TaxTMI 
TaxTMI 
2024 (11) TMI 629
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.... by Ld. A.O. on account of unexplained cash credit u/s. 68 of the Act. 4. The Ld. CIT(A) has erred in law and in facts in confirming the addition of Rs. 5,69,672/-made by Ld. A.O. on account of interest paid on bogus loans. 5. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 2. The brief facts of the case are that, the assessee company is engaged in business of manufacturing and has filed the return of income for the assessment year 2012-13 on 27/09/2012 disclosing a total income of Rs. 1,21,67,790/- and the return of income was processed u/sec. 143(1) of the Act. Subsequently, the Assessing Officer (A.O) has received information from DGIT (inv) Mumbai that the assessee has obtained accommodation entries from Shri Vipul Vidur Bhatt group entities. Therefore, the AO has reason to believe that the income has escaped assessment and issued notice u/sec. 148 on 29/03/2017. In compliance to the notice, the assessee has filed the letter dated 03/08/2017 mentioning that the return of income filed earlier on 27/09/2012 may be treated as due compliance and the assessee was also provided reason reopening of asses....
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....appeal before the Hon'ble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the addition of u/sec. 68 of the act and disallowance of interest u/sec. 37 of the act Act irrespective of the facts that the assessee has filed the details in respect of the loans and interest payable and submitted the confirmation of the loan creditors along with other details. Further, the Ld. AR submitted that the assessee maintains the regular books of accounts and has obtained unsecured loan from genuine creditors and they were repaid in the subsequent assessment years. Whereas, the assessee has furnished before the CIT(A),the confirmation of loans, bank statement of both the assessee and loan creditors, audited financial statements to substantiate the genuineness, identity and creditworthiness of the loan creditors. Further the A.O relied on the statement of Shri Vipul Vidur Bhatt in the search and seizure u/sec132 of the Act conducted on his group entities which was retracted subsequently and hence addition of unsecured loans is bad in law. The Ld.AR supported the submissions on the disputed issues with the material evidences in the paper book a....
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....tity, genuineness and creditworthiness in decision making and granted relief. And the Ld. AR has relied on the judicial decisions. 6.The Jurisdictional High Court of Bombay in the case of Pr. CIT Vs. M/s Chawla Interbild Construction Co Pvt Ltd (2018) ITA No. 1103 of 2015 has observed as under: "7. We find that the Assessing Officer while the assessment order has dis-allowed 40% of the total payments made on the basis of the payments made to 13 parties, who were not produced before him during the assessment proceedings. This on the ground that payments are not genuine. We are unable to understand on what basis the dis- allowance is made on the total payments, if at all it should have been restricted only to the amounts paid to the 13 persons who are not produced before the Assessing Officer. Be that as it may, we find that the respondent assessee had done everything to produce necessary evidence, which would indicate that the payments have been made to the parties concerned. The details furnished by the respondent assessee were sufficient for the Assessing Officer to take further steps if he still doubted the genuineness of the payments to examine whether or not the pay....
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....es who have duly shown the amount of loan in their returns of income and banks statement of loan parties and the Assessee showing the transactions held, but also shown to have deducted TDS on the interest payment made to the parties, which also strengthen the genuineness of the claim of the Assessee. Therefore, on the basis of the general statement made by any 3rd party, without demolishing the case/claim of the Assessee, making of an addition is not logical. 9.2 We also observe as noted above that the loan of Rs. 20,50,000/- was taken by the Assessee from the said entities in 2010-11 (AY:2011-12) and during the year consideration, no such amount was found credited in the books of an Assessee maintained, if any and even otherwise the Assessee has claimed the he is not maintaining any books of account. It is a settled law that mere suspicion cannot takes place for the purpose of passing an order, in fact there must be something more than suspicion in support of an assessment. The Hon'ble Apex Court in the case of CIT us. P. Mohankala (Civil Appeal no. 2540 of 2007 decided on dated 15.05.2007) has clearly laid down the dictum "that there has to be credited amount in the ....
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....the said case, survey action u/s 133A of the Act was conducted by DGIT (Inv.) Mumbai. During the course of survey, the books of account of the assessee were examined which revealed that the assessee had received unsecured loan and share application money from the concerned companies operated and controlled by Sh. Pravin Kumar Jain to the tune of Rs. 7,75,00,000/-. A survey was also conducted in the case of Mr. Rakesh Doshi, Proprietor Rakesh Doshi Associates. As per the revenue, Shri Doshi was the broker who arranged the loans and share capital money from the concerned company controlled by Pravin Kumar Jain. During the course of survey Mr. Rakesh Doshi in his statement admitted that he was an accommodation entry facilitator and he had arranged accommodation entry from various other companies which were not the part of company controlled Pravin Kumar Jain. The assessee had shown unsecured loans from such parties amounting to Rs. 1,25,00,000/-. 9. During the course of assessment proceedings, the assessee was asked to show cause as to why unsecured loan taken from the party should not be treated as unexplained cash credit u/s 68 of the Act. The assessee contended that it has....
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....and the assessee had requested to cross examine him that the same has been denied by the A.O. 35. As regards the statement of Shri Rakesh Doshi, the assessee's claim was that the assessee was never provided with the detail of statements given by Shri Rakesh Doshi despite request. On this issue of retraction of Shri Pravin Kumar Jain's and request by the assessee for cross examination of Shri Pravin Kumar Jain and Shri Rakesh Doshi, the Id. CIT(A) observed that there is a clear violation of natural justice. He noted that the copy of the statement of Shri Pravin Kumar Jain as well as his cross examination was not provided to the assessee during the course of assessment proceedings, although the assessee has specifically asked for the same. He noted that the copy of statement of Shri Rakesh Doshi was provided to which the assessee has submitted its rebuttal. He noted that the A.O. has not provided cross examination of Shri Rakesh Doshi. The Id. CIT(A) has placed reliance upon the several case laws in this regard for the proposition that where oral evidence of any party is sought to be used against an assessee, it is necessary that information relating to such statemen....
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....n survey regarding the share capital and share premium and that as regards the unsecured loan, upon reference to the materials, the assessee has found that the same was in order and, therefore, the assessee has furnished the necessary materials to support the genuineness of the loan. In this regard, the Id. CIT(A) has rightly referred to the decision of the Hon'ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. (supra) that "an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made admission to show that it is incorrect. Similar observations were made by the Hon'ble Apex Court in the case of S. Kadar Khan 352 ITR 480 (SC) that the statements obtained in the course of survey de hors corroborative evidence cannot be conclusively proof for making the additions. Furthermore, the Id. CIT(A) by referring to the statements of Shri Rakesh Doshi has given a finding that his admission was not with relation to unsecured loans obtained by the assessee from the concerned companies. In this regard, we are of the considered opinion that these circumstances can give rise to a suspicion but they are ....
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....ital and share premium from other corporate entities. First of all, we note that this is a case of unsecured loan and not share capital and share premium. Further, we find that the above said proviso to section 68 was inserted by Finance Income Tax Act, 1961, 2012 w.e.f. 01.04.2013. The Hon'ble jurisdictional High Court in the case of CIT vs. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 has held that the said proviso is prospective and cannot be applied to assessment years preceding the same. We may painfully refer to the decision of Hon'ble jurisdictional High Court which is also relevant in this case: During the previous relevant to the subject Assessment Year the assessee had increased its share capital from Rs. 2,50,000/to Rs. 83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs. 6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs. 190/per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of....
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....rts (P)Ltd. 317 ITR 218 in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. As noted in the ratio emanating from the decision of Hon'ble Jurisdictional High Court above, even if the source of funds of this corporate entities who have advanced loan to the company are considered suspicious in the context of pre- amended section 68, the addition can be considered in the hands of these companies and cannot be made in the hands of the assessee. Even otherwise (as the proviso is applicable for A.Y. 2013-14) as rightly noted by the ld. CIT(A), the said proviso provides for an adverse inference if the assessee company providing those sums does not offer any explanation about the nature and source of sums. In this regard, it is noted that the A.O. has not made any enquiry from these corporate ent....
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....rmatory letters, bank statements and financial statements of the creditors. The Assessing Officer has not found any error therein. It has been held in number of cases that when the assessee has given all the necessary details of the loan creditors, including the creditworthiness and genuineness of the identition, the onus upon the assessee is discharged. In these circumstances, in our considered opinion, the these car has discharged its onus. The Assessing Officer has assrebutted any of the submission of the assessee and the not rebutary evidence in this regard. Hence, in our documered opinion, there is no infirmity in the order of the Id. Commissioner of Income Tax (Appeals). The various case laws referred by the Id. Commissioner of Income Tax (Appeals) are germane and duly supports the case of the assessee. In the background of the aforesaid discussion and precedent, we uphold the order of the Id. Commissioner of Income Tax (Appeals)." 40. The above case law duly supports the proposition that no adverse inference can be drawn by the A.O. without making any enquiry in this regard. Even the ld. DR has tacitly acknowledged this proposition when he submits that the id. Couns....
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....the assessee nor made any enquiry. As noted above, the assessee has given all the necessary evidence including the confirmation letters, bank statement, financial statements of the corporate entities. Hence, in our considered opinion, the identity, creditworthiness, genuineness of the transaction has been proved by the assessee and the onus cast upon the assessee has been discharged. In the background of the aforesaid discussion and precedent, we find that the Id. CIT(A) has passed well reasoned order supported by a appropriate case laws duly rebutting all the findings of the A.O. Hence we uphold the order of the ld. CIT(A)." 10. As pointed out by the Ld. counsel for the assessee, the issue involved in the present case is fully covered in favour of the assessee by the decision of the T Bench of the Tribunal in the case of Dy. CIT vs. Manba Finance Ltd. (supra), for the AYs 2010-11, 2011-12 and 2013-14. In this case, the assessee has furnished documentary evidence including confirmation letters, bank statements, financial statements of the entities from whom, the assessee had obtained loans in question etc. Hence, in our considered view, the assessee has discharged his onus....
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....us in Ground No. 2 to 2.4 of the assessee for the assessment year 2012-13, allowing the grounds of the assessee are reproduced as under:-' 4.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the AO while making the assessment in the case of the assessee observed that during the year under consideration the assessee company had taken credit entries in the form of unsecured loan from the entities which are 27 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR managed by Shri Vipul Vidur Bhatt for providing accommodation entries and rotated unaccounted money of Rs. 80 lacs in its bank through these companies. Thus the AO added unaccounted money of Rs. 80 lacs to the total income of the assessee company for the year under consideration and the ld. CIT(A) has confirmed the action of the AO. The Bench noted that if any sum is found credited in the books of account of the assessee then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. From the record, it is noted that identity of the creditor is ....
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....ee are squarely applicable to the facts of the assessee. ITO vs Om Shanti Realtors (ITA No. 5615/Mum/2017 07003-2019 wherein the Bench observed as under:- "7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties andength we find that the assessee had already placed on record all the documentary evidence in order to show the identity and creditworthiness of the lender and genuineness of the transactions. We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lender was not in dispute. We have also considered all the documents placed on record by the assessee in the shape of statement of accounts and documents to show that the transactions were carried out through banking channels and the confirmations which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS. All those documents prov....
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.... 68 or on general principle. Merely because the depositors explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to assessee itself. If the creditors explanation about the source of deposits is not found to be acceptable, the investment owned by such persons may be subjected to proceedings for inclusion of the amounts as their income from undisclosed sources or if they are found benami the real owner can be brought to tax. In the absence of anything to establish that the sources of the creditors deposits flew from the assessee, the cash credits cannot be treated as unexplained income of the assessee." 30 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 4. Kanhaialalaurt od us ACIT (2008) 8 DTR 38 (Raj) the Hon'ble Court observed that While it is the burden to furnish the explanation wherein assessee's relating to cash credits, the buressee's burdred does not extend beyond proving the asistence of the creditor and further proving that such creditor exins to have advanced the amount credited in the account of assessee. However, the burden does not go be....
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.... Ground No. 2 to 2.4 of the assessee is allowed 8. In the result, both the appeals of the assessee are partly allowed." 10. The Ld.AR filed a chart with the details filed in the paper book in respect of these unsecured loan creditors dealt and relief was granted. Sr. No. Judgement P. Saji Textiles Ltd Shipra Fabrics Pvt Ltd 1. Hon'ble Co-ordinate Bench of (Mumbai) ITAT in the case of Veenapani Investment Pvt Ltd vs ITO 13(3)(1) [ITA No. 193/MUM/2024] Yes Page 151- 198 of the Original Paperbook. 2. Hon'ble Co-ordinate Bench of (Mumbai) ITAT in the case of Arjun Manoj Purohit vs ITO 2(1) [ITA No. 3654-3655/MUM/2023] Yes Enclosed herewith as Ex 3. Hon'ble Co-ordinate Bench in the case of Shri Darshan K Vakharia Mumbai. Vs Income Tax Officer Ward2(1), Mumbai [ITA No. 1540 & 1539/Mum/2023] Yes Yes Page 199-209 of the Original Paperbook. 4. The Hon'ble Co-ordinate Bench in the case of The Income Tax Officer - 15(2)(3) V/s. M/s MJD Financial Services Pvt. Ltd. (ITA No. 6051/MUM/2018) dated 10/09/2020 _ Yes Page 210- 226 of the Original Paperbook. 5. The Hon'....
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....ils of short term capital gains on sale of land/DRC, copy of confirmation from M/s. Shipra Fabrics Pvt Ltd and M/s. Lunkad Textile Pvt. Ltd. The AO issued notice u/s 133(6) of the Act to M/s. Shipra as well as M/s. Lunkad, which according to the AO did not elicit any reply from them though it was served upon them. Therefore, the AO was not satisfied with the aforesaid documents submitted by assessee to prove the nature & source of credit entries; and he conveyed to the assessee his desire to add the same u/s 68 of the Act by issuing show cause notice to the assessee wherein he pointed out that M/s. Shipra as well as M/s. Lunkad were entry providers controlled by Shri Vipul Vidur Bhatt who had admitted it u/s 132(4) of the Act and therefore, he did not accept the genuineness of the loan, which according to him, was nothing but bogus accommodation entry. However, the assessee brought to the notice of the AO that as per his information Shri Vipul Vidur Bhatt has retracted the statement given during search by filing an affidavit on 2nd Sep. 2016 wherein he has alleged duress/coercion by the search team for extracting the admission (of providing accommodation entry through his entities)....
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....ich is found placed at page no. 9 of the PB. And in order to prove the creditworthiness of the M/s. Shipra, the Ld. AR drew our attention to the balance-sheet of the ibid company as on 31.03.2014 which is found placed at page no. 13 of PB which reveals that it has share capital and reserves & surplus to the tune of Rs. 3.42cr and it has given assessee loan of only Rs. 77 Lakhs. Thus, according to the assessee, the creditworthiness of M/s. Shipra cannot be doubted; and according to assessee, by producing these material he has discharged the burden to prove nature & source of Rs 77 lakhs. Likewise, the assessee in order to prove the identity of the M/s. Lunkad Textile Pvt. Ltd filed the ITR acknowledgment of M/s. Lunkad which is found placed at page no. 26 of PB. We note that the PAN of that lender company is AAACL0757A; and this company is assessed under the jurisdiction of Central Circle-39, Mumbai; and has shown gross total income of Rs. 10.26 Lakhs. And Rs. 40 Lakhs has been given as loan to the assessee by M/s. Lunkad on 21.09.2023 through banking channel which fact is discernable from page no. 24 & 25 of PB wherein the bank statement of Bank of Baroda of M/s. Lunkad Textiles Pv....
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..... 77 lakhs and Rs. 4 lakhs from M/s.Lunkad Textile Pvt. Ltd.) by adducing primary/relevant documents/material as discussed supra; and the AO has not been able to find fault with the primary/relevant documents filed by the assessee to prove the "nature and source" of the credit entries. Once, the assessee has discharged the burden to prove prima- facie "nature and source" of the credit entries, onus shifted to the AO to rebut it with cogent evidence. In this case, the AO based on the statement of Shri Vipul Vidur Bhatt has disbelieved the transaction of loan taken from M/s.Shipra Fabrics Pvt. Ltd., and M/s.Lunkad Textile Pvt. Ltd., because, Shri Vipul Vidur Bhatt had admitted before the search team that these two entities were his paper companies. However, the assessee has brought to the notice of the AO as well as the Ld.CIT(A) that Shri Vipul Vidur Bhatt has retracted his statement by filing Affidavit alleging coercion and duress for eliciting such a statement. In such a scenario, the AO ought to have summoned Shri Vipul Vidur Bhatt and cross-examined him; and in that process ought to have elicited from him about the genuineness of the lenders viz M/s.Shipra Fabrics Pvt. Ltd. and ....
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.... (a) Memorandum of Association and Article of Association (b) Certificate of Incorporation (c) Certificate of Commencement of Business (d) Acknowledgement of the Return of Income AY. 2008-09 (e) Affidavit of the Director confirming the investment (f) Application for allotment of shares (g) Photocopy of the share certificate (h) Audited account and Directors report thereon including balance-sheet, Profit and Loss Account and Schedules for the year ended 31.03.2009. (i) audited account and Directors reports thereon including balance-sheet, Profit and Loss Account and schedules for the year ended 31.03.2010. (j) The Bank statement highlighting receipt of the amount by way of RTGS. (k) Banks certificate certifying the receipt of the amount through Banking channels." 6. On going through the documents which have been produced which are basically from the public offices, which maintain the records of the Companies. The documents also include assessment Orders for last three preceding years of such Companies. 7. The Appellants have failed to explain as to how such Companies have been....
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...., have come to the conclusion that once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re- examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents. 10. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apar....