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Mehta Financial Services Ltd. Versus Dy. Commissioner of Income Tax 4 (2) , Mumbai

2016 (10) TMI 420 - ITAT MUMBAI

Addition u/s 68 - unsecured loans - bogus bills for purchases - Held that:- Tribunal has reached the findings that the assessee has duly proved the genuineness of transaction, creditworthiness and identity of the creditor by producing the Principal Officer of the company and also by filing the details of the company like banks statement, audited account of the lender. Same records were produced and the Principal Officer was also produced and his statement was also recorded by the AO. We find tha .....

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RAJESH KUMAR, A. M: These are the appeals filed by the assessee against the order dated 16.3.2016 passed by the ld.CIT(A)-9, Mumbai for the assessment years 2008-09 and 2009-10. Since these appeals pertain to the same assessee, these appeals are being decided by this common order for the sake of convenience. 2. ITA No. 3812/Mum/2016. 3. Grounds of appeal taken by the assessee are as under : 1. The Commissioner of Income-tax (Appeals) - 9, Mumbai (hereinafter referred to as CIT(A) erred in uphold .....

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and hence, the Assessing Officer had the information in his possession when he completed the original assessment proceedings for the year under reference by his order dated 15.12.2011 and as such, the issue of impugned notice under section 148 is bad in law and consequently, the impugned reassessment order is also bad in law. 2. The CIT(A) erred in upholding the assessment order passed by the AO u/s 143(3) r.w.s147 inasmuch as he assessment order is bad in law. The appellants contend that the A .....

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ts further, contend that the assessment order is bad in law inasmuch as, per Explanation 3 to section 147 the Assessing Officer has to assess or reassess income ('such income') which escaped assessment and which was basis of formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during course of proceedings. Accordingly, the Assessing Officer having not made any addition on account of alleged bogus .....

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der section 68 of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the identity and creditworthiness of the lender and genuineness of the transaction are proved beyond doubt and thus, the said loan received cannot be treated as unexplained cash credit under the provisions of section 68 of the Act. Further, the appellants contend tha .....

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sessing Officer has based the impugned addition, inspite of the appellants requesting for the same; it is the obligation of the Assessing Officer to produce Mr Girishchand Yadav for cross examination inasmuch as he is the witness of the Department. 4. Facts of the case are that the assessee filed is return of income on 19.9.2008 declaring total income of ₹ 1,47,76,121/- which was processed under section 143(1) of the Income Tax act, 1961 (hereinafter referred to as the Act). Thereafter the .....

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eturn was processed u/s 143(1) of the Income Tax Act, 1961. During the course of Search & Seizure Operation u/ s 132 of the Income Tax Act, 1961 in the case of KSL Group on 23. 12.2008,it has been found that the assessee company has taken bogus bills for purchases from the following parties: i) Realstar Trading Co. Pvt. Ltd. ii) Watergate Mercantile Co. Pvt. Ltd. iii) Sea view Trading Co. Pvt. Ltd. iv) Superhouse Trading Co. Pvt. Ltd. v) Montreal Trading Co. Pvt. Ltd. vi) Starview Mercantile .....

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utory notices were issued under section 143(1) and 142(3) of the Act and served upon the assessee asking various details from the assessee as mentioned in the said notice. The assessee attended the hearings from time to time before the AO and particularly on 21.3.2014, the assessee filed a letter along with the ledger account, banks statements and a copy of the cheques issued to M/s Seaview Trading Co. Pvt Ltd. Thereafter a summons dated 24.3.2014 u/s 131 (1) were issued to M/s Seaview Trading C .....

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ring in the books of the assessing amounting to ₹ 1,05,00,000/- in the credit of above company on various grounds such as the said company having ₹ 65.95 crores turnover, net profit of ₹ 1,52,180/- with paid up capital of ₹ 1 lakh, investments of ₹ 9.5 crores and advances of ₹ 3.65 crores. The AO observed that it is impossible to believe that a company s paid up capital of ₹ 1 lakhs has advanced ₹ 3.65 crores whose director earning ₹ 8000/- p .....

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O was upheld by the ld. CIT(A) in the appellate proceedings.Now the assessee is before us challenging the order of CIT(A) 5. We shall first take up the issue on merit as raised in ground No.3 of the appeal that the ld. CIT(A) has erred in upholding the addition of ₹ 1,05,00,000/- as made by the AO u/s 68 of the Act for unexplained cash credit. 6. The ld.AR vehemently argued before us that similar issue of addition u/s 68 has been decided in assessee s own case by the co-ordinate bench of t .....

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d. AR argued that the co-ordinate bench of the Tribunal after considering all the facts and circumstances, concerning the said transaction has decided the issue in favour of the assessee by holding that the addition cannot be sustained u/s 68 of the Act as the identity and creditworthiness of the creditor and genuineness of the transactions could not be doubted as the assessee furnished all evidences which satisfied all three conditions namely identity , creditworthiness and genuinity and prayed .....

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e addition u/s 68 of the Act as the identity and creditworthiness of the creditor and genuineness of the transaction was not proved as the company having paid up capital of ₹ 1 lakh could not loan such huge sum to the assessee. Thus it was clear that the entire transaction was sham and bogus one and heavily relied on the orders of the Authorities below and prayed that the addition be confirmed by dismissing the appeal of the assessee. 8. We have considered the rival contentions and perused .....

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amounting to ₹ 94,95,000/- and in the current year the assessee took the amount of ₹ 1.05 crores from M/s Seaview Trading Co. Pvt. We find that the facts of the current year are identical to that of the facts of earlier year i.e AY 2007-08 in which the co-ordinate Bench of the Tribunal deleted he addition by upholding that the transactions as made by the assessee from Realstar Tradisng Co was genuine and no addition u/s 68 could have been made . The operative portion of the judgment .....

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f ₹ 94.95 lakhs. Admittedly, these statements were taken from the above said persons in connection with the search operations conducted on KSL group of Companies. Admittedly, the questions posed in the Statements should have been aimed to bring out the facts relating to M/s KSL Group only. Admittedly, at that point of time, these persons should also have given the statements in connection with M/s KSL group only. 10. In the above said statements, as submitted by the Ld A.R, no question see .....

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. Thus, it is seen that the assessing officer has proceeded on the presumptions that all the transactions entered by M/s Real Star Trading Co. P Ltd shall be bogus only. The Ld CIT(A) has also confirmed the addition only on such presumptions. This approach of the tax authorities, in our view, does not appear to be correct. 11. The provisions of sec. 68 of the Act place the initial burden of proof upon the assessee. It is well settled proposition that the assessee has to discharge three main ingr .....

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said company has also filed its income tax returns. As requested by the AO, the assessee has also produced the director also. Through the financial statements, the assessee has proved the credit worthiness of the above said company. There is no doubt about the identity of the Company. However, the AO has, in effect, doubted about the genuineness of the transaction, in view of the findings arising out of the search operations conducted on M/s KSL group of companies. 12. We have already noticed th .....

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case. We notice that the assessee has asked for an opportunity to cross examine the four persons cited above, but the said opportunity seems to have not been provided with, even though the AO has reported that the assessee did not avail the opportunity. We have already noticed that the assessee has furnished affidavits obtained from the four persons and these affidavits would show that they have not received any communication from the AO asking them to appear for Cross examination. These facts, .....

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er in colour and character. Hence, we are of the view that the revenue cannot take support from the decision rendered by Hon ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd (supra). 13. The documents furnished in the paper book would show that the share application money has been received by the assessee by following proper procedures through the Banking Channels. The financial statements of M/s Realstar Trading Co. P Ltd also show that it is carrying on business activi .....

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