TaxTMI 
TaxTMI 
2022 (6) TMI 1569
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....rounds of appeal "The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 29.03.2016 passed u/s. 143(3) rw.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another: 1. The learned Commissioner of Income Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs to stand and hence must be quashed. 2. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 2,00,000/- u/s. 68 of the Income tax Act, 1961 as unexplained cash credit. 3. The learned Commissioner of Income Tax (Appeal) failed to note that the entire evidences do prove the ....
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....that original return filed u/s 139 (1) of the act may be treated as return filed in response to the above notice. Reasons of reopening were provided to the assessee on 4/2/2016. Assessee raised objection by letter dated 9/2/2016, which were disposed of by an order dated 26/2/2016. The assessee during the course of assessment proceedings invoked the provisions of Section 144A of the act seeking direction from The Joint Commissioner of Income Tax stating that the notice was issued u/s 148 of the act at wrong address and without jurisdiction. The objections raised by the assessee were disposed of and direction was given to the AO to proceed with the assessment. 05. The fact shows that assessee has taken an unsecured loan from Olive overseas private limited, which is one of the entities controlled operated and managed by one Mr. Praveen Kumar Jain group. During the course of search and seizure on 1/10/2013, various incriminating evidences were found and the name of this assessee appears in the list of the beneficiaries who have taken accommodation entries. Therefore based on the statement of various persons and information obtained during the course of search of that party, the lear....
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....as also not given, [4] Addition has been made purely based on information received from the investigation wing [5] On the information submitted by the assessee the learned assessing officer has not made any enquiry. Therefore, it was submitted that addition deserves to be quashed on the merits also. 09. The learned Commissioner of appeals dismissed the grounds of appeal against reopening of the assessment. On the issue of natural justice, it was stated that the assessing officer has extracted the statement in the assessment order and therefore there is no violation of the principles of natural justice. On the issue of addition on the merits, he held that that the argument of the assessee rests on the fact that full documents regarding taking of the loan were placed before the assessing officer and it was repaid along with interest. The assessee also stated that the statement by Mr. Jain has been retracted and the opportunity of cross-examination was not afforded to the assessee and therefore the reliance by the learned assessing officer is solely on the information received from investigation wing of the Department could not have resulted in the confir....
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....d on information provided by investigation wing. On merits, he relied on the orders of lower authorities. 013. We have carefully considered the rival contention and perused the orders of the lower authorities. We also considered the various judicial precedents cited before us by the learned authorised representative as well as stated in the assessment order and appellate order of the lower authorities. 014. The ground number 1 is with respect to the reopening of the assessment. The claim of the assessee is that case of the assessee is reopened without application of mind and it is invalid. We find that the original return of income filed by the assessee was not picked up for scrutiny but was accepted as it is. Later on information is received that assessee has obtained an accommodation entry from entry operator, this information was emanating from such carried on that person and several statements on incriminating documents found during the course of search of accommodation entry provider namely Mr. Praveen Kumar Jain. In view of the extensive investigation of revenue Department, information unearthed clearly shows that assessing officer has reason to believe that income of t....
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..... We find that the assessee had received unsecured loans during the year under consideration from the following parties for the purpose of its business, apart from other parties together with the details of interest paid to these parties are as under :- Name of the Loan Creditor Loan Amount Interest Amount Sumukh Commercial Pvt Ltd 50,00,000 4,81,667 Olive Overseas Pvt Ltd 1,00,00,000 10,21,667 Josh Trading Co Pvt Ltd 1,00,00,000 9,01,667 Casper Enterprises Pvt Ltd 50,00,000 5,45,000 Nakshatra Business Pvt Ltd 1,00,00,000 10,20,000 4,00,00,000 39,70,001 3.3. We find that the ld AO had observed that the aforesaid concerns were operated by Shri Praveen Kumar Jain and belong to his group. During the course of search action u/s 132(1) of the Act on 1.10.2013, Shri Praveen Kumar Jain had given statement on oath that his concerns are engaged in the business of providing accommodation entries and that his concerns do not indulge in real business activities. Accordingly, the ld AO issued a show cause notice to the assessee as to why the aforesaid loans should not be treated as unexplained cash credit u/s 68 o....
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....of Shri Praveen Kumar Jain before the ldAO, which was not provided by the ld AO. 3.6. We find that the ld AO completely ignored the aforesaid contentions of the assessee and the documentary evidences filed hereinabove and concluded that the assessee had not been able to satisfactorily explain the nature and source and creditworthiness of the unsecured loan credits totalling to Rs. 4 crores purported to have been taken from those 5 parties and accordingly treated the same as unexplained cash credit u/s 68 of the Act. Since the loans were added as income, the interest paid on such loans amounting to Rs. 39,70,001/- was sought to be disallowed by the ld AO in the assessment. This action of the ld AO was upheld by the ld CITA. 3.7. From the perusal of the assessment order, we find that the ld AO had given more emphasis in the entire assessment order to discuss the modus operandi adopted by Shri Praveen Kumar Jain and his group which had been unearthed during the search action carried out on him on 1.10.2013. We find that the assessee had submitted before the ld AO that nowhere in the statements of Shri Praveen Kumar Jain or his accomplices, the name of the assessee LL....
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....dictional High Court in the case of PCIT vs Aquatic Remedies P ltd in ITA No. 83 of 2016 affirming the tribunal decision in ITA No. 6356/Mum/2014. We further find that all the loans were duly repaid by the assessee either in the same assessment year or in the immediately succeeding assessment year with interest after subjecting the interest to due deduction of tax at source. These facts are not controverted by the revenue before us. Hence the addition made u/s 68 of the Act deserve to be deleted on merits also. Correspondingly, the interest paid on such loans would become allowable expenditure u/s 36(1)(iii) of the Act as there is no dispute that the monies received in the form of loans had been utilised by the assessee LLP for its business purposes. 3.8. Moreover, we also find that all the aforesaid loan parties had been accepted to be genuine and additions made u/s 68 of the Act had been directed to be deleted by this tribunal in the following cases :- a) DCIT vs D.N.H.Spinners Pvt Ltd in ITA Nos. 6315 & 6316/M/2017 for Asst Years 2013-14 & 2014-15 dated 8.8.2019 (Mumbai Tribunal) b) ACIT vs Hetali Enterprises in ITA No. 421/Mum/2018 for Asst Year 2013-....
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....S. KUNDALI JEWELS (INDIA) PVT. LTD. VERSUS THE INCOME TAX OFFICER 12 (3) (1), MUMBAI AND VICE-VERSA [I.T.A. No. 3511/Mum/2019 I.T.A. No. 4337/Mum/2019 February 23, 2021] it has been held that :- "15. Under this issue the revenue has challenged the deletion of addition of Rs. 4,00,00,000/- made by AO u/s 68 of the I. T. Act, 1961. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the addition, therefore, the finding of the CIT(A) is not justifiable, hence is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record .:- "10. I have considered the facts of the case and submission of the appellant and findings by the AO. On the merits, the issue is of unexplained credits u/s 68, to which my findings are as under. The legal position is very well settled i.e. where any credits are found in the books of the assessee, the onus is on the assessee to prove the genuineness of the same and on failure of the assessee, the presumption u/s 68 becomes absolu....
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....Y. 2013-14. Under this proviso, where the assessee receives share application monies/premium, the assessee is expected to prove source-of-source as well. Firstly, in the case in hand, the amounts received were in the F.Y. i.e. A.Y.2012-13 and further this proviso would apply only from AN. 2013-14. {Ref: decision of the Bombay High Court in Gangadeep Infrastructure 394 ITR 680 (Born.)). The Hon'ble jurisdictional High Court reiterated the said position in PCIT V/s. Veedhata Tower Pvt. Ltd. ITXA/819 of 2015 dated 17th April 2018. However, the said proviso was inserted because, sec.68 (unamended) was incapable of obliging the assessee to prove the source-of-source and hence the proviso was required to inserted. It follows that where the proviso doesn't apply, the sec.68 does not put the burden on the assessee to prove the source-of-source. 10.4 From the above, as submitted by the AR, it follows that it is not the business of the assessee to find out the source of the money of his creditors {CIT V/s. Daulat Ram Rawaltmull 87 ITR 349 (SC). Reference can also be made to the decision of the Apex Court in CIT vs Orissa Corporation Pvt Ltd. 158 ITR 78 (SC). It is also possible ....
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....vt. Ltd., 4] Kavya Shares and Securities Pvt. Ltd. & 5) Arawali Stock braking Pvt. Ltd. The AR also submitted and referred that, in the case of CIT V/s. U.M. Shah, Proprietor, Shrenik Trading Co. 90 ITR 396 (Bom.)). the Hon'ble jurisdictional High Court held that once credible material is produced before the AO, the AO is expected to make efforts to dislodge the explanation given by the assessee. No such thing has been done by the AO. The AO cannot simply reject explanation/materials produced by the assessee without bringing any contrary findings on record. In this regard. I find that the decision referred by the appellant's AR on the issue of company is managed and controlled by Praveen Kumar Jain/Bhawarlal Jain and also other Jurisdictional ITAT/High Court cases decided on similar facts in favour of the assessee which are binding on the undersigned, the case laws are as under: 1 ITO-4(3)(1) Mumbai Vs. Nityanand Industries Pvt. Ltd. ITA. No.4277 & 4278/M/2017 2 Komal Agrotech Pvt. Ltd. Hyderabad Vs. The ITO, ward 2(1) Hyderabad ITA. No.437/Hyd/2016 3 Arceli Realty Ltd. Vs. ITO 15(1)(1), Mumbia 4 Shri Naresh Hiran VS. ITO 30(2)(4), Mumbai ITA 1236/M/....
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....n their balance sheet thereby doubting their creditworthiness. It is pertinent to note that the AO remained silent after this. He did not even resort to issue notice u/s 133(6) of the Act to the share subscribers and seek their replies before arriving at a conclusion that the receipt of share capital by the assessee is to be added as unexplained cash credit under section 68 of the Act. In these circumstances, the CIT(A) went through each and every document filed by the assessee before the AO and concluded that the assessee had duly proved all the three necessary ingredients viz identity and creditworthiness of share subscribers together with the genuineness of transactions, apart from placing reliance on various decisions. We find that the same parties from whom share subscription money is received by the assessee has been the subject matter of adjudication and this tribunal in various decisions as listed by the CIT(A) had considered them to be genuine and having sufficient creditworthiness apart from proving their identity beyond doubt. The learned counsel for the assessee also placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Gagandeep Inf....
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....s the source of such sum in the hands of the lender. 019. Honourable Supreme court in PCIT V NRA Iron & Steel P Ltd [[2019] 103 taxmann.com 48 (SC)/[2019] 262 Taxman 74 (SC)] has held that :- "8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P.) Ltd. [1995] 82 Taxman 31/[1994] 208 ITR 465 (Cal.): ● Proof of Identity of the creditors; ● Capacity of creditors to advance money; and ● Genuineness of transaction This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details befo....
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....he same basis in which he confirmed the addition in the case of assessee for assessment year 2008 - 09. Therefore, assessee is in appeal before us. 026. Assessee has raised following grounds for A.Y. 2009-10 :- "The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 29.03.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another: 1. The learned Commissioner of Income Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs to stand and hence must be quashed. 2. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in confirming the additio....
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....acts and circumstances of the case, as well as the reason for confirming the reopening of the assessment and deleting the addition. There is no change in the facts and circumstances of the case. The assessee has produced relevant details before the learned assessing officer however without looking at that information the learned assessing officer proceeded to use the same material, which were available before him for reopening of the assessment for confirming the addition u/s 68 of the income tax act. For assessment year 2008-09 we have held that when initial onus is discharged by the assessee, the learned assessing officer should have made a minimum enquiry, which the learned assessing officer has failed to do so, in that circumstances, the addition cannot be sustained. 029. In view of this we dismiss ground number 1 of the appeal of the assessee with respect to reopening of the assessment and allow ground number 2 - 5 of the appeal with respect to the addition u/s 68 of the income tax act and also 6 of the appeal with respect to the disallowance of interest paid to those parties. 030. Accordingly, appeal of the assessee in ITA number 2417/M/2021 four assessment year 2009 - ....
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.... (Appeal) failed to note that the entire evidences: do prove the identity, creditworthiness and genuineness of the loan transaction amounting Rs. 5,00,000/- and therefore the CIT(A) fell into error in confirming the addition of Rs. 5,00,000/-. 4. The learned Commissioner of Income Tax (Appeal) failed to note while confirming the addition of Rs.5,00,000 that the entire enquiry by DGIT (Inv.), Mumbai and the information received by the Assessing Officer about Mr. Praveen Kumar Jain was used against the appellant without giving a copy of the evidence/statement received from the DGIT (Inv.). Mumbai, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed and more so allowability of that addition of Rs.5,00,000 by the learned CIT(A). 5. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assessing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing ....
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....- was confirmed. 038. Aggrieved with the above order of the assessee has preferred following grounds of appeal for A.Y. 2012-13 "The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 23.12.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another :- 1. The learned Commissioner Income Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs must be quashed. stand and hence must be quashed. 2. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 30,00,000/- u/s. 68 of the Income tax Act 1961 as unexplained....
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....spect to a sum of Rs. 30 lakhs. Assessee is found to have obtained Rs. 10 lakhs from Olive overseas private limited, Rs. 10 lakhs from Nakshatra business private limited and Rs. 10 lakhs from Duke Business Pvt Ltd. Corresponding interest paid to these parties was also held to be disallowable u/s 69C of the act of Rs. 173,443/-. Accordingly the assessment was passed u/s 143 (3) read with Section 147 of the income tax act at Rs 4989560/-. 040. During the course of assessment proceedings the assessee furnished the requisite details called for as it furnished for assessment year 2008-09 to assessment year 2010-11. The learned assessing officer proceeded to make the addition u/s 68 of the income tax act without putting any efforts of making any enquiry on the information furnished by the assessee during the course of assessment proceedings but solely relying on the material available made by the investigation wing. Therefore assessee aggrieved, filed appeal before the learned CIT - A who also dismiss the appeal of the assessee in identical manner in which disposed of the appeal of the assessee for earlier years. Therefore assessee is in appeal before us. 041. Both the parties conf....
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....nicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs to stand and hence must be quashed. 2. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assessing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed. 3. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in disallowing of Rs. 2,14,521/- on account of interest paid on borrowed fund/Short Term Loans considered now as unexplained cash credit u/s. 68 taken from loaner i.e. Olive Overseas Pvt. Ltd, Nakshatr....