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2016 (5) TMI 364 - ITAT JAIPUR

2016 (5) TMI 364 - ITAT JAIPUR - TMI - Addition u/s 68 - cash credit - non-genuine transactions - bogus / accommodation entries in form of loan - Held that:- Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction, PAN number, complete addresses of creditors, copy of balance sheet, ITR for A.Y. 2008-09, bank statement and form No. 18. The assessee had discharged its onus by providing the requis .....

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usive to held that the cash creditors were not genuine. It is not required under the law to prove the source of source U/s 68 of the Act. Primary burden lies on the assessee has been discharged by filing the requisite evidences before the Assessing Officer and shifted on the Assessing Officer to disprove the cash creditors’ transactions are not genuine or bogus. The share application money was received by the appellant and subsequently returned though banking channel. In case of 7 companies, the .....

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ovide loan/share application money even there is no evidence with the ld DR for making such allegation during the course of written submissions - Decided against revenue - ITA No. 1103/JP/2011 - Dated:- 21-3-2016 - SHRI T.R.MEENA, AM and SHRI LALIET KUMAR, JM For The Revenue : Shri P.R. Meena For The Assessee : Shri Rajiv Sogani and Shri Rohan Sogani (CA) ORDER PER: T.R. MEENA, A.M.: The Revenue has filed this appeal against the order of the ld. CIT(A)-III, Jaipur dated 01/09/2011 for the assess .....

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of had shifted to the A.O. even when the assessee had not discharged its burden under Sec. 68 of the I.T. Act, 1961. 2. The assessee is engaged in the business of manufacturing and trading of transformers. The assessee filed its return of income on 30/09/2008 declaring total income of ₹ 6,34,790/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). All the grounds of the revenue are against deleting the addition of ₹ 2.16 crores made U/s 68 of the Act .....

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. 2007-08. The ld Assessing Officer got the interim report from ADIT, Kolkata, which was received on 14/12/2010 in the office. According to the report in nine cases, copies were returned back. Departmental Inspectors were deputed to ascertain the existence of 9 concerns. They were also could not ascertain the existence of these companies at their respective given addresses. The notices issued U/s 131 of the Act had been served in respect of 21 concerns with which transactions were made by the as .....

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. Divine Tie Up Pvt. Ltd., 14A, Madhu Roy Lane, Kolkata-700006 No such company Divine Tie Up Ltd. in this address 14A Madhu Roy Lane, Kolkata-6, hence not known ₹ 45,00,000/- 4. M/s Lake View Vinimoy Pvt. Ltd., 13, Mother Tala Lane, Howrah-711106 Not Known ₹ 4,50,000/- 5. M/s Shibpujan Agencies Pvt. Ltd., 50B, Gariahat Road, Ground Floor, Kolkata 700019 Left ₹ 13,50,000/- 6. Nischay Distributors Pvt. Ltd., 13, Mothr Tala Lane, Howrah-711106 Not Known ₹ 22,50,000/- 7. Ujja .....

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Row, 2nd Floor, R.N.-54, Kolkata-700001 Served ₹ 5,00,000/- 2. Brajal Sati Tracom Pvt. Ltd. Do ₹ 5,00,000/- 3. Safal Dealers Pvt. Ltd. 52B, Tal Talla Lane, Kolkata-700016 Do ₹ 4,50,000/- 4. Evergreen Trafin Pvt. Ltd., 52B, Tal Talla Lane, Kolkata-700016 Do ₹ 13,50,000/- 5. Gurukripa Projects Pvt. Ltd. Do ₹ 25,00,000/- The ld Assessing Officer gave reasonable opportunity of being heard to the assessee why loan shown in the name of company which are not traceable and .....

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ny business activities done by these concerns. So she held that there is a reason to add back whole amount received from 9 companies, which are not traceable. She further held that in case of some companies, investment fund was unexplained. The creditworthiness of the creditors had not been proved. She also considered the case laws cited by the assessee but which were found distinguishable. Accordingly, the ld Assessing Officer made addition of ₹ 2.16 crores U/s 68 of the Act. 3. Being agg .....

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t mainly the AO has made the additions u/s. 68 of the IT Act, i.r.o., the part of share application money record and also towards the unsecured loans, received by the appellant, during the relevant period. Here, it is also relevant to mentioned that as per the provisions of Sec. 68 of the Act, to prove the genuineness of any cash credit, the assessee has to prove three vital aspects .i.e. identity, capacity of creditors and the genuineness of such transaction. The above views have been expressed .....

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ecured Loans: - From the assessment order, it can be seen that the appellant has received total loans of ₹ 80 lacs, from the following parties - a. M/s. Rajdeep Merchandise P. Ltd. ₹ 80 lacs b. M/s. Gayload Merchandise P. Ltd. ₹ 30 lacs c. Garu Kripa Projects P. Ltd. ₹ 25 lacs ₹ 135 lacs As per the ADI s above report, the summons u/s. 131 could not be served through postal authority as well as through ward inspector, at the office premises M/s. Rajdeep Merchandise P .....

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orily. On the other hand, the Ld. AR has submitted that to prove the identity, capacity and genuineness of the above loan transactions, they have submitted confirmations, affidavits, PAN No., copy of relevant returns of income, bank statement of relevant period and complete address of such creditors etc. Accordingly, the loans under considerations should be considered as proper and genuine u/s. 68 of the IT Act. In the light of the above factual and legal positions, I tent to agree with the Ld. .....

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action taken in this regard, specially when theses parties are not only assessed to tax but filed the returns for the relevant period also. In the light of the voluminous documentary evidences, it would be rather difficult to understand and appreciate the findings given by the ADI in this regard. Moreover in the case of M/s. -Garu Kripa Projects P. Ltd., since the concerned person as appeared and submitted the relevant documents and confirm the loans transaction, in the light of settled legal p .....

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documentary evidences submitted in this regard, suggest otherwise, as such. 2.3.2 Share Capital/Application Money In this regard the total share capital/share application money of ₹ 1.36 crores received from 11 entities were considered as unproved, u/s. 68 of the IT Act, for various reasons and grounds by the AO, mainly based on the findings given in the ADI report, as discussed above. The gist s of the above stands of the AO are as under:- i. In seven cases, the notices could not be serv .....

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td. Rs.9,00,000/- vii. M/s. Panchmukhi Commodities Ltd. Rs.4,50,000/- ii. In four cases, though the compliance of summons u/s. 131 were made by such companies with necessary details and documents before the ADI, Kolkata, however, in the light of their financial status, the ADI and the AO did not considered respective share capital investment, as genuine, as such. The details of such concerns are as under:- i. Safal Dealers P. Ltd. Rs.4,50,000/- ii. Evergreen Trafin P. Ltd. Rs.13,50,000/- iii. Sa .....

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ements of relevant period and complete address of such companies alongwith the R.O.C. papers also. Here the ratios upheld by various courts, including the Hon ble Supreme Court in the case of M/s. Lovely Export Pvt. Ltd. 216 CTR 195 and M/s. Stellar Investment Ltd. 251 ITR 463, are found quite relevant and applicable, as found dealt with the issue, similar to the present appellate proceedings also. In the above decision, the Hon ble Apex Court has categorically held that even if the share applic .....

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In the light of the above decisions and also such voluminous and statutory evidences submitted by the appellant, in my considered view, simply non serving of notices at given addresses or inadequate financial resources of such companies etc, to support such investment as perceived by the ADI/the AO, cannot be a valid ground to make the addition of such share capital investment in the hands of the appellant company, u/s. 68 of the IT Act. In another recent judgment of Hon ble Delhi High court, gi .....

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revenue and just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke Sec. 68 as revenue has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source. As in the instant case, the tribunal has confirmed the order of the CIT (A) of deleting the impugned addition, while holding that the assessee has been able to prove the identity of the share .....

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apital/application money of ₹ 1.36 crores, by providing all possible documentary/statutory evidences, as discussed above. It is also found that the AO has disapproved or disbelieved the above transactions, simply on the basis of a half cooked and inconclusive observations of the ADI (Inv.) Kolkota, discussed in his interim report. In the light of the various court s decisions, including of the Apex Court and the Jurisdictional High Court and Tribunal as relied upon by the appellant also, i .....

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addition of ₹ 2.16 crores made u/s. 68 of IT Act is hereby deleted. Consequently this ground of appeal is upheld. 4. Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the Assessing Officer and argued that the assessee had not proved the identity, genuineness and creditworthiness of the creditors. The ld Assessing Officer had enquired through ADIT, Kolkata and came to conclusion that loan transaction had not proved as per the provisions of Section 68 of .....

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had been indulging in providing accommodation entries to various parties in lieu of the commission charges. It was also found that they used to receive cash equivalent to the share application money from the interested party, which were deposited in the bank accounts and cheques/DDs of equal amount have been issued as a share application money to such party concerned on given addresses. No such companies were found. The assessee failed to produce the Directors of such companies for further verif .....

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there is no law point involved, the matter ready to actual aspect. He further relied on the decision in the case of S.P. Jain 87 ITR 370 wherein it has been held that in the case of unexplained investment in form of share capital made by the assessee, benami entity, the IT authorities were justified including such investment in the hands of the assessee, as such. He also relied on the decision in the case of Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC). Reliance has also been placed on the follo .....

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x. Vasantibai N. Shah Vs. CIT (Bom) 213 ITR 805 xi. Sreelekha Banarjee & Ors. Vs. CIT (SC) 49 ITR 112 xii. CIT Vs. Precision Finance P. Ltd. (Cal) 208 ITR 465 xiii. K.C.N. Chandrasekhar Vs. ACIT (ITAT, Bang) 66 TTJ 355 xiv. CIT Vs. United Commercial & Industrial Co. (P) Ltd. (Cal) 187 ITR 596. xv. CIT Vs. Sophia Finance Limited (Del) 205 ITR 98 xvi. CIT Vs. Active Traders P. Ltd. (Cal) 214 ITR 583 xvii CIT Vs. Nivedan Vaniya Niyojan Ltd. (Cal) 263 ITR 623 xviii. CIT Vs. Bhagwati Jewels L .....

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esponding share premium amount to be genuine. The details are as under:- Image No. 1 Share application money received by the assessee company through proper channel amounting to ₹ 10 lacs, which was subsequently returned back through banking channel. He referred the order of the ld CIT(A) for this purposes. The assessee company produced all the required documents to prove the identity, genuineness and creditworthiness of the companies, who had invested lent money. All the parties are priva .....

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he assessee company. The ld AR has further submitted that the following companies had been served notices by the income tax department, which is reproduced as under:- S.No Name of Company Address PB 1. M/s Rajdeed Merchandise Pvt.Ltd. 6, Waterloo Street, Kolkata -700069 266-267 2. Divine Tie Up Pvt.Ltd. 25B, Raja Raj Ballav Street, Ground Floor,Kolkata -700003 266 3. M/s Lake view VinimoyPvt.Ltd. 202, Jessore Road, Shyam Lake Garden, Block - B, Shop No.5, Kolkata -700089 266 4. M/s Shivpujan Age .....

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e in the income of the assessee merely on suspicion. Since the identity of the cash creditors had been established by the assessee company. The ld Assessing Officer at best could have assessed such amount in the hands of those companies. There is also no allegation by the ld Assessing Officer or in the interim report by ADIT Kolkata that these companies were part of any racket or were entry operators. The ld Assessing Officer made routine enquiry to ADIT, Kolkata. There is also no information on .....

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s First Point Finance Ltd. (2006) 286 ITR 477 (Raj.). (viii) CIT Vs Supertech Diamond Tools (P) Ltd. (2014) 44 taxmann.com 460 (Raj). (ix) M/s Bells Paper Board (P) Ltd. ITA No. 575/JP/2011, M/s Misty Meadows (P) Ltd. ITA No. 422/JP/2012. (x) Shree Markha Synthetics Ltd. (2006) 155 Taxman 289 (Raj.) 5.1 The ld AR further argued that when the identity has been established by the assessee, there is no need to establish the source of money infused by the creditors, for which he relied on the follow .....

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planation about the nature and source of such sum. The factual background of the creditor is to be understood and has held by the Hon ble Supreme Court in Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC). He further relied on the decision of Hon ble ITAT-A Bench Mumbai in the case of Superline Construction Private Limited ITA No. 3644/Mum/2014 wherein it has been held that such receipts cannot be regarded as the undisclosed income of the assessee company and in case the department has inf .....

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erve and surplus and share capital money. The ld Assessing Officer verified the information submitted by the assessee through ADIT, Kolkata, who had sent interim report, which was received on 14/12/2010 whereas assessment was completed on 30/12/2010. In interim report, as per Assessing Officer in 9 cases, notices were returned back but it was not informed to the assessee about the conclusion of the enquiry by the ADIT, Kolkata or Assessing Officer of the assessee. The ld Assessing Officer heavil .....

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icer on changed addresses. The ld Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction, PAN number, complete addresses of creditors, copy of balance sheet, ITR for A.Y. 2008-09, bank statement and form No. 18. The assessee had discharged its onus by providing the requisite evidences to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer hersel .....

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