TaxTMI 
TaxTMI 
2022 (10) TMI 1258
X X X X Extracts X X X X
X X X X Extracts X X X X
....the learned CIT (A) erred in upholding Assessing Officer's order by completely ignoring the fact that interest (on which TDS was deducted) on unsecured loans taken by the appellant has been allowed in toto, thereby treating the loans as genuine Without prejudice it is also submitted that the parties that have advanced loans must have taken credit for the interest and also the TDS deducted thereon. On the facts & circumstances of the case and in law, the learned CIT (A) erred in upholding Assessing Officer's order by completely ignoring the fact that the unsecured loan taken by the appellant have largely been repaid through bank accounts due to which the parties concerned did not bother to come forth against notices issued w/s. 133(6) On the facts & circumstances of the case and in law, the learned CIT (A) erred in upholding Assessing Officer's order by not accepting the Appellant's contention that the loan taken from the parties for which the appellant had submitted copies of the balance sheets of 14 parties for the financial year ended 31 March 2013 as downloaded from website of the MCA establishing the creditworthiness of the parties The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the AO to establish identity, creditworthiness and genuineness of transactions It is observed that in-spite of giving a no of opportunities, the appellant failed to produce the parties concerned for examination by the AO. Instead of that he has produced names, address and PAN of the companies concerned and copies of the balance sheets of the 14 parties (out of total 15 parties) for the financial year ended 31st March 2013, as downloaded from website of the Ministry of Corporate Affairs (MCA) In order to establish genuineness of transactions, cheque no/RTGS/NEFT details and name of the bank on which the cheque/RTGS/NEFT were drawn, were submitted to the AO during the course of assessment proceedings and claimed that the loans are genuine. 13.2 From the details submitted during the assessment/appellate/remand proceedings, following facts have emerged. (1) Out of 15 companies, 13 companies are based in Kolkata and traced to the following four addresses as below: 1. 1A, Grant Lane, Room No. 114, Kolkata WB 700012 2 95A, C R Avenue 1st Floor Kolkata WB 700073 3. 3, Saklat Place Kolkata WB 700072 4. 10A, Hospital Street 2nd Floor, R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hree ingredients regarding establishing genuineness of loan are fulfilled. In the process, he has relied upon few judgments in this regard. 13.4 In my considered opinion, once a finding of the fact about bogus nature of the companies being involved is brought on record by the AO, which is not disputed by the appellant or his Ld. AR further argument justifying genuineness of shell loans given by the 15 companies/entities being operated by an entry operator, will not hold good. Moreover, the judgments relied upon by the Ld. AR are completely distinguishable on facts 13.5 In this regard, it is observed that an identical issue was before the Hon'ble ITAT, Ahmedabad bench in the case of Pavankumar M Sanghvi vs ITO [2017] 81 taxmann.com 308. The fact of the case was that the assessee Shn Pavankumar M Sanghvi had received different amount on different dates dunng the year from two lenders. Hon'ble Tribunal after appreciation of facts, noted that the transactions in the bank accounts of the lenders did not inspire any faith in the proposition that the entity in question is a genuine business concerns One lender had shown a turnover of Rs 122 92 crore but without c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x and enforcement officials is rather recent, and that, till recently, little was known, outside the underbelly of financial world, about modus operendi of shell entities. There were, therefore, not many questions raised about genuineness of transactions in respect of shell entities. That is not the case any longer Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, the earlier judicial precedents cannot have blanket application in the current situation as well. Genuineness of transactions thus cannot be decided on the basis of inferences drawn from the judicial precedents in the cases in which genuineness did come up for examination in a very limited perspective and in the times when shell entities were virtually non-existent. As the things stand now, genuineness of transactions is to be examined in the light of the prevailing ground realities, and that is precisely what has been done Thus, for the detailed analysis set out earlier, the alleged loan transactions of the assessee cannot be held to be genuine on the peculiar facts and circumstances of this case 13.7 in para 7 of the order, H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d reiterated by a Special Bench of this Tribunal in the case of Tata Communications Ltd v. Jt CIT [2009] 121 ITD 384 (Mum). That is, of course, besides the fact that there is no attempt, direct or indirect, to enlarge the subject matter of appeal. The legal plea of the learned counsel proceeds on clearly fallacious assumptions 13.8 It is further held by the Hon'ble Tribunal that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-à-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions to give it colour of a normal business entity, used as a vehicle for various financial maneuvers. A shell entity, by itself, is not an illegal entity but it is their act of abatement of,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uine. The AO and the CIT (A) have rightly held that the identity, creditworthiness and the genuineness are all in doubt. Moreover, the Court notes that that these amounts have been advanced to the Assessee without any explanation as to their relationship with the Assessee, the reason for the payment of such huge amounts, as also whether any repayments have, in fact, been made. There are contradictions in the explanation given by the Assessee and the statements recorded by those four individuals, which are irreconcilable For example, in the case of Shri Ram Chander/Ram Charan, he had initially stated that he had given Rs. 10,00,000/- out of the proceeds of sale of the land but thereafter it was claimed by him that the money had come from her sister Vidya Such contradictions clearly render all these transactions dubious The ITAT could not have, merely because the payments were through cheques, held that the transactions were genuine The ITAT erred in simply accepting the explanation of the Assessee qua the four transactions The ITAT, clearly did not follow the binding precedent in Divine Leasing & Finance Ltd. (supra), which in no uncertain terms requires that the authonties are duty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i Ram Charan/Ram Chander and Smt Sunita to the tune of Rs 50,00,000/- Rs. 1,10,00,000/- Rs. 10,00,000/- and Rs. 98,00,000/, respectively, are liable to be added back to the returned income of the Assessee for the relevant AY, under Section 68 of the Act." 14. Considering the totality of the fact and circumstances of the issue involved, in my considered opinion, the ratio of the judgments in the Pavankumar M Sanghvi Vs. ITO (supra) and Pr. CIT vs Bikran Singh (supra) are fully applicable to the facts of the instant case Hence, respectfully following these discussions, it is held that the AO has correctly treated the unsecured loans amounting to Rs 373 lakhs taken by the appellant from fifteen (15) parties as unexplained cash credits u/s 68 of Income Tax Act. Hence, the addition is confirmed. Thus, the sole ground of appeal is rejected." 5. Heard the ld. D.R and perused the material on record. During the course of appellate proceedings the ld. CIT(A) called the remand report from the A.O. In the remand report the A.O reported that as directed by the ld. CIT(A), vide letter dated 14.12.2016, the assessee was asked to produce the lenders for examination on 05.01.2017. Howev....