TaxTMI 
TaxTMI 
2026 (10) TMI 1530
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....013-14 as the 'Lead Case'. The decision rendered would apply mutatis mutandis to other appeal. 2. ITA No. 1950/MUM/2026(AY 2013-14) The grounds of appeal are as under:- 1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in not accepting the returned loss of Rs. (10,57,574/-), without considering the facts and circumstances of the case. 2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in estimating the income of the appellant at Rs. 27,57,706/-, being 2 percent on sales of Rs. 13,78,85,318/-, by rejecting the books of accounts u/s. 145(3) of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 2,35,00,000/- u/s. 68 of the Income Tax Act, 1961, by considering the unsecured loan taken for certain parties as alleged unexplained cash cre....
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....ing officer for deciding afresh. The ground No. one of the appeal is accordingly allowed for 4.1 In respect of the addition made by the AO of Rs. 2,35,00,000/- as cash credit u/s. 68 of the Act, the ITAT observed and directed that the Ld. DR could not controvert that there was limited time frame in which the assessee was asked to provide the information and before the assessee could file the said information, the assessment order was passed on 22/12/2017. In our opinion, the assessee fulfils the circumstances under Rule 46A(1)(d) i.e. no sufficient opportunity, therefore additional evidences are eligible for admission. Since in respect of the ground No. 1 of the appeal, we have already restored the issue in dispute to the file of the Assessing Officer and therefore, for avoiding multiplicity of simultaneous proceedings, instead of restoring the matter to the file of Ld. CIT(A), we feel it appropriate to restore the issue also to the file of the Assessing Officer for deciding afresh after verification of the additional evidences and examination of the parties, which will be produced by the assessee." 5. In compliance to the direction of Hon'ble ITAT, fresh proceedings were....
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....eet. On 22.03.2024 the director of the assessee company Shri Kirtikumar Doshi attended the proceedings with computerized print of books of accounts. On going through the same it is noticed that the assessee company failed to produced supporting evidences w.r.t. entries appearing in the books of accounts accept few original purchase and sale bills. However, later the assessee company filed letter online requesting adjournment for one week. However, the same could not be entertained as the matter is getting barred bylimitation of time limit by this month end. Ample opportunity and time has already been accorded to the assessee company in this matter i.e. for production of books of accounts with supporting evidences. 6.5 In this regard, it is pertinent to mention that during the course of original assessment proceedings, the assessee company failed to furnish books of accounts in order to verify the delivery of goods or services as in consequence to Survey proceedings it is found that no real business of trading or services were conducted by the assessee company. Therefore, assessee company failed to prove the genuineness of the purchase and sale transaction and no copies of ....
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.... Doshi that loans in its balance sheet were genuine loans which were received in cheque and interest @11% were paid on the same. Sr. No. Name of the party Amount Controlled by 1 Marine Gems P. Ltd. 1,50,00,000/- Pramod Kumar Ranka 2 Parshwanath Gems Pvt. Ltd. 35,00,000/- Gautam Jain 3 Karishma Diamond Pvt. Ltd. 25,00,000/- Gautam Jain 4 Keshariya Diamonds Pvt. Ltd.25,00,000/- Vijay Narendra Kothari Total 2,35,00,000/-. 8.2 During the course of current assessment proceeding, vide notice u/s. 142(1) dated 24.02.2024, the assessee company was requested to furnish particulars of loans taken and submission in order to prove the creditworthiness of the lender and the genuineness of transactions and details of interest/brokerage given. In response assessee vide letter 04.03.2024 submitted its response. However, on going through the details submitted it is noticed that Assessee company had submitted account confirmation, bank statement and return of income of only two entities namely Karishma Diamond Pvt. Ltd and Parshwanath Gems Pvt. Ltd. However, in both cases, confirmations were not signed. The onus was on the assessee company which it failed to discharge. 8.3 Further,....
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....ated as per provisions of Income tax Act, 1961. The assessee company furnished its response on 18.03.2024 The same is perused and considered. 8.6 It is pertinent mentioned here that during the course search and seizure and survey action in the case of Gautam Bhanwarlal Jain and others on 03.10.2013 premises of Karishma Diamond P. Ltd, M/s. Parshwanath Gems P. Ltd, M/s. Marine Gems Pvt. Ltd, M/s Kesharia Diamonds Pvt. Ltd also covered. In the statement recorded on oath u/s. 131(1A) on 06.10.2013, Shri Gautam Bhanwarlal Jain admitted that M/s. Karishma Diamond Pvt. Ltd, M/s. Parshwanath Gems Pvt. Ltd were controlled and operated by him and there is no actual business carried out by these companies. They were paper companies and were being used for the purpose of providing accommodation entry. Further, in the statement recorded on oath u/s. 131(1A) on 06.10.2013 Shri Pramod Kumar Ranka, director of M/s. Marine Gems P. Ltd and Shri Vijay Narendra Kothari, director of M/s. Keshariya Diamonds Pvt. Ltd has also admitted that there is no actual business carried out by these companies. They were paper companies and were being used for the purpose of providing accommodation entry. ....
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.... u/s. 68 of the Income Tax Act, 1961 and the same are added back to the income of the assessee company. Penalty proceedings u/s. 271(1)(c) of the Income Tax Act." 6. In the subsequent appeal before the ld.CIT(A) the assessee contested the above additions. After taking into account the facts of the case and the contentions of the assessee, the ld.CIT(A) concluded as under, "7.1 I have carefully considered the assessment order, the grounds of appeal, and the written submissions filed by the appellant. The facts of the case, briefly, are that the assessment u/s 143(3) r.w.s. 254 was completed after the Hon'ble ITAT set aside the matter for fresh verification. The AO made two primary additions: an addition of Rs. 27,57,706/- based on an estimation of profit @ 2% of sales, and an addition of Rs. 2,35,00,000/- under section 68 treating unsecured loans as bogus. 7.2 Ground No. 1: Estimation of Profit @ 2% on Sales The AO rejected the books of accounts under section 145(3) of the Act. The basis for this rejection was the non-production of critical primary evidences such as purchase/sales bills, vouchers, delivery challans, and transportation bills, despite specific....
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....nus by submitting loan confirmations, bank statements, and ITRs. It relies on the proposition that once these documents are filed, the onus shifts to the AO. The appellant also argues that it was not given an opportunity to cross-examine the third parties. 7.8 I have considered the rival contentions. The primary requirement of section 68 is the satisfaction of the AO regarding the identity, creditworthiness of the creditor, and the genuineness of the transaction. While the appellant has produced the "paper trail" (confirmations, ITRs, bank entries), this only establishes the identity and a superficial layer of creditworthiness. The test of genuineness goes deeper. 7.9 The fact that the lenders failed to respond to summons issued u/s 131 is a critical failure. In a real-world commercial scenario, a genuine lender who has advanced crores of rupees would readily comply with a summons to confirm the transaction. Their non-compliance validates the AO's finding that these are merely paper companies. As held by the Hon'ble Supreme Court in CIT vs. Durga Prasad More (82 ITR 540) and Sumati Dayal vs. CIT (214 ITR 801), the taxing authorities must look at the surrou....
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....ove the genuineness of the transactions which were made through banking chanels. More importantly, the said loans were also repaid. TDS was also made on the interest paid. It was also argued that non production of the lenders before the AO could not be considered enough to treat the loans as non-genuine, ignoring the relevant evidences produced. 10. We have carefully considered the relevant facts of the case. It is noted that before the AO the assessee claimed that all the loans were genuine and interest bearing. However, the director of the company failed to give specific details of the respective directors of lender companies nor could produce them for examination regarding the genuineness and creditworthiness. The AO on his part, issued notices u/s 131 of the Act twice which elicited no response from the lenders. 10.1 As is evident from the contents of the order, impugned loans were received from certain concerns like M/s Karishma Diamonds P. Ltd. amounting and Parshwnath Gems P. Ltd. which were found to be controlled by one Sri Gautam Jain who during search operation in his sworn statement recorded u/s 131 of the Act admitted that these companies were controlled and opera....
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....re that the AO in the instant case has not merely relied upon the Investigation wing report and the statements of the directors as referred above but he also made effort to independently examine the reality by summoning the directors of the respective lenders who by not responding to the notices issued twice u/s 131 0f the Act foiled such exercise by the AO. Therefore, his action cannot be faulted with. Moreover, as stated above, directors of both the lender companies as also the borrower i.e. the assessee, had admitted that no real business activity was being carried out by them and were engaged in the dubious and illegal activity of providing accommodation entries for the purposes of money laundering to the respective parties. Subsequent denial by way of affidavits could not make the transaction genuine, more so, in the light of non compliance to the summons for no explicable reasons. It is not understandable when their respective affidavits could be submitted before the AO, why not the said directors in person? Therefore, we are of the considered opinion the assessee has failed to discharge the primary onus in the matter. 10.3 We find that the ld.CIT(A) has duly pondered over....
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....e ground no.3 of the assessee. 11. In the result, appeal of the assessee stands dismissed. 12. ITA No. 1951/MUM/2026(AY 2014-15) The grounds of appeal are as under: 1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in estimating the income of the 1 appellant at Rs. 91,59,294/- being 5 percent on sales of Rs. 18,31,85,888/-, by rejecting the books of accounts u/s. 145(3) of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 1,00,00,000/- u/s. 68 of the Income Tax Act, 1961, by considering the unsecured loan taken from M/s Marine Gems Pvt. Ltd, as alleged unexplained cash credit, without considering the facts and circumstances of the case. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in disallowing the interest of Rs. 22,85,828/- ....
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....e decision in the instant appeal. 15. We have carefully considered the above facts and find merits in the contentions of the ld.AR. Action of the AO is contrary to his own conclusion drawn by him in the original assessment order as also in appeal for AY 2013-14.The ld.AR did not contest the addition in the appeal for AY 2013-14 and accepted the estimation at the rate of 2%.Considering all such facts, we set aside the appellate order and restrict the addition to 2%. Accordingly, the AO is directed to rework out the actual quantum of disallowance. The ground is therefore, partly allowed. 16. Ground nos.2 and 3 are interlinked and are related to the alleged bogus loans and the interest thereon. The ground has already been adjudicated in the appeal for AY 2013-14 against the assessee. Accordingly, the decision rendered therein applies mutatis mutandis to the facts of the instant appeal. The appellate order is therefore, upheld and both the grounds are dismissed. 17. In the result, the appeal is partly allowed. 18. ITA No. 1952/MUM/2026(AY 2015-16) The grounds are as under: 1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has er....
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.... granted to it. The three conditions with the help of which the assessee has to establish his burden of proof in proving the impugned loans are (i) identity (ii) creditworthiness (iii) genuineness of the transaction. Hence, the burden of proof had not been discharged and the loans appearing in the Balance sheet of the assessee was added back to the total income of the assessee u/s. 68 of the Act. 21. In the subsequent order u/s 143(3)/254 of the Act consequent to the directions of the ITAT, the AO observed that during the relevant year, the assessee had shown fresh borrowing from Karishma Diamonds Private Limited, Parshwanath Gems Private Limited and Marine Gems Private Limited. Hence, in order verify the loan parties under consideration summons u/s. 131 of the Act were issued twice to them. However, none of the above mentioned entities complied to the summons issued. 21.1 It was stated that one Shri Gautam Bhanwarlal Jain admitted that M/s. Karishma Diamonds Pvt. Ltd, M/s. Parshwanath Gems Pvt. Ltd were controlled and operated by him and there was no actual business carried out by these companies. They were paper companies being used for the purpose of providing accommodatio....