TaxTMI 
TaxTMI 
2026 (3) TMI 1332
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.... 68 of the Income Tax Ac 1961 of Rs. 40,00,000/- being accommodation entry received from M/s. MahagouriVintrade Put. Ltd. by routing it through M/s. Gulmohar Towers Pvt. Ltd., without oppreciating that it was established during the course of enquiry conducted by Investigation Wing Kolkata that the company, M/s. MahagouriVintrade Pvt. Ltd., is the paper/shell company, with no creditworthiness, its bank accounts are used for parking funds and providing accommodation entries." 2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that, it is equally well settled that, the initial burden of proof is always upon the assessee. This burden does not stand discharged by mere production of PAN numbers, income tax returns or by showing that the transactions were routed through banking channels. These documents, though relevant are not conclusive when the surrounding circumstances indicate otherwise. When lender/investor companies have negligible income, no genuine business and no real financial capacity, then mere production of documents or banking records cannot establish genuineness of the transactions. Hon'ble Supreme Court in the case ....
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.... a/c for their trading investments and the total credit transaction in the said account was of Rs 12.58 crores and subsequently the said account was closed on 07.10.2013. It was also submitted that these transactions included high value RTGS and interest transactions. In order to further enquire into the existence and business activities of the said company, an Inspector of the Investigation Wing was deputed who neither found any office nor saw any business activities of the said company. Ld. DR also stressed upon the point that on further perusal of MCA Database it was seen by the Investigation Wing that the name of MahagouriVintrade Pvt. Ltd. had already been struck off which goes to show that the said company is a shell company and their account was being used for parking of funds providing accommodation entries. It was also pointed out that MahagouriVintrade Pvt. Ltd. had zero fixed assets and the total turnover of said company for the F.Y. 2011-12 and 2012-13 was also zero therefore on the basis of above submissions it was submitted by Ld. DR that the order of CIT(A) in deleting the additions made was bad in law and therefore the order of AO be restored. 5. On the Contrary ....
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....se of M's. Everfine Construction Pvt. Ltd. is not known as to whether the assessee has contested the addition in further appeal. 3. From certain facts and enquiries conducted, it was found that M/s. Mahagouri Vintrade Pvt. Ltd. was a shell company and their Bank Accounts were used for parking of funds/ providing accommodation entry and hence there is no need to prove the source of source by the assessee as it is already established that the source of source was a shell company used for accommodation entries. 4. M's. Gulmohar Towers Pvt. Ltd. had received amount of Rs. 40,00,000/- from Mis. Mahagouri Vintrade Pvt. Ltd. which was transferred to the assessee as ultimate beneficiary. Hence, considering the facts discussed above, the amount of Rs. 40,00,000/- received by the assessee as ultimate beneficiary from the shell company M/s. Mahagouri Vintrade P Ltd. is treated as unexplained cash credits in the hands of the assessee. Appellant's Submission 1. During the year under consideration, the appellant company had obtained a loan of Rs. 1,83,00,000/-from M's. Gulmohar Towers Pvt Ltd. The said sum indudes the sum of Rs. 40,00,000/- whi....
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....s u/s. 68 of the Act in the hands of Mis. Everfine Constructions Pvt. Ltd. in the course of reassessment proceedings u/s. 147r.w.s. 143(3) dated 22.12.2017. iv. Further, M's. Everfine Constructions Pvt. Ltd. had preferred an appeal before the Hon'ble CIT(A) against the addition of Rs. 42,80, 19,650/- which was also sustained by the Hon'ble CIT(A). (Refer Order of the Hon'ble CIT(A) enciased herewith marked as Annexure 'E) v. Your Honour's attention is drawn to the relevant extract of the statement of Shri Khimji Patel wherein it was stated by him that the amount of Rs. 42,80, 19,650/- was brought back to the group by way of loans from Mis. Gulmohar Towers Pvt. Ltd. to different group concerns over a period of time in which even the assessee was covered. Statement of Shri Khimji Karamshi Patel Q13 Please refer to the balance sheet of the M's Gulmohar Towers Private Limited, referred above. On perusal of Balance sheet of Mis Gulmohar Towers Private Limited, it is found that this company has share premium of Rs. 42.80,19,6501- apart from Share Capital of Rs. 2,26,30,0001-. It is impossible that a company having share prem....
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....he above mentioned concern vi. Accordingly, not only an addition of Rs. 42,80, 19,650/- was made in the hands of Mis Everfine Constructions Pvt. Ltd on substantive basis by the Id. Assessing Officer but also made respective additions in the hands of the recipients of the loans on protective basis including the appellant company of Rs. 1,83,00,000/- 5. Considering our submission, the Hon'ble CIT(A) has concluded as under:- 7.11 in view of the above facts, I find that the addition u/s. 68 of the Act is uncalled for in the present facts and circumstances of the case. In any case, it is pertinent to note that although the revenue has authority and right to make protective assessment as well as substantive assessment in another case, however, with the rider that ultimately and finally, the income/transaction/addition, if at all would be in the hands of A or B but it cannot be sustained in both the hands. In this regard, the decision of in the case of Commissioner of Income-tax, Jaipur v. Sobhrajmal [2014] 51 taxmann.com 506 (Rajasthan) is relevant wherein it was held that addition once made on substantive basis in case of firm or other partners and same wa....
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....n iii Copy of ITR acknowledgment iv. Copy of PAN card v. Copy of Bank statement It was evident from the financials of the M's. Gulmohar Towers P Ltd that the company had sufficient owned funds of its own for advancing the funds to the appellant company in the year under consideration and therefore, it correctly discharged its burden of establishing the genuineness of the funds received. 5. In this context, at para 7 of the impugned assessment order, the Id. Assessing Officer has referred to the information received about the alleged bogus entity M's. Mahagouri Vintrade Pvt. Lid and stated that there is no need to prove the source of source by the assessee as it is already established that the source of source was a shell company used for accommodation entries. In this regard, we wish to state that the appellant company is not bound to prove the source of source with the support of the provisions contained in the legislature and not due to the fact that it has already been established by the Investigation Wing. Your Honour would sppreciate that if predominantly the money trail of the lenders is to be analyzed, then it would always....
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....f the amount received." A reading of the above judgement makes it amply dear that the 2nd proviso to section 68 of the Act became effective from AY.2013-14 onwards wherein the source of source only in respect of share application money had to be established whereas in the present case, the appellant company had received unsecured loans and infact even today there is no provision in the Act to prove the source of source of unsecured loans obtained. Therefore, for the appellant company, the source of funds is M's.Gulmohar Towers Pvt. Ltd. of which the identity. genuineness and creditworthiness had been duly substantiated. The appellant company cannot be penalized for the alleged bogus loans given by Ms.Mahagouri Vintrade Pvt. Lid where infact no transaction has been done with the alleged company. 7. Also, the Hon'ble Bombay High Court in following recent cases has also held the assessee is not required to prove the source of source wherein the assessment years concerned were prior to AY.2013-14. a. Mr. Gaurav Triyugi Singh v. ITO ITA No. [1750 of 2017] dated 22.01.2020 b. PCIT v. Ami Industries (India) (P.) Ltd. (2020) 116 taxmann.com 34 ....
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.... as Annexure 'G. ME TAX DEPARTMEN 10. In view of the above, Your Honour would appreciate that a sum of Rs. 40,00,000 (actual amount Rs. 30,00,000/-) had not only been once added in the hands of the appellant company which has been deleted by the Hon'ble CIT(A) but the addition of the same amount has also been sustained in the hands of Mis. Everfine Constructions Pvt. Ltd. and therefore once again an addition of Rs. 40,00,000/- would tantamount to double addition which is not justified. Accordingly, we request Your Honour to kindly delete the addition of Rs. 40,00,000/- made u/s. 68 of the Act" 6. Thus while relying upon the above submissions, the Ld. AR submitted that the additions were rightly deleted by Ld. CIT(A) after evaluating the entire records and therefore the order of CIT(A) be upheld and this appeal by the Revenue be dismissed 7. We have heard counsels for both the parties, perused the materials placed on record and also the judgements cited before us and the order passed by the Revenue authorities. From the records we noticed that the Assessee had taken a loan from M/s. Gulmohar Towers Pvt. Ltd and the said company in turn had taken a loa....
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.... 7.7 The assessee has submitted the above documents in the course of assessment as well as before me. I have perused the aforesaid documents. It is pertinent to note that Section 68 is not a charging section but a deeming fiction dealing with the burden of proof. The section casts initial onus u/s. 68 of the Act on the assessee to prove identity. genuineness and creditworthiness of the transaction to the satisfaction of the AO. If the assessee fails to do so or the explanation offered by him is not satisfactory to the AO. the AO is empowered to add the same to the total income of the assessee. The said power is to be exercised judiciously by the AO. Thus, once the initial onus is discharged by the assessee, the onus shifts on the AD to bring out fallacies in evidence brought by the assessee or by bringing new evidence that indicate the transactions undertaken by the assessee are non-genuine. Thus, the section deals with an equilibrium of onus of proof and must be viewed to evaluate as to whether the evidences brought by the assessee or AD weigh more and accordingly in whose favour the equilibrium bends. In the present case, on one hand, the assessee has placed evidence in ....
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....oncerned, that can be proved by producing the bank statement of the creditors/cuboorborallender showing that it had sufficient balance in its accounts to enable it to subscriber to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to prove the matter further. 7.9. The assessee must satisfy three important conditions, namely, (1) the identity of the creditor, (i) the genuineness of the transaction; and (i) the financial capacity of the person, le the credit worthiness of the party. However, the onus of the assessee is limited to the extent of proving the source from which he received the cash credit. The credit worthiness of the lender has to be judged vis-à-vis the transaction which had taken place between the assessee and the lender, and it is not the burden of the assessee to find out the source of creditworthiness of the lender to prove the genuineness of the transaction. This issue is dealt by the Gauhati High Court in the case of CIT v. Smt. Sangh....
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....of Mis. Gulmohar Towers Pvt. Ltd. at the time of acquisition of shares, the amount received by the assessee from Mis. Gulmohar Towers Pvt. Ltd, in the form of advance against property cannot be again added to the income of the assessee on protective basis more so when the assessee has also discharged is onus u/s 68 of the Act. 7.12 Accordingly, the addition of Rs. 1,83,00,000/- deserves to be deleted. This ground of appeal is accordingly ALLOWED 9. Now since this amount of Rs. 30,00,000/- received by the assessee forms the part of total receipt of Rs. 183 Crore received from M/s. Gulmohar Towers Pvt. Ltd during the year 2011-12 and it had already been considered for taxation in the original assessment and deleted in the first appeal, therefore the assessee had relied upon and submitted the ledger confirmation from M/s. Gulmohar Towers Pvt. Ltd as per which a total outstanding of Rs. 29.57 crores was repaid by the assessee to M/s. Gulmohar Towers Pvt. Ltd by 31.03.2021 thus we found that the assessee had successfully discharged its onus for proving the genuineness of the loan taken from M/s. Gulmohar Towers Pvt. Ltd and assessee was not required to prove the genuineness ....