TaxTMI 
TaxTMI 
2022 (10) TMI 1261
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....otice u/s 148 of the IT. Act on the basis of information from 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 credito....
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....dabad on 29.11.2017 that a search & seizure action u/s 132 was carried out in case of Mr. Vipul Vidur Bhatt and 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....
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....r initiating action u/s 147 is that AO must have reason to believe that any income chargeable to tax has escaped assessment. 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 sati....
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....r Bhatt had admitted that he director in the entities / companies and all other directors of entities/ companies are dummy directors appointed by him and through these companies he is 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 V....
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.... the matter. The AO noted that search and seizure was conducted in the 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.'' 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 for....
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.... AO by giving the following findings ''(i) The assessee has filed additional evidence in the form of affidavit duly sworn by the Directors of the companies. Two of these affidavits are sworn 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 t....
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.... given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. AR of the 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 di....
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....or providing accommodation entries and rotated unaccounted money of Rs. 80 lacs in its bank through the 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 be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs. 2.08 crores (PB 49), M/....
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....ment 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 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....
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....008) 8 DTR 38 (Raj) wherein the Hon'ble Court observed that - '' While it is the assessee's burden to furnish the explanation relating to cash credits, the assessee's burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns 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 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....
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....lcohol & Chemicals Ltd. 2. The Ld. AO has erred both in law as well as in facts in making addition of Rs. 54,50,000/- 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 complied with the requirements of section 68 of the Act. 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,....
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...., 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 been recorded above. Thus, in terms of clause (b) of Explanation 2 to section 147, income chargeable to tax has escaped assessment. The assessee objected to the notice issued u/s 148 vide reply dt. 06.12.2018 (PB 24-26) which was disposed of by the AO vide order dt. 10.12.2018 (PB 28-30) and accordingly 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 estab....
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....clusion that can be drawn is that Sh. Bhatt through the bogus companies has given accommodation entries to the assessee. Unless the findings of Investigation Wing are found to be untrue, no amount of argument can changed the balance in favour of assessee. The retraction of statement cannot change the facts unearthed in course of search and therefore, retraction is a self serving statement. Accordingly, the addition made by AO is confirmed. 7.3 We have heard both the parties and perused the 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 ....
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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. 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 b....
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....t disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the 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 ....