proceedings. Any rejection of an explanation by an AO is an inference drawn basically from the facts and does not involve any legal principle. The appellant submits that the AO is cast upon with great deal of accountability while rejecting the explanations offered by the assessee and deciding to make additions of cash credits. He is duty bound to bring in outweighing evidence and material to the contrary to substantiate an addition. No arbitrary approach of rejecting appellant's explanation is allowed under the law. As per the rule of evidence the burden of showing that the apparent was not real is on the person who claims it to be so. Accordingly, it is for the revenue to disprove explanation offered by an appellant which is apparently consistent with the facts of the case. No easy going would be available for the Ld. AO in rejecting appellant's explanation, unless contrary evidence that can outweigh the material and evidence supplied by the appellant is brought on record. It is further sub....
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....as sufficient to delete the addition. Besides, the Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd. v. C.I.T. (1963) 49 ITR 723 (Bom) (Para 9) which has been referred by the P&H High Court in the aforesaid decision, had held so. Besides in the case of C.I.T. v. Kamalaben Sureshchandra (2014) 367 ITR 692 (Guj), the Hon'ble Gujurat High Court held that deletion by the CIT (A) was based on appreciation of evidence on record, and hence such decision has to be upheld by the Court. Besides, the Gujurat High court in the case of C.I.T.v Sachitel Communication Pvt. Ltd. (2014) 227 Taxman 219 (Mag) (Guj) held that - "Where the assessee proved the identity of the Creditor and capacity to pay and that payment was made through the Banking Channel, no addition could be made as unexplained Cash Credits." The Hon'ble Gujurat High Court in the case of C.I.T. v. Patel Ramniklal Hirji (204) 222 Taxman 15 (Mag) held as under: "The addition on the basis that four depositors furnished requisite details to prove their identity and showed the place of their residence. The loan was received through account payee cheques. Copies of Bank Statements were given and the details of PAN w....
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....unts had been received by him by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Office to prove the contrary. The failure on the part of the creditors to show that their Sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources." (ii) That no assessment could be made contrary to the provisions of law. In the instant case, the very basis for making the assessment was und....
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.... of such material/statement etc. shall be rendered illegal. Reference in this regard can be made from the decisions made in the following judiciary ruling:- * R.B. ShreeramDurga Prasad 176 ITR 169 (SC), * KishanChandChellaram Vs. C.I.T. (1980) 125 ITR 713 (SC) * Jindal Vegetable (order of Hon'ble Delhi High Court in ITA no. 428 of 2007, 174 Taxmann 440 (Raj.) * LaxmanBhai Patel (order of Hon'ble Gujarat High Court dated 22.07.2008 in ITR no. 41/1997). 11. Shri Jagdish Purohit was never a DIRECTOR as well as SHAREHOLDER of lender companies. from whom the respondent company has received the unsecured loan amounting to Rs. 1,25,00,000/- during the said Assessment Year. 12. A person (Jagdish Purohit), who is neither holding managerial berth in the lender Company nor holding any ownership rights, cannot control the affairs of the lender Company. 13. Further, following legal position/ judicial rulings on the subject under consideration must be considered before arriving at any conclusion:- a. It is also settled law that where the assessee provides identity and details pertaining to the lenders/ creditors/ investor of share application money and is unable to produc....
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...., the Respondent in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the AO to disprove the claim of the Assessee by establishing that the evidence filed by the assessee was false and by bringing new material on record and failure to do so would vitiate the addition made on this count. g. It was also held in the case of CIT v. Bedi & Co. P. Ltd. (1998) 230 ITR 580 (SC) that where prima-facie the inference on facts is that the assessee's explanation is probable, the onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere surmises. Other similar judiciary ruling are as under:- * Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) * CIT v. Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) * CIT v. Rohini Builders 256 ITR 360 (Guj.). h. It is also settled law that it is mandatory for the AO to confront the assessee with any material collected by the AO at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assess....
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....and proceedings enquiries were carried out and no adverse remark was made by the ld. Assessing Officer. The assessee as well as the other parties furnished all possible documents evidencing that the loans are not bogus. No cash was found deposited in the accounts of alleged six parties, thus, keeping in view, the totality of facts, attendant circumstances, human probabilities, and in the presence of plausible explanation by the assessee, relevant material, and requirement of fulfillment of ingredients, enshrined in section 68 of the Act, we find that onus cast upon the assessee has been duly discharged, therefore, the addition made u/s 68 of the Act, which is purely based upon presumption or the statement recorded and later on retracted by the concerned parties, therefore, we find infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, the appeal of the Revenue is dismissed." j. It was held in case of DCIT 12(1)(2) vs. Bairagra Builders P Ltd.[ITA No. 4691 & 4692/Mum/2015]- "We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not dischar....
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....e, we hold that the addition made under section 68 of the Act is bad in law." We noted that in the said case also loan had been received from M/s Javda India Impex Ltd., M/s Kush Hindustan Entertainment Ltd. and M/s Olive Overseas Pvt. Ltd Para 12. Being consistent with the view taken by this co-ordinate Bench in case of Komal Agro tech pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal." k. It was held in case of Ito 4(3)(4), Mumbai vs Suchitra Fabtex P.Ltd, [ITA No. 2979 & 2980/Mum/2017]- "Ansh Merchandise Pvt .Ltd. (earlier known as New Planet Trading Co. Pvt. Ltd.) Thus, after careful considerations of the entire material on record, which may also be evident from the above given chart, it is found that the appellant has indeed proven the genuineness of the loans taken from all the parties referred above. Accordingly the addition made by the AO under section 68 of the Act on that count to the tune of Rs 40,00,000/- under the heading loan as cash credit cannot be sustained. Consequently, the addition of Rs. 1,51,694/-made under s....
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....sues. a) ITO - 10(2)(1) vs. M/s. Deep Darshan Properties Pvt Ltd in ITA No. 2117/Mum/2014 : AY 2006-07 and ITA No.2118/Mum/2014 : AY 2007-08 b) ITO -10(2)(3) vs. Aajivan Computers Pvt Ltd in ITA No.2160/Mum/2014 : AY 2006-07 c) ITO -10(2)(3) vs. Dignity Securities Trading Pvt Ltd in ITA No.2157/Mum/2014 :AY 2006-07 d) ITO -10(2)(1) vs. M/s. Blue Hill Properties Pvt Ltd in ITA No.2119/Mum/2014 :AY 2006-07 With the facts and various Judicial rulings as discussed above, it is crystal clear that the Unsecured Loan Received by the Respondent was genuine and cannot be treated as Accommodation entry. m. Jurisdictional Hon'ble ITAT, Mumbai for an identical case i.e. Arceli Realty Limited Vs. The Income Tax Officer 15(1) (1), Mumbai pronounced on 21.04.2017 ITA-6492/Mum/2016-17, the summary of the case is outlined as under:- "........A.O. merely relied upon the information provided by the office of DGIT(Inv.), Mumbai and did not made any independent enquiry. The papers filed by the assesse do demonstrate the identity, credit worthiness, genuineness, Source of Source of the transaction. AO did not provide Opportunity to Cross Examine the concerned person and also the department....
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....gh the orders of authorities below. The AO made addition towards unsecured loans received from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd on the basis of information received from Investigation Wing which revealed that the assessee is beneficiary of bogus accommodation entries provided by Shri Praveen kumar Jain through his bogus companies.................. The AO has brought out facts in the light of statement of Shri Pravin kumar Jain deposed before the Investigation Wing to make addition. Except this there is no contrary evidence in the possession of the AO to disprove the loan transaction from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd. On the other hand, the assessee has furnished various details including confirmation letters from the parties, their bank statements along with their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details" "............It is well settled legal position that the assessee has to discharge 3 main ingredients in order to ....
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....aid any sort of commission for the said genuine borrowings. 16. The learned Assessing Officer further has disallowed the legitimate Interest expense paid on Borrowed fund/ Short Term Loan amounting to Rs. 62,18,903 /- without any proper base. The disallowance was made, alleging that loan was paper entry hence there was no liability to pay interest on the said Loan. Further also Reliance Place on following case Laws: THE INCOME TAX APPELLATE TRIBUNAL "H", BENCH MUMBAI The ACIT 25(2) vs. M/s. H.K. Pujara Builders ITA No.3127/Mum/2017 Held that..... 8.2. With regard to non-production of Shri Jagdish Prasad Purohit by the assessee before the Ld. AO for the purpose of cross examination of him by the assessee, we hold that it is the revenue which had placed reliance on the statement of Shri Jagdish Prasad Purohit. Hence, Shri Jagdish Prasad Purohit becomes the witness of the revenue. Hence, it is the duty of the revenue to produce the party as their witness in order to enable the assessee to cross examine the said party, if it so desires. This responsibility cannot be shifted to the assessee by the Ld. AO. 8.3. In view of the aforesaid findings in the peculiar facts and circumsta....
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....s enunciated in various case laws relied upon by him and further applying the same to the facts of the present case. Thus we notice that the Ld CIT(A) has reached his decision in a systematic manner. Accordingly we affirm the decision rendered by Ld CIT(A). In the result, the appeal filed by the Revenue is dismissed. Shri Ashok Nagraj Mehta vs. ACIT Circle 19(1) ITA No. 2100/Mum/2016, and ITA No. 1645/Mum/2017 A perusal of the order passed by Ld CIT(A) would show that the Ld CIT(A) has examined the documents furnished by the assessee and has come to the conclusion that the assessee has discharged the initial burden of proof placed upon his shoulders u/s 68 of the Act, i.e., he has proved the identity of the creditor, creditworthiness of creditor and genuineness of transactions. Once the assessee discharges the initial burden placed upon him, then the onus shifts to the shoulder of the assessing officer to prove otherwise. In the instant case, we notice that the AO has failed to prove that the documents furnished by the assessee are wrong. The above view is supported by the decision rendered by the co-ordinate bench in the case of Reliance Corporation (supra). Hence we do not find....
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.... established at least prima facie. The AO has come to a different conclusion mainly on the basis of the statement of Shri Bhanwarlal Jain Group without providing to the assessee an opportunity of cross examination. Hence, it is seen that except the statement of Shri Bhanwarlal Jain Group, there is no adverse material brought on record by the AO. No shortcoming is pointed out in various documents brought on record by the assessee to establish the identity and credit worthiness of the loan creditor and genuineness of the transaction as noted above. Since, the AO has not provided an opportunity of cross examination of Shri Bhanwarlal Jain Group, the adverse statements of that group cannot be used against the assessee. I hold so by respectfully following this Judgment of Hon'ble apex court rendered in the case of Kishan chand Chellaram vs. CIT (Supra). Once, I exclude the same, the addition made by the AO cannot be sustained in the facts of the present case as discussed above. Hence, I delete the same. In the result, the appeal of the assessee is allowed." ITA No. 7047/Mum/2016 Jitendra M Kitawat (HUF) vs. ITO 18(1)(5) We find that in the cases relied upon by the assessee i.e. Sangha....
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....e and identity of parties was established and also creditworthiness of creditors was established - Whether since finding which had been recorded by Tribunal was essentially a finding of fact and since revenue had failed to point out any error or perversity in said finding of fact, order of Tribunal was to be upheld - Held, yes [2014] 45 taxmann.com 203 (Rajasthan) HIGH COURT OF RAJASTHAN Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal Section 68 of the Income-tax Act, 1961 - Cash credit (Unsecured loan from relatives) - Assessment year 2006-07 Unsecured loan raised by assessee from relatives was added in income of assessee on ground that none of creditors were able to prove source of amount advanced to assessee and immediately before grant of loan by them cash was deposited in their accounts - However, it was admitted by Assessing Officer that all creditors were assessed to Income tax and they had provided confirmation as well as their PAN - Moreover, all payments were through account payee cheques and most of cash creditors appeared before Assessing Officer and were examined on oath - Whether since there was no clinching evidence nor Assessing Officer had been able....
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.... merely because assessee withdrew cash instead of sufficient cash balance available with him and subsequently re-deposited same in bank account for his own use, no addition could be made - Held, yes [2015] 61 taxmann.com 28 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH 'E' ACIT v. Sanjay M. Jhaveri* Where assessee had taken unsecured loan and duly filed confirmation letters of creditors, copies of their bank accounts and acknowledgements of returns of income filed by them, same could not be treated as undisclosed income of assesse [2014] 45 taxmann.com 473 (Rajasthan) HIGH COURT OF RAJASTHAN Commissioner of Income-tax, Jaipur - II v. Morani Automotives (P.) Ltd. Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment year 2006-07 - Assessing Officer made certain addition on account of unexplained share capital contribution and unsecured loans - Assessee submitted details, confirmations, returns, affidavits, bank statements, etc. from various persons in respect of share capital contribution as also for loan advanced, which could not be collected during course of assessment proceeding - It was found that contributors were all Income tax ass....
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....in unsettled for a long period of time. However, in this case, the assessee has taken the loan and repaid the same along with interest, it clearly indicate that the loan transaction is genuine. 24. Further, it is brought to our notice that the assessment was reopened mainly on the basis of statement of Shri Jagdish Purohit and Shri Jagdish has subsequently retracted the statement given. Therefore, the genuineness has to be seen independently. Accordingly, Ground No.2 raised by the assessee is allowed. 25. With regard to ground No.3 relating to making addition of Rs..62,81,903/- under section 57 of the Act, during the course of assessment proceedings, Assessing Officer made addition of interest expenses observing as under: - "23. Further, it is seen from the details submitted by the assessee that interest amounting to Rs. 62,81,903/- has been paid to the parties mentioned in the aforesaid table during the financial year 2014-15 relevant to A.Y. 201516. These companies have been charged with entering into fraudulent & manipulative activities in the stock exchange in respect of bogus capital gains/capital losses. They were also found to be engaged in money laundering and providing....
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.... Name of the Party Interest paid(In Rs. ) 1 Blue Circle Services Ltd. 2,12,301/- 2 JMD Telefilms Industries Ltd., 1,68,658/- 3 JMD Sounds Ltd. 87,377/- 4 Global Infratech & Finance Ltd. 9,33,827/- 5 Unisys Software Ltd. 48,79,740/- Total 62,81,903/- 9.2 In view of the above, the AO disallowed the assessee's claim of interest expenses to the extent of Rs. 62,81,903/- on the ground that when the unsecured loans itself are not genuine and treated as income of the assessee, the question of allowing interest on such bogus loans doesn't arise. While doing so, the AO observed that, as per the provisions of section 57 of the Act, the assessee is eligible to claim expenses actually incurred for earning income subject to tax u/s. 56 of the Act. 9.3 Also, the AO stated that, as per the provisions of section 37(1) of the Act, the onus is cast on the assessee to prove that expenses claimed as deduction have been wholly and exclusively incurred for the purpose of business of the assessee. Accordingly, since the assessee has failed to prove nexus between interest income and interest expenses and, also, the onus of proof u/s. 37(1) of the Act, coupled with the f....