TaxTMI 
TaxTMI 
2017 (11) TMI 2085
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....ained loans. 3. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the additions while placing reliance upon the Hon'ble ITAT order dated 16.12.2016 in ITA No. 159/JP/2016 for AY 2012-13 which is sub-judice before the Hon'ble High Court." 2. Briefly the facts of the case are that based on the information received from the Investigation Wing, Mumbai, the AO issued a show cause to the assessee as to why unsecured loan of Rs. 1.00 crore from M/s Mehul Gems (P) Ltd. and Rs. 2.01 crore from M/s Ankita Export should not be brought to tax u/s 68 of the Act. In response, the assessee submitted that no fresh loan has been taken from M/s Mehul Gems (P) Ltd during the year under consideration and only an amount of Rs. 9,00,000/- has been credited in the account of M/s Mehul Gems(P) Ltd. towards interest payable on unsecured loan of Rs. 1.00 crore taken during previous year relevant to assessment year 2012-13. It was further submitted that the confirmation of the party has already been submitted by the assessee. Further, in compliance to the notice issued by the department, the party has directly confirmed the loan transaction ....
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....oss examine such persons. 2.4 The submission of the assessee was however not fully acceptable to the Assessing Officer for the reasons stated in the assessment order as under:- "(a) The unsecured loans was received by cheque does not make the transaction genuine. The Hon'ble ITAT Jaipur n the case of M/s Kanchwala Gems vs. JCIT, ITA No. 134/JP/02 dated 10.12.2003, and affirmed by the Hon'ble Supreme Court in 288 ITR 10 (SC) has held that even payment by account payee cheque is not sufficient to establish the genuineness of the transaction. (b) The contentions of the assessee that neither Bhanwarlal Jain nor his sons are directors of the company, is also not relevant to the material fact that in the statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was pr....
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....anwarlal Jain and Shri Manak Chand Jain were directors. 2.6 Finally, the AO held that based on the information with the investigation department, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the said group on 03.10.2013, and the existence of nexus as briefed above cannot be considered as a coincidence specially when Shri Bhanwarlal Jain has categorically admitted that his group was indulged in providing accommodation entries of bogus unsecured loans and advances through Benami concerns (70) operated and managed by him and his sons. Thus, under such facts and circumstances M/s Mehul Gems (P) Ltd. is nothing but a Benami concern of Shri Bhanwarlal Jain group. 2.7 Based on case laws and discussions, it was further stated by the AO that: (a) The primary onus is on the assessee to establish the genuineness of the transaction claimed by it. (b) If the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents....
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....of interest by the assessee cannot be allowed as expenditure. Therefore, a sum of Rs. 914301/- claimed as expenditure is disallowed and is added back to the total income of the assessee. 5. Further, on perusal of profit and loss account it has been noticed that assessee has claimed interest on TDS of Rs. 51520/-. In this regard the A/R of the assessee was asked to state his case to which he has agreed that this amount has left from adding back to the total income. Therefore, interest expense of Rs. 51520/- is disallowed and added back to the total income of the assessee." 3. Being aggrieved the assessee carried the matter in appeal before the ld. CIT(A) who after examining the submissions and other documentation filed by the AO deleted the disallowance made by the AO. Now, the Revenue is in appeal before us. 4. The ld DR vehemently argued the matter and took us through the findings of the AO and submitted that the ld CIT(A) has erred in following the order of the Tribunal for AY 2012-13 which has been contested by the Revenue and the matter is currently sub-judice the Hon'ble Rajasthan High Court. 5. Per contra, the ld AR submitted that the issue is covered by fin....
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..../s Ankita Exports is benami concern of Shri Bhanwar Lal Jain Group. The Ld AO has listed name of various companies in para 4.5, and your honor would find that the partners of M/s Ankita Exports and Shri Bhanwar lal Jain are not common partner in any concern. d) As regard to contention of ld AO that various incriminating documentary evidences were seized during the course of search on Bhanwar Lal Jain and statement of several persons were recorded which proves that the entry of the assessee is accommodation entry this is to submit that the ld AO has not provided the copy of so called incriminating document or statement to the assessee and opportunity of confrontation was not given to assessee. The assessee has specifically demanded to ld AO to provide the copy of so called incriminating documents and statements but the same was not given to assessee. It is necessary that a copy of the incriminating statement of the witness must be given to the assessee in order to enable him to have an effective and useful cross examination as held in State of Punjab Vs Bhagat Ram AIR 1974 SC 2335; Vaasanji Ghela & Co Vs CST (1977) STC 544,553 (Bom), Gargi Din Jwala Prasad Vs CIT (1974) 96 ....
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....turnover of cash creditor firm was 219.58 crores. Further during the course of assessment proceedings ld. AO made direct inquiries from this firm regarding loan taken by the assessee and this firm confirmed about giving the loan to the assessee. f) The assessee has discharged his initial onus: The assessee has discharged his initial onus laid down u/s 68 of Income Tax Act. The assessee has filed confirmation letters and affidavit of cash creditors before the AO who has admitted giving of money to the assessee as a loan. The ld AO has erred in making addition of Rs.1,00,00,000/- even in the facts and circumstances of the assessee and the learned AO has no material to reject the evidences filed before him. (i) Identity:- The identity of cash creditor stood proved in as much as copy of PAN card and copy of Income Tax return were filed. Hon'ble Rajasthan High Court in the case of Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199 has held that once the existence of the creditors is proved and such persons own the credits, the assessee's onus stands discharged and the assessee is not required to prove the source from which the creditors c....
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.... has submitted several other evidences such as income tax return and bank statement of cash creditor and Profit and loss account and balance sheet of cash creditor, which prove that the transaction of assessee is genuine. i) The ld AO held that M/s Ankita Exports is benami firm of Shri Bhanwar Lal Jain but the ld AO has not brought any positive material to show that M/s Ankita Exports is benami of Shri Bhanwar Lal Jain. To hold a person as Benami of another, one ought to have concrete evidences in contrast to sheer presumptions and suspicion and in such cases initial burden lies on revenue. The ld AO failed to appreciate the facts, evidence and the tests laid down by Apex Court and High Court. The assessee relies on the following decisions a) CIT Vs Daulat Ram Rawatmull 87 ITR 349 (SC) b) Jaydayal Poddar vs. Bibi Hazra, AIR 1974 SC 171 Hon'ble Supreme Court has held that it is well settled that the burden of proving that a particular sale is Benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. c) Prakash Narain Vs CIT 134 ITR 364 (ALL) d) Lal Chand Agarwal vs. ACIT 21 Tax World 213 Ho....
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.... q) Radhey Shyam Ojha vs. ACIT 32 Tax World 81 held that it is the duty of AO to bring on record sufficient material to prove Benami nature. j) The AO appeared to be bent upon making the addition under the influence of some report without application of mind. AO cannot be guided for his decisions by what the officer preparing the report says. As per section 119 (1) (a) even the CBDT cannot issue directions or instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. Recently, the SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said that an assessment order is the result of a judicial proceedings. According to the Apex Court an assessment proceeding a judicial proceeding. Obviously, no one can have influence or say in the course of judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried ....
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....efore the Hon'ble Rajasthan High court, the appeal of the department has been dismissed in default. As such, the said order is still effective and operative. Following the same, disallowance of interest amounting to Rs 8,10,000 on such loan transaction which is solely based on findings of the AO in previous assessment year 2012-13 is hereby deleted. 10. In respect of unsecured loan of Rs 1.00 crore taken by assessee from M/s Ankita Exports during the financial year relevant to impunged assessment year, the ld CIT(A) has given the following findings which are reproduced as under:- "3.1.3 ....The AO has made the additions of Rs. 1,00,00,000/- & Rs. 9,14,301/- by applying the provisions of section 68 of the Act which is based on information received from Investigation wing, Mumbai. It is submitted that in compliance to the show cause notice issued, assessee filed following documents: (i) copy of confirmation letter of the above named cash creditor, (ii) copy of acknowledgment of return (iii) copy of Balance sheet and profit and loss account of the cash creditor (iv) copy of bank statement of the cash creditor (v) copy of Pan car....
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....the case of Sh. Prateek Kothari for AY 2012-13 (PAN: ABIPK8090R)-reg. 1. Please furnish brief of your business activities. 2. Please furnish the details of the transactions undergone with the above mentioned assessee. 3. Please furnish copy of ITR, computation and Balance Sheet, P & L with Audit report for the FY 2012-13. 4. Please furnish copy of bank statement through which the transactions were undergone for the relevant period i.e. FY 2012- 13 The above information may be furnished on or before 09.10.2015 in the office of the undersigned. This information is being called from you under the provisions of sec. 133(6) of the Income-tax Act, 1961. Any failure to furnish the same would attract penalty u/s 272A(2)(c) of the Income-tax Act, 1961......." From the perusal of assessment records, it is also seen that M/s Mehul Gems Pvt Ltd has complied with its letter dt 05.10.2015 to the notice issued by the AO and the same was received in the office of AO on 08.10.2015. Similarly, M/s Ankita Exports has also complied with the notice vide letter dt 02.10.2015 (to be read as 07.03.2016). However, AO did not take any cognizance of the a....
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.... "2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain inform....
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....roviding of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carrie....
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....osed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, thi....