TaxTMI 
TaxTMI 
2023 (4) TMI 1352
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....the fact that the assessee failed to prove genuineness of transactions and creditworthiness of investors during the assessment proceedings as well as at time remand report though he was requested to do so? (ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of unexplained unsecured loan amounting to Rs. 8,10,13,188/- without appreciating the fact that the assessee failed to prove genuineness of transactions and creditworthiness of investors during the assessment proceedings as well as at time remand report though he was requested to do so? (iii) On the facts and circumstances of case and in law, the Ld. CIT(A) has erred in deleting the total additions of Rs. .8,78,28,138/- on account of unexplained cash credit u/s 68 of the Act for unexplained Share capital + Share Premium and unsecured loan as the decision of the Hon'ble 1TAT, Surat in assessee's own case on similar issue for the A.Y 2012-13 has not been accepted by the department and further appeal have been filed before the Hon'ble High Court where decision is pending: (iv) On the facts and circumstances of case and i....
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....erved upon assessee. 4. During the year under consideration assessee has shown receipt of share capital/premium and unsecured loan from following persons/concerns: Sl. No. Name & Address Unsecured Loan (Rs.) Share Capital/Premium (Rs) Total 1 Arya Marketing, Prop. Vipulbhai M Savaliya, C-401, City Corner Complex, Nandanvan Society, Mota Varachha, Surat 20775238 0 20775238 2 Ashvini Fibres, Prop. Sangita Rajesh Vekharia 8-C, Ashwini Apptt, Anmol Compound, Sumul Dairy Road, Surat 27,70,000 0 2770000 3 Creative Fashions, Prop Haresh Vekaria 3-D, Ashwini Apptt., Sumul Dairy Road Director in R. J. Squarelink Pvt. Ltd., 3465000 2023500 54,88,500 4 Master Corporation, Prop. Haresh Vekharia HUF, 39, Kamla Estate, Kohinoor Road, Varachha, Surat 5631100 0 56,31,100 5 Metro Fibres, Prop. Jitendra Vekharia HUF 109, Sachi Complex, Runghnathpura, Nain Road, Lal Darwaja, Surat 5095850 "To" 50,95,850 6 Shilp International, Prop. Shilpa Prakash Dhanani C-1/101, Krishna Township, Satellite Road, Mota Varachha, Surat 14000000 591150 1,45,91,150 7 Sunflower Enterprise, Prop. Bhavikaben A. ....
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....nt to assessee similar amount was credited on same date in bank accounts of assessee. Their capital and the balance sheet doesn't have enough credit worthiness to invest in assessee company or give advance to company. It was found that creditors of assessee have invested in company as share capital/premium or unsecured loans. The amounts which were paid to purchase parties returned back to assessee as unsecured loan or share capital. Further the persons who have invested have obtained unsecured loans or sale proceeds from creditors of assessee. All those concerns are not doing any real business. The Inspector was deputed by assessing officer to conduct a spot enquiry of business premises shown by the investors/creditors of assessee. As per his report as on date none of the concern from whom assessee has received unsecured loan/share capital are running from that premises. Neighbors of addresses given were unaware of any business running from those places. In few cases even proprietor herself stated that she was not aware of any concern running from that place. The Inspector's report is reproduced below: Date: 17-3-2016. To The Income-tax Officer ....
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....havikaben A Vekharia, (i) 3-C/D, Ashvini Apptt. Opp. Sardar Nagar Soc. Sumul Dairy Road, Katargam, Surat. (i) I visit this premise on 15-3-2016. From the premise, Medical clinic of Dr. Ashwinbhai Vekharia is running. I met the Dr. Ashwinbhai Vekharia (Mobile No. 9824199706) informed me that the firm is closed two years ago. (ii) I visit this premise on 15-3-2016. Its residential premises and no business activities are being carried out from this premise. 8 Sunrise Fibre, Prop. Ushaben J Vekharia, 109 & 208, Sachi Complex, Rughnathpura, Main Road, Lal Darwaza, Surat. I visit this premise on 17-3-2016. I met there Shri. Bhagirath S Narigara (Mobile No. 8460666039) who informed me that the firm Metro Fibres is closed two years ago. Now at present, Ankur Pharma is running from this premise. 9. Sunstar Creations, Prop Manishaben Vekharia, 38, Kamla Estate, Kohinoor Road, Varachha Road, Surat. (ii) 3/C, Ashwini Apptt. Sumul Dairy Road, Surat. (i) I visit this premise on 15-3-2016. I met there Shri. Himatbhai Kababhai (Mobile No. 9824199706) informed me the firm Sunstar Creation, is closed two years ago. (ii) I visit this premise on 15-3-2016. Its residential pr....
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....Master Corporation, Prop. Haresh Vek haria HUF, Metro Fibres Prop. Jitendra Vekharia HUF, Shilp International Prop. Shilpa Prakash Dhanani Sunflower Enterprise, Prop. Bhavikaben A. Vekharia Sunrise Fibre, Prop. Ushaben J vekharia Vinubhai Ramani, 1 2 3 4 5 6 7 AMOUNT INVOLVED 27,70,000 56,31,100 50,95,850 1,45,91,150 1,09,40,900 80,95,000 8,00,100 Turn Over 393243321 30456463 9639055 158871566 56428500 12089344 No details were furnished as summon as well as letter u/s. 133(6) could not be served Purchase 392576953 27340160 7375854 164247852 51398989 5030459 Administration & Selling Expenses 351685 18468 112024 232918 473419 258858 Profit 616001 285134 121762 252234 402358 452726 Capital 229103 2049142 1857066 703821 1487907 1177499 USL 30820167 397257 12253804 0 0 Cr 181483869 199955719 69302309 112405061 63774900 141888497 Fixed Assets 25198 0 0 6054 0 0 Loans, Adva....
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....Rent 0 0 0 0 0 60000 8. In view of above table it is clear that except Shri Ashvin Vekharia and Shri Jitendra Vekharia all other persons creditworthiness is not enough to invest/advance of amount in excess of 20 lakhs. Shri Ashvin Vekharia is also running a medical clinic whose transactions are not shown in above chart. As stated in show cause letter no business can be run without incurring expenses of rent, electricity, stationery, transport. Majority of the business concerns were running from residence which 2 bed room accommodations. They were trading in grey cloths and yarns which are voluminous items and to trade in these goods substantial amount of space is required. All the lenders/investors were from the promoter families. Summonses were issued to them but no one attended. All the involved persons are relatives of assessee or closed friends so could be easy for assessee to produce before the undersigned, however surprisingly no one attended. All the concerns must have started their business at a particular period of time and as stated by assessee, all have closed their business as on date. Almost all have opened their bank accounts with one bank and one....
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....stationery expenses, transportation expenses, salary expenses, telephone expenses which are the basic requirements of running establishment. From the bank account statements of all these concerns, one characteristic invariably emerges consistently in all the cases. There is a pattern of bank deposits immediately prior to the issue of cheques. This fortifies the stand of Revenue that the accounts are irrigated with need based 'temporary creditworthiness' adequate only to meet the fund requirements of the entry recipients. From the pattern of deposits and issuance of cheque it stands established that not only the alleged concerns are devoid of any true creditworthiness, they are merely account lenders providing accommodation entries through their bank accounts. 11. The assessing officer also noted that Investors made investments/advances of around 50 times or even more than 50 times of their yearly income. For example, Shri Vipul M Savaliya has shown total income of Rs. 2,64,240/- whereas he has advanced Rs. 2,07,75,238/-. Their yearly withdrawals are from Rs. 60,000/-to 2,00,000/-. Manishaben, Prop of M/s Sunstar Creations has shown yearly withdrawals of Rs. 86,000/- but ....
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....ed copies of ITR-V, computation of income, copy of bank statement 6. The appellant also filed contra ledgers and confirmation of source of source parties of all the creditors. 7. The AO has mentioned in Para 8.3 of the assessment order that all the lenders/investors from the promoter families. 8. In the preceding assessment year 2012-13 the Ld. CIT(Appeal), Surat-3 has held that identity, creditworthiness of the creditors and genuineness of transactions of 8 creditors were proved. The Hon'ble ITAT, Surat also sustained the order of the Ld. CIT(Appeal), Surat-3. 9. The appellant has filed the assessment orders u/s 143(3) for relevant AY 2013-14 in the case of 6 creditors while assessment orders u/s 143(3) for AY 2012-13 were filed in the case of 4 creditors. 10 . All the creditors presented themselves before the AO and confirmed giving the unsecured loan to the appellant company or the obtaining of shares of the appellant company. 4.13 The appellant has submitted that the lenders/investors presented themselves before the AO during the remand proceedings and their statements were recorded by the AO. All the creditors submitted....
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....d that the same documents/evidences relevant to the AY.2013-14 have been produced in the current appeal also. In the present appeal apart from the abovementioned documents/evidence, the creditors appeared before the AO during the remand proceedings. Considering the above facts, I do not find any reason to differ with the view taken by my Id. Predecessor CIT (Appeal), Surat for AY.2012-13 in the case of the appellant. 4.16 In view of the facts discussed above and the applicable binding decisions of the Hon'ble Supreme Court, Hon'ble Gujarat High Court and the jurisdictional ITAT, Surat Bench, I hereby hold that the addition of Rs. 8,78,28,138/- on account of unexplained share capital of Rs. 68,14,950/- and unexplained unsecured loan of Rs. 8,10,13,188/- made u/s.68 cannot be sustained. Hence, the AO is directed to delete the same. Accordingly, ground no. 1 & 2 are allowed." 13. Aggrieved by the order of ld.CIT(A), the Revenue is in appeal before us. 14. Learned DR for the Revenue vehemently relied on findings of the assessing officer. The ld DR pointed out that during the year under consideration, the assessee company has shown receipt of Share Capital/Share P....
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.... case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that disputed unsecured loan is to the tune of Rs. 8,10,13,188/- and most of the loan has been repaid in subsequent year. Therefore, such loan should be treated genuine. Where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit, as held by Hon`ble Gujarat High Court in the case of CIT v. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251/221 Taxman 146. The detailed findings of the Hon`ble Court is reproduced below: "5. Heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue. The only contention on behalf of the revenue is that on the last day of passing the order, communication dated 22-12-2008 of the assessee along with the confirmation letter of Shri Ishwar Adwani confirming the loan/advance of Rs. 1,45,00,000/- given to the assessee, was produced before the Assessing Officer i.e. on the day the Assessing Officer passed the order and thereafter the same was reproduced before the CIT(A) and the CIT(A) considered the same, th....
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....section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder: "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case th....
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....rough banking channel. We have also gone through the detailed findings of ld CIT(A) and noted that conclusion reached by ld CIT(A) in deleting the addition of Rs. 8,10,13,188/-is acceptable. 20. We note that so far addition of Rs. 68,14,950/-, on account of share capital/premium is concerned, we note that assessee submitted PAN, returns of income, audited financial statements, transactions through banking channels, and assessee also stated that their scrutiny assessments were done. The Ld. Counsel invited our attention to the respective balance sheets of the share applicants to show that each of them had sufficient funds available at their disposal to make investment in the assessee- company. Referring to the respective bank statements, it was further pointed out that the transactions were conducted through proper banking channel and that there were no cash deposits in any of the bank account of the share applicants. He also invited our attention to the explanation furnished by each of the share applicants regarding their source of funds. It was thus submitted that the fund flow position of the share applicant and not the profitability was the decisive criteria to examine the cr....
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....a 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] If on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, those lenders have made inco....