TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 1261
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....m the Investigation wing only without application of mind and analysing the basic facts of the case. The notice issued on the basis of borrowed satisfaction is illegal and void and consequently assessment based on such notice may kindly be quashed. 1.1. That the Ld.CIT(A) has also erred in confirming the action with regard to reopening of the case without considering the fact that the Assessing Officer has not applied his mind and having no independent satisfaction with regard to reopening of the case u/s 148 and, as such, proceedings u/s 148 are liable to be quashed. II. Addition u/s 68 of Rs 80,00,000/- being loan received from M/s Lunkad Textiles Pvt. Ltd. (Rs 20,00,000/-), M/s P. Saji Textiles Ltd (Rs 30,00,000/-), M/s Sampada Chemicals Ltd. (Rs 10,00,000/-) and M/s Santoshima Tradelinks Ltd. (Rs 20,00,000/-). 2. The Ld. AO has erred both in law as well as in facts in making addition of Rs. 80,00,000/- by treating the unsecured loans received by the appellant as unexplained cash credit without appreciating the fact that the appellant has entered into genuine transactions with its loan creditors and complete details of loans were submitted by the appellant and it has also ....
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....nd his other 11 related entities on 05.02.2016. During the search statement of Mr. Vipul Vidur Bhatt was recorded on 09.02.2016 where he accepted that he is an entry operator and all the mentioned entities/ companies are bogus entities/ companies which are used by him for providing bogus accommodation entries to the various beneficiaries for commission. He also accepted that he is director in these entities/ companies and all other directors of these entities/ companies are dummy directors appointed by him. During the year assessee has obtained bogus accommodation entries in the form of unsecured loans from 4 entities/ companies controlled and operated by Sh. Vipul Vidur Bhatt amounting to Rs. 80 lacs. The assessee has rotated unaccounted money of Rs. 80 lacs in its bank account through these companies. Thus, Rs. 80 lacs has escaped assessment. A letter u/s 133(6) was sent on 15.03.2018 (date of notice is 13.03.2018) and information was called. The assessee filed the reply on 20.03.2018. However, the reply of assessee is not satisfactory. No scrutiny assessment u/s 143(3) of the Act was made and therefore, the only requirement to initiate proceedings is reason to believe which has ....
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.... This satisfaction must be of AO himself and not a borrowed satisfaction. Reason to believe cannot be at the instance of audit party or investigation conducted by others or third party statement etc. 2. In the present case, before issue of notice u/s 148, the AO issued notice u/s 133(6) dt. 13.03.2018 (copy enclosed) to furnish the statement of account of 10 entities in the books of accounts of assessee. In response to same, assessee vide reply dt. 20.03.2018 (copy enclosed) submitted that during the year it raised loan only from 5 parties, i.e. of (i) Rs. 20 lacs from M/s Lukand Textiles Pvt. Ltd., (ii) Rs. 30 lacs from M/s P Saji Textiles Ltd., (iii) Rs. 10 lacs from M/s Sampada Chemicals Ltd., (iv) Rs. 20 lacs from M/s Santoshima Tradelink Ltd. & (v) Rs. 30 lacs from M/s Dolex Commercial Pvt. Ltd., totalling to Rs. 1.10 crores. It was further explained that the loan was repaid during the year itself. Copy of ledger account and bank statement in support was filed. However, in the reasons recorded, AO stated that reply of the assessee is not satisfactory and accordingly he treated the amount aggregating to Rs. 80 lacs received from 4 parties namely (i) M/s Lukand Textiles Pv....
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....providing accommodation entries, the AO was well within his powers to initiate proceedings u/s 148 of the Act, more particularly when the assessment of the assessee is not framed u/s 143(3) of the Act. 3.5 We have heard both the parties and perused the materials available on record. It is noted from the assessment order that the assessee company filed its original return of income on 29-10-2012 declaring NIL income. Thereafter, the AO was having information relating to escapement of income by the assessee on account of unaccounted money of Rs. 80.00 lacs during the year and the AO initiated proceedings u/s 147 of the Act and thus notice u/s 148 dated 26-03-2018 (PB 21-24) was issued on the basis of information received from DDIT(Inv), Unit7(4),Mumbai vide letter dated 13-10-2016 through ITO, Ward 3(1)(1), Ahemdabad on 29-11-2017 that a search and seizure action u/s 132 was carried out in case of Mr. Vipul Vidur Bhatt and his other 11 related entities on 5-02-2016. During search, statement of Shri Vipul Vidur Bhatt was recorded on 9-02-2016 wherein he accepted that he is an entry operator and all the mentioned entities/ companies are bogus entities/ companies which are used by him ....
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.... doubt. The assessee claimed to have taken substantial loan from a party which was found to be bogus is also not in doubt. The above circumstances are sufficient reasons to form a belief that taxable income had escaped assessment. At the stage of reopening, what is required is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis.'' After evaluating all the facts and circumstances for the purpose of deciding this ground, we are of the view that since the assessee has claimed to have substantial loan from a party which was found to be bogus. Therefore, under these circumstances, prima facie, these facts are sufficient for forming a belief that taxable income has escaped assessment. We are further of the view that at the stage of reopening, the only requirement is that the AO should have some tangible material facts which can form the basis to believe that income has escaped assessment and at that stage it is not to be established beyond reasonable doubt that such amount of income had already escaped assessment. Therefor....
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....by Sh. Vipul Vidur Bhatt (VV Bhatt in short) in his capacity as Director of M/s P Saji Textiles Ltd. and M/s Sampada Chemicals Ltd. VV Bhatt in search has admitted to creation of several bogus companies and giving accommodation entries to unscrupulous beneficiaries. He is the genesis of the investigation and subsequent assessment in the case of present assessee. (ii) Sh. VV Bhatt had by an affidavit sworn on 02.09.2016 retracted the statements given by him in course of search proceedings. The affidavit filed by him do not serve his case. This only go to prove the fact that he was the real creator of the bogus companies which were giving accommodation entries. The affidavit is just self serving documents to sub-serve the unscrupulous activities indulged into by Sh. VV Bhatt. (iii) The documents relating to various entities were found in the premises of Sh. VV Bhatt in course of search. This fact had been admitted by him. The assessee had not demonstrated before the AO that those entities were doing genuine business. The money transactions carried out by them have not been proved as genuine before the AO. In fact the AO had taken the view that they were rotating unaccounted money....
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....e assessee further submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. In fact the Ld. CIT(A) having not found any flaw in the additional evidences filed before him has discarded the same by simply stating that these are self serving documents. Therefore, once the assessee has discharged its onus casted u/s 68 of the Act, the addition confirmed by Ld. CIT(A) is not as per law. To this effect, the ld. AR ....
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....ited 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 be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs. 2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs. 3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs. 10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs. 45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. T....
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....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 ld. 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 that the lenders had substantial turnover and had a very large basis of assets as is reflected in the respective balance sheet.'' 2. Pr. CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj. H.C.) wherein the Hon'ble Court observed at para 7. "7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on ....
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....sessee 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 department that the source of such moneys come from the assessee himself or such source could be traced to the assessee itself. In the present case, while the existence of the creditor is not in doubt & he has admitted to have advance the loan to the assessee, the fact that the explanation furnished by the creditor about his source of such advancement has not been accepted by the revenue authority cannot lead to any presumption that the source of such advancement by creditor emanated from the assessee. Therefore, the addition in the income of the assessee as cash credit cannot be sustained.'' 5. Labchand Bohra vs ITO (2008) 219 CYR 571 (Raj) wherein the Hon'ble Court obser....
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....The entire loan of Rs. 54,50,000/- was also repaid during the same financial year itself. 2.1. The Ld. CIT (A), erred on facts and in law in confirming the addition of Rs. 54,50,000/- which was made by the Ld. AO by treating the unsecured loans received by the appellant as unexplained cash credit Rs 54,50,000 received from M/s Shyam Alcohol & Chemicals Ltd u/s 68 and without appreciating that appellant has duly established identity, existence and creditworthiness of the loan creditor and also genuineness of the transaction of the appellant with the said party and thus onus of the appellant casted u/s. 68 was duly fulfilled and hence, addition u/s 68 of Rs 54,50,000/- may be deleted. 2.2. Without prejudice to above, the Ld CIT(A) erred in making the addition on the basis of statement of Vipul Vidur Bhatt without appreciating that appellant had proved the identity, creditworthiness and genuineness of the party by filing documentary evidences and Vipul Vidur Bhatt has retracted his statement and hence, addition u/s 68 of Rs 54,50,000/- may be deleted. 2.3. The Ld CIT(A) erred in making addition of Rs 54,50,000/- without considering the detailed submission and explanation dated 1....
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....ordingly the assessment was framed u/s 147 of the IT Act, 1961. 6.2 In first appeal, the Ld. CIT(A) upheld the validity of reopening of assessment by holding that the search and seizure was conducted in case of Sh. VV Bhatt. The fact of search leading to detection of various bogus entities controlled by the person is not in doubt. The assessee claimed to have taken substantial loan from a party which was found to be bogus is also not in doubt. The above circumstances are sufficient reasons to form a belief that taxable income had escaped assessment. At the stage of reopening, what is required is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis. Thus the ld. CIT(A) confirmed the action of the AO. 6.3 We have heard both the parties and perused the materials available on record. It is noted that similar issue had been raised by the assessee in ITA No. 302/JP/2013 for the assessment year 2012-13 wherein the Ground No. 1 and 1.1 of the assessee has been dismissed. Hence, the decision taken by us in Ground No. 1 and 1.....
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....e materials available on record. In this case, the AO made an addition of Rs. 54.50 lacs holding it as unaccounted money relating to Shri Vipul Vidur Bhatt for providing accommodation entries and rotating it in its bank account through these companies during the year. In first appeal, the ld. CIT(A) has confirmed the action of the AO. It is not imperative repeat the facts of the case as similar issue had been raised by the assessee in ITA No. 302/JP/2013 for the assessment year 2012-13 wherein the Ground No. 2 to 2.4 of the assessee has been allowed. Since the similar points are involved in the appeal of the assessee for the assessment year 2013-14, therefore, applying the same analogy, we feel that the ld. CIT(A) is not justified in confirming the action of the AO as to the addition of Rs. 54.50 lacs in the case of the assessee company. Hence, the decision taken by 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 o....
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....the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. The case laws and the report relied upon by the ld. DR are with reference to the LTCG claimed exempt u/s 10(38) of the Act which are not relevant to the facts of the assessee's case where he took loan and also repaid during the same financial year. Hence, these case are of no help to the revenue. As against this, the ratio laid down by the assessee are squarely applicable to the facts of the assessee. 1. ITO vs Om Shanti Realtors (ITA No. 5615/Mum/2017 dated 0103-2019 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 at length 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....
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.... eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse." 3. Aravali Trading Co. vs ITO (2008) 8 DTR 199 (Raj) wherein the Hon'ble Court observed that ...Once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of sec. 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....