TaxTMI 
TaxTMI 
2024 (10) TMI 1700
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....n of Id. CIT(A)/ NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natural justice. 2. In the facts and circumstances of the case and in law, Id. CIT(A)/ NFAC has erred in confirming the action of the Id AO in making an addition of Rs. 1,50,00,000 by treating the unsecured loans received as alleged unexplained cash credit u/s 68 of the Act. The action of the Id. CIT(A)/ NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 1,50,00,000. 3. In the facts and circumstances of the case and in law, Id. CIT(A)/ NFAC has erred in confirming the action of the Id. AO in disallowing a sum of Rs. 3,57,521 and Rs. 59,681 u/s 36(i) (va) of the Act paid for employees' contribution to PF and ESI respectively. The action of the Id. CIT(A)/ NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 4,71,202. 4. The assessee company....
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....e bogus companies. 3.2 Vide letter dated 22.12.2015 assessee objected to the issuance of notice u/s 148 of the Act and requested to drop the proceedings u/s 148 and alternatively also requested to dispose off objections through a speaking order before proceeding further. The speaking order regarding objections filed against the issuance of notice u/s 148 of the Income Tax Act, 1961 was passed on 12.02.2016 and rejected the objections filed by assessee. Further notice u/s 142(1), 143(2) along with query letter was issued on 17.08.2015 fixing the case on 09.09.2015. In response of the above the assessee filed submission 09.09.2015 in which he submitted the confirmation of unsecured loan and bank statement. On perusal of details filed by assessee and available record of assessee, show cause notice was issued to assessee vide letter No. 3229 on 11.03.2015 fixing the case on 18.03.2016. In response the show cause notice submissions was filed in which details / confirmation of unsecured loan received from M/s Falak Trading Co. Pvt. of Rs. 1,00,00,000/- and M/s Pragati Gems Pvt. Ltd. of Rs. 50,00,000/- was produce. The ld. AO noted that according to the statement of Shri....
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....ors even though they have established their identity and genuineness of the transactions, credit worthiness of the lendors is not conclusively proven. However, from the current assessment year i.e., AY 2013-14, provisions of Sec. 68 have been amended which requires even the lendors to explain the nature and source of loans given by them. The relevant provisions of the Act are hereby reproduced for ready reference:- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory unless:- 1. The person, being a reside....
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....t in the case of Smt. Sumathi Dayal Vs CIT [214 ITR 801] has given an observation that human probabilities and circumstances are to be considered while coming to conclusions in finalizing the assessments. In view of the above, the ground as raised by the appellant is hereby dismissed. As a result, the appeal of the appellant is hereby dismissed. 5. I have gone through the above submissions and also considered the various case laws relied on by the appellant. From the facts it is understood that the assessee collected employees' contribution of ESI and PF and the same was paid beyond due date as specified by the concerned authorities which is not allowable u/s. 36(i)(va) r.w.s. 2(24)(X) and 43B. Hon'ble Apex Court brought rest to all these disputes by its recent judgement in the case of Checkmate Services Pvt Ltd Vs CIT-1 [448 ITR 518] and clearly held that any employees contributions of PF & ESI paid beyond due dates of the concerned authorities are not allowable as expenditure. By respectfully following the above judgement, the ground raised by the appellant is hereby dismissed." 5. As the assessee did not find any favour, from the appeal so filed befo....
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....ssee company, along with the bank statements evidencing the transaction done through banking channel was made available. Details are as under:- Name of the Company Confirmation of account w.r.t payment and repayment of loan Bank Statement (of Assessee) Computation of income and ITR M/s Falak Trading Co. Pvt. Ltd ✓ ✓ ✓ M/s Pragati Gems Pvt. Ltd. ✓ ✓ ✓ 1.2. It is undisputed that both the lending entities were companies (AO Order Page 2), regulated by the stringent provisions of the Companies Act, 2013. Their complete financial details, on yearly basis, were available in public domain. The department also issued them PAN and these companies were regularly assessed to tax. Thus, assessee company proved beyond doubt the identity, creditworthiness of the lending companies as well as genuineness of the transactions. Thus the onus, on the part of the assessee company, stood fully discharged. 1.3. Since assessee company established the Identity of both the lending companies beyond doubt. Under such circumstances ld. AO at best could have assessed such amount in the hands o....
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....oceedings, Commissioner (Appeals) noted that assessee had explained source of a part of amount deposited coming from bank loan and sale of agricultural land - He thus deleted substantial portion of addition made by Assessing Officer - Tribunal confirmed order of Commissioner (Appeals) - Whether since entire issue was based on appreciation of evidence on record, no substantial question of law arose therefrom - Held, yes..." 1.3. iii Aravali Trading Co v ITO (2008) 220 CTR (Raj) 622 "..Head notes: Income- Cash Credit- Burden of proof- once the existence of the creditor 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...." 1.3. iv Labh Chand Bohra v ITO (2010)189 Taxman 141 (Raj) Sec. 68: Identity and genuineness of Cash Creditor proved- No need to prove the capacity of Cash Creditor - source of source not to be enquired. 1.3. v ACIT, Jaipur v M/S Rajasthan Asbestors Cement Co., Jaipur (ITA NO. 940/JP/2008) "Now tribunal has upheld t....
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....t 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..." 1.7. Ld. AO made addition, under Section 68, of the unsecured received from the Lending Companies, on the basis of the statements made by Shri Praveen Jain during the course of search and survey proceedings and also on the basis of incriminating documents alleged to have been found from the business premises of Shri Praveen Jain. Ld. AO, being a quasi judicial authority, was duty bound to provide opportunity to cross examine Shri Praveen Jain and also for providing copies of the impugned documents before relying on the same for making additions in the hands of the assessee company. Request for the same was made to ld. AO as evident from Page No. 9 of the order of the ld. AO. 1.8. It is submitted that such statements of Shri Praveen Jain were untested and could become evidence only if opportunity of Cross Examination would have been provided to the assessee company. It is well settled that statement of third party cannot be unilaterally utilized against the assesse....
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....y evidences supporting its claim. Ld. AO failed in discharging the said onus and passed the assessment order without further investigating and producing evidences supporting the rejection of the claim of the assessee company, that the unsecured loans were genuine. 1.15. Even if it is assumed that Shri Praveen Jain was involved in bogus transactions, such fact may be relevant for suspicion but it ipso facto does not lead to conclusion of all transaction of Shri Praveen Kumar Jain would be bogus. Hon'ble Jharkhand High Court in case of CIT, Jamshedpur v/s Arun Kumar Agarwal (HUF) [2012] 26 taxmann.com 113 (Jharkhand) held that "Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of u....
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.... case of Varinder Rawlley [2014] 51 taxmann.com 524 (Punjab & Haryana) held that "....Head Noted : Section 68 of the Income-tax Act, 1961 - Cash credit (Sale of goods) - Assessment year 2002-03 - Whether where assessee received and returned amount in question by way of account payee cheques and transaction was reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated as assessee's income when department failed to prove to contrary - Held, yes [Paras 9 and 10] [In favour of assessee]..." 1.19. Hon'ble Calcutta High Court in the case of SAHIBGANJ ELECTRIC CABLES (P) LTD. (1978) 115 ITR 408 (Cal-HC) held that where the amounts of loan were received by cheque and repayment was also made by cheque through assessee's bankers; and confirmation of creditors along with their income-tax file numbers were furnished the assessee discharged its initial burden and ITO was not justified, in the absence of any further investigation, to reject the evidence and make addition. 1.20. The aforementioned factual and legal position wa....
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....sed on the documentary evidence, the credit entries cannot be looked into in isolation after ignoring the debit entries. Thus in view of the above and after considering the facts in totality, we are not inclined to uphold the finding of the learned Commissioner of Income-tax (Appeals). Accordingly, we set aside the finding of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. Order pronounced in the court on February 7, 2022 at Ahmedabad." 1.22. ii Reliance is also placed on the decision of Hon'ble ITAT Bangalore Bench in the case of Smt. Madhu Solanki - ITA No. 974 /Bang/2009 wherein it was held as under: "14...AO did not get reply from both the trade creditors and hence he proceeded to assess the outstanding balances, while accepting the purchases made during the year & payments made during the year. The AO has made the addition u/s 68 of the Act and did not invoke provisions of Sec. 41(1) of the Act. On the contrary, the assessee has shown that the payments have been made in the succ....
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....pany, through proper banking channel. 1.26. It is submitted that under identical set of facts in the below mentioned cases, wherein the assessees had also taken loans from Falak Trading Company Pvt. Ltd. and Pragati Gems Pvt. Ltd., additions were made under Section 68 by the ld. AO. Thereafter, in the appellate proceedings, the additions made by the ld. AO were deleted, considering these two companies having the creditworthiness to extend loans to different parties. 1.26.i Chetan R. Shah, ITA No. 5781/Mum/2017 [ITAT Mumbai Bench] 1.26. ii Yug Developers Vs. ACIT, ITA Nos. 7130 and 7222/Mum/2018 [ITAT Mumbai Bench] In view of the above, additions made by the ld. AO and confirmed by the ld. CIT (A) deserve to be deleted in to-to." 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S.No. Particulars Page No. 1. Copy of confirmation of accounts of Falak Trading Co. Pvt. Ltd. 1-2 2. Copy of confirmation of accounts of Pragati Gems Pvt. Ltd 3-4 3. Copy of bank statement (State bank of Bikaner and Jaipur) of assessee. 5-9 ....
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....ssee is beneficiary to the accommodation entry from Shri Praveen Kumar Jain. It is evident that the company from whom the assessee has accepted as ICD were incurring loss, despite that they have given loan to the assessee. The ld. DR thus also relied on decision of Gujarat High Court in the case of Manoj Kumar Saraf vs. ITO (45 taxmann.com 63) (Gujarat) and thereby relied on the orders of the lower authorities. 9. We have heard the counsel for both the parties and perused the material placed on record, judgment cited before us and the orders passed by the revenue authorities. In the present appeal the assessee has raised three grounds. Ground no. 3 relates to the addition made on account of delayed payment of ESI & PF for an amount of Rs. 4,71,202/-. Apropos to this ground the ld. AR of the assessee fairly admitted that considering the decision of Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-01, 2022 (10) TMI 617 (SC) he do not intend to press this ground. Based on these oral submission ground no. 3 raised by the assessee stands dismissed. Apropos to the ground no. 1 & 2 raised by the assessee the relevant facts as emerges from the record is ....