TaxTMI 
TaxTMI 
2024 (11) TMI 629
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....e 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 assessment. Further notice u/sec 142 and u/sec142(1) of the act are issued, in compli....
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....mitted 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statement of Shri Vipul Vidur Bhatt in the search and seizure u/sec132 of the Act conducted on his group entities which was retracted subsequently and hence addition of unsecured loans is bad in law.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 and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld. DR sub....
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....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 payment was genuine. The Assessing Officer on receipt of further information did not carry out the....
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....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 books of account of the Assessee and such credit has to be sum during the previous year and the Assessee offers no explanation. In the instant case, it is a fac....
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....aled 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 submitted all the documents to prove the genuineness of the transaction. The assessee further requested that cross examination of Pravin Jain may be allowed. The assessee further sub....
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....see 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 statement or the copy of deposition should be furnished to the assessee with opportunity to cross examine the deponent, if required by the assessee. In this regard, we note the submission that these amount....
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....an. 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 not conclusive proof for addition without any proper enquiry by the A.O. rebutting the documentary evidences submitted by the assessee. 38. The A.O. in this regard has doubted the creditworthiness of the corporate entities on the ground that they have taken loans and share capit....
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.... 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 Companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs. 7.53 crores i.e. the aggregate of the issue price and the premium on the shares i....
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....he 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 entities who have provided the loan, not even notice u/s. 133(6) has been issued. In these circumstances, without making any enquiry, the A.O. cannot presume that the funds obtained by these corporate entities are bogus or they are assessee's own funds being circulated. In this regard, we note that in the identical situation, this tribunal in the case of Asst. CIT us. Shri Dilip Chi....
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....e 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. Counsel of the assessee has mentioned that the A.O. has not issued notice u/s. 133(6) and summons u/s. 131 and has quoted the Hon'ble Delhi High Court decision in the case of CIT v/s Gangeshwari Metal Pvt. Ltd. (2013) 96 DTR (Del) 200 and other decisions. In this connection, the Id. DR has relied upon the decision of the Hon'ble Karnataka High Court in the case of Fidelity Business Services India Pvt. Ltd. (in ITA No. 512/2017 dated 23/07/2018) for ....
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....IT(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 of establishing the identity and the entities from lon question. The assessee has also established the genuineness of the question. The adducing necessary evidence. On the other hand the ha not brought any material on record to rebut the contention of the assessee. In our considered opinion, the findings of the Ld. CIT (A) are based on the established principles of law and in accordance with the decision of the coordinate Bench rendered in the case of DCIT vs. M/s Manba F....
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..../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 established from the company master data downloaded from MCA Portal. The genuineness of the transaction is established from the confirmation of accounts, affidavit of Director of loan creditor companies and bank statement from where it can be seen that the transaction had been carried out through banking channel and the loan amount is repaid during the year itself. It is also noted from the records that the creditworthiness of the creditor is established from the balance sheet from where it can ....
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....mation 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 prove the genuineness of the transactions. Now as far as creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances. Further, we also noticed upon the records that Id. CIT(A) had rightly pointed out in its order that the AO made the additions by holding that as the declared income by the respective loan creditors was less, therefore, they were not capable of lending. However, the AO ignored the fact....
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....e 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 beyond to put the assessee under an obligation to further prove as to wherefrom the creditor has got or procured the money to be deposited or advanced to the assessee. The explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purpose of rejecting the explanation furnished by the assessee and making additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the depa....
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....;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'ble ITAT Mumbai in the case of M/s. Celebrity Lifespace Private Limited (ITA 6301/MUM/2017) Yes Enclosed herewith as Ex C. 6. The Hon'ble Jaipur ITAT in the case of M/s. Noble Tradelink Private Ltd. Vs The ITO Ward 1(5), Jaipur [ITA No. 302 & 303/JP/2021] Yes Page 227- 257 of the Original Paperbook. 11. The Hon'ble Tribunal Mumbai bench in the case of Arjun Manoj Purohit Vs. ITO in ITA number 3654/Mum/2023 and 3655/Mum/2023 assessment year 2014-15, 2015-16 order dated 02/05/2024 has considered the facts and submission of the assessee on the unsecured loan in....
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....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). And therefore, the assessee pleaded before AO that such statement of Shri Vipul Vidur Bhatt should not be used against him to draw adverse view regarding loan taken from two entities. However, according to Assessing Officer, the DDIT(Inv.) report did not mention about any retraction affidavit filed by Shri Vipul Vidur Bhatt, therefore, the AO did not accept such a contention of the assessee. Moreover, the AO also noted that Shri Vipul Vidur Bhatt was a director of M/s. Shipra and his own dummy director Shri Deepak Raval was director of both the lender companies. Therefore, according to the AO, the assessee has not ....
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....r 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 Pvt. Ltd is found placed in PB. The confirmation of lending money to the assessee is found from the confirmation given by M/s.Lunkad which is found placed at page no. 23 of PB. The Ld. AR drew our attention to the balance-sheet of the company as on 31.03.2014 which is found placed at page no. 27 of PB which reveals that M/s. Lunkad has own funds (Share Capital and Reserves and Surplus) to the tune of Rs. 2.32 cr (and has lended Rs. 40 Lakhs to the assessee). Thus, according to the Ld. AR M/s. Lunkad had sufficient creditworthiness to lend Rs. 40 Lakhs to assessee. Thus, according to the Ld. AR, the assessee has dischar....
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....ile 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 M/s.Lunkad Textile Pvt. Ltd. i.e. whether these companies actually conducted any business or were only his paper companies engaged in providing accommodation entries. The AO, however, has not endeavored to take such a course of action and instead has brushed aside the Affidavit of retraction on the specious plea that the DDIT Investigation Report is silent about it. Such action of the AO cannot be accepted and since, the assessee has discharged his burden to prove the identity, creditworthiness and genuineness of the loan creditors, and the assessee has shown to have re-paid loan the loan in question (supra), the add....
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....t 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 assessed though according to them such Companies are not existing and are fictitious companies. Besides the documents also included the registration of the Company which discloses the registered address of such Companies. There is no material on record produced by the Appellants which could rebut the documents produced by the Respondents herein. In such circumstances, the founding of fact arrived at by the authorities below which are based on documentary evidence on record cannot be said to be perverse. Learned Counsel appearing for the Appellants was unable to point out that any of such findings arrived at by the authorities below were on the basis of misleading of evidence or failure to examine any material documents whilst....
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....iscarded 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. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of the Income Tax Act cannot lead to re- verification of the records. These findings of the CIT Appeals have not been assailed before the Income Tax Appellate Court. 11. In such circumstances, we find that there is no case made out by the Appellants-Revenue for any interference in the impugned Orders passed by the Courts below. 12. Hence, the Appeal stands rejected." 7. In the light of the discussion (supra), we direct deletion of the addition made by the AO to the tune of Rs. 1.17 Crs; and the interest expenditure claimed by assessee to the tune of Rs 4.80 Lakhs given to the two entities in AY ....