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M/s. Parth Enterprises and others Versus ITO-22 (1) (4) Mumbai and others

2015 (6) TMI 636 - ITAT MUMBAI

Addition of unsecured loans u/s. 68 - CIT(A) deleted addition - Held that:- The assessee had produced all the required documentary evidences and discharged its onus as far as those 76 creditors are concerned.The AO did not make any further inquiry.So,in our opinion,order of the FAA does not suffer from any legal infirmity.In case of remaining 14(JVA and 13 creditors about whom the assessee filed details before the FAA)creditors the FAA had rightly held that it had failed to discharge the initial .....

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hore (1994 (7) TMI 45 - RAJASTHAN High Court) has clearly laid down the said principle. No discrepancy was found by the AO in the documents filed by the assessee. Therefore,upholding the order of the FAA, we decide the first limb of the first ground of appeal against the AO.

Second part of the first ground deals with deletion of interest amount of ₹ 40.37 lakhs.While deciding the appeal filed by the assessee,we have upheld the decision of the FAA in restricting the interest disa .....

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3/Mum/2013 1.The ld. CIT(A) -33 had erred in law and in fact by confirming addition of ₹ 36,00,000/- out of total unsecured loans of ₹ 3,35,00,000/- u/s. 68 of the Income tax Act, 1961. 2. The ld. CIT(A) -33 had erred in law and in fact by giving part relief and confirming part disallowance out of interest paid to various unsecured loan creditors as per 1 above. 3. Appellant plead before your honour leave or add/alter or amend any/all grounds of appeal before or at the time of hearin .....

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had confessed before the DGIT(Inv.) that he had arranged for bogus loans. 2. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. Assessee-firm, engaged in the business of builders and developers,filed its return of income on 20.09.09, declaring income at ₹ 7.72 lacs.The AO completed the assessment on 26.12.2011, .....

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hat it had not paid interest to the parties from whom loan was received. The AO conducted enquiry from external sources on the basis of information available on record and on test check basis on 01.12.2011. As per the AO in case of Jayant V. Amonkar (JVA),it was found that the creditor denied to having given any loan to the assessee,that the signature on the confirmation filed were different, that all documents kept were by one Chartered Accountant,Deepak Kapadia (DK).In case of Leeelavnati K.Ga .....

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adopted by the assessee indicated that cheque books and pass books were kept by DK. A survey action,u/s. 133A of the Act,was carried out at the business premises of DK on 01.12. 2011 and his statements were record. In his statement, DK agreed that he had provided entries for loan in lieu of cash received for the assessee and others. He further explained that the assessee approached through one Shri Valjibhai Bhanushali (VB) for arranging bogus unsecured loans,that it was handing over the cash t .....

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e assessee had not furnished loan confirmation in case of the 13 creditors, that vide notice dt.9.12.2011 the assessee was given an opportunity to produce the witness for examination, that he did not produce any witness, that it did not furnish any supporting documentary evidence to substantiate its claim, that assessee had not denied its relation with DK and VB through whom they had contacted DK for arranging unsecured loans, that DK had elaborated the modus opernadi, that the assessee had not .....

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rs, that the burden of proof was on the assessee.Finally, he held that the explanation of the assessee with regard to unsecured loan of ₹ 3.35 crores was not satisfactory, that same was to be taxed u/s.68 of the Act for the year under consideration.He further held that the assessee had debited interest of ₹ 40.97 lacs in the P&L A/c.,being interest paid on unsecured loans,that it had not furnished any evidence on deduction in payment of TDS,that it had not provided copies of Form .....

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material or evidence that the assessee had generated any unaccounted cash, that it had discharged the primary onus,that it had given all details as well as documents with confirmation letters to prove identity, genuineness and credit worthiness of those persons, that the loan creditors had confirmed their PAN and other details,that the AO made the addition u/s 68 of the Act without having discharged his onus of making any enquiry to show that the details given in confirmations were not correct,t .....

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that out of 90 loan-creditors 75 were repaid in the succeeding assessment years, that non-production of creditors could not by itself be considered a good ground for making addition u/s. 68 of the Act,that DK had retracted his statement also subsequently,that VB had stated that he did not had any professional or business relationship with the assessee,that it had also been stated that he had not introduced the DK to the assessee.The assessee relied upon the case of the Hon ble Rajasthan High Cou .....

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stated that loans were given through their consultant, the creditors were showing income in the range of ₹ 1 to 1.5 lacs for all the earlier years, that none of them had paid taxes, that in their statement all of them admitted that their withdrawal was from ₹ 1 to 1.5 lacs, that none of them filed capital account, that non-payment of tax by the creditors proves that the loans were mere accommodation entries.About the 13 parties, after considering the remand report and submission of t .....

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ven loan amout of ₹ 3.5 lacs to the assessee, that affidavit filed by him and in other 12 cases were of no help to the assessee , that whatever TDS had been deducted same has been claimed as refund, that it was totally in contradiction of the stand taken by assessee that Form 15H and 15G were filed in case where income was below taxable limit and no TDS was made. The FAA asked the assessee to give the reason if the persons who were not having taxable income at all and where no TDS was made .....

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erred to the case of Orient Trading Co. of Bombay High Court and Oasis Hospitality (P) Ltd. of Delhi High Court. He held that the explanation of the assessee about these 13 Parties was not satisfactory and was liable to be rejected. Referring to the cases of MK Brother (163 ITR 249) ; Durgaprasad More (82 ITR 540); Sumati Dayal (214 ITR 801); he upheld the addition of ₹ 31.00 lacs. He also held that the capacity and credit worthiness of those parties had not been proved by the assessee, th .....

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kept with DK, that in case of JVA the signature on confirmation letter was found to be non-genuine, that AO had found that out of the 5 parties i.e. Mansukh P. Sheth , B.M. Doshi, Hiralal P. Patel, Pushpa P Solanki and Jagdish V Ratnani, the first party was not found on given address, that 4 were found not traceable.Referring to the provisions of section 68 the FAA held that no specific enquiry in those 55 cases were made,that the ratio of cases where findings were adverse to the assessee had to .....

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rtunity to produce the witness for examination which he had failed to do so,that it also failed to furnish any further supporting documentary evidence about the genuineness of the loan transaction that were shown in the name of four parties referred in the earlier part of the order,that the assessee had replied in case of each of those persons who found not staying at the address given,that on the reply given by the assessee the AO formed an adverse opinion for the reason that it did not produce .....

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of those parties was also deleted.The FAA also held that in certain cases enquiries were actually conducted,that statements were recorded on the spot,that three out of those four persons had admitted having given the loans and also stated that their cheque books and pass books etc.were kept by them with the chartered accountant,that one person denied having given the loan,that the AO had issued show cause notice to the assessee mentioning about outcome of enquiries in those four cases to which t .....

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e loans bogus,that from the statements of DK no where it was clear that those parties said that those were bogus loans,that in the questions asked to DK there was no question pertaining to finding of pass books and cheque books at his office,that statements four persons were not corroborated by findings of survey proceedings,that in absence of any such findings the statement of CA remained mere statement not supported by any finding to support the same,that 3 out of those 4 unsecured creditors i .....

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finding of the inquiry was properly communicated, that opportunity was given to the assessee by the AO to the assessee to augment its stand by any further supporting evidence,that the assessee had not been produced any evidnence,that the assessee did not choose to cross examine the party and merely relied upon the loan confirmations filed,that the subsequent onus had shifted on assessee was heavier than his primary onus in view of the outcome of the enquiry and evidences collected by the AO,tha .....

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balance 11 cases no enquiries had been conducted or even attempted,that the statement of CA was contradicted by at least three assessees,that addition made merely on the basis of the statements of the DK could not be sustained.He referred to the cases of Mehta Parekh & Co.(30ITR14),Taradevi Goenka (122 ITR 14), Mohanlala M.Patel(90 TTJ 57), Sona Electric Co.(152 ITR 507).However,he upheld the addition of ₹ 5 lakhs appearing in name of JVA.With regard to the affidavit of VB the FAA held .....

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ngs,that no cognizance of the same had to be taken,that DK was silent almost for nine months,that the assessee had simply relied upon the loan confirmations,that the AO had stated that it had purposely chosen not to cross examine those four persons who had given their statement as well as also had not asked for the opportunity to examine DK.Finally,she confirmed the addition of 36.00 lacs (31 lacs +5 lacs ),as against the addition of ₹ 3.35 crores made by the AO.With regard to the interest .....

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enough material, that the statement of DK was wrong and contradictory, that the assessee had discharged his onus by proving the identity, capacity and genuineness of the lenders, that it had paid interest and TDS was deducted,that copy of loan confirmation of 77 parties were filed before the AO, that non- production of parties could not be the basis for additin, that inference of some parties could not be applied to some parties, that the AO had not discharged the burden of proof, that his entir .....

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f documents was not sufficient to prove the genuineness of the loans, that assessee did not ask for any cross examination,that penalty u/s. 271(1)(b) was imposed by the AO for non-compliance, that assessee had not called for cross examination. 5.We had heard the rival submissions and perused the material before us. We find that there were total 90 loan creditors from whom unsecured cash credit amounting to ₹ 3,35,00,000/- had been introduced in the books of accounts by the assessee,that ou .....

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under section 133A of the IT Act was conducted on 01.12. 2011 at the premise of DK by the DDIT (investigation), unit IX (3), Mumbai,that his statement was also recorded, that in his statement he admitted that he had provided entries for loans in lieu of cash received from the assessee and also explained that the modus operandi is of giving cheques and receiving cash back which were then returned to those parties whose names are appearing as unsecured creditors in the books of account of the app .....

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should be disallowed that were held to be non-genuine. As stated earlier,the AO did not make any inquiry about 76 creditors out of the 77 Creditors. The FAA has given a categorical finding of fact that no inquiry was made and hence the addition made by the AO for those creditors was not justifiable,excpet one case.It is said that in the matters related to section 68 burden of proof cannot be discharged to the hilt-such matters are decided on the particular facts of the case as well as on the bas .....

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e the FAA)creditors the FAA had rightly held that it had failed to discharge the initial burden.In matters regarding cash credit,the onus of proof is not a static one-the initial burden of proof lies on the assessee.Amount appearing in the books of a/cs. of the assessee is considered a proof against him. But,if it produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts again to the Revenue.In the matter before us,the FAA-after considering the reman .....

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