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TMI Blog2016 (12) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured loan from M/s Mehul Gems (P) Ltd amounting to Rs. 1 crore. During the course of assessment proceedings, the AO was in receipt of information that M/s Mehul Gems (P) Ltd. is a benami company of Shri Bhanwar Lal Jain group who is the leading entry provider in Mumbai. The group provides accommodation entries of bogus unsecured loans and advances from various benami concerns being operated and managed by Shri Bhanwar Lal Jain and his sons. The said information was received by the AO pursuant to search and seizure action by the Investigation Wing, Mumbai on 03.10.2013 where various incriminating documentary evidences were seized and statement of various persons who assisted Shri Bhanwar Lal Jain in providing bogus loans and advances through benami concerns were recorded. It was noted by the AO that in the said search and seizure operations carried out by the Investigation wing, accommodation entries pertaining to bogus loans and advances of Rs. 2,000/- crores were detected. It was further noted by the AO that the entire bogus nature of the transactions has also been admitted by Shri Bhanwar Lal Jain in his statement recorded u/s 132(4) of the IT Act. As per this information, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eque and no accommodation entry was taken from Shri Bhanwar Lal Jain or his group. In the books of accounts of the assessee, no irregularity has been pointed out by the AO. Therefore, the entries recorded in the books of account of the assessee is evidence under the Evidence Act and should be accepted. It was finally submitted that if the department wants to accept what has been found from the possession of Shri Bhanwar Lal Jain and its group, the burden to prove that the amount attributable to the assessee represents its concealed income would be on the department. This burden cannot be discharged merely on suspicion, surmises and conjectures. The Judicial view has been that there cannot be a presumption against a third party in what a person writes in his account books about him or it. Therefore, the AO was requested to provide the copies of incriminating documents and statements of various persons on the basis of which the belief was drawn and provide an opportunity to confront the material and cross examine the persons. The assessee further submitted the following documents in support of genuineness of loan transaction: (i) Confirmed copy of a/c of above named party in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sufficient to reject the contentions of the asseesse. (c) The assessee had requested for cross examination of such persons. In this regard, it is pointed out that the Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) (3 Judge Bench) had observed that " the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." (d) The right of cross examination is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and the above discussions it is to be seen whether the assessee was able to establish the genuineness of the transactions claimed by it or it has failed in discharging this onus. The information received from investigation wing and statement of Shri Bhanwarlal Jain and group clearly explains the modus operandi of this bogus transactions. In the present case, assessee has shown unsecured loans of Rs. 1,00,00,000/- from M/s Mehul Gems (P) Ltd. a benami concern of Shri Bhanwarlal Jain group, and this party is only providing bogus accommodation unsecured loans and advances for the reasons given in detail in the above para. Therefore, the unsecured loans from M/s Mehul Gems (P) Ltd. was treated as unexplained cash credit u/s 68 of the IT Act, 1961 and an addition of Rs. 1,00,00,000/- to the declared income of the asessee was made u/s 68 of the IT Act, 1961. 2.5 Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A). The ld. CIT(A) after considering the assessee's submissions deleted the entire addition and his findings are as under: "3.1.3 I have duly considered the assessee's submission and also taken a note of judicial pronouncements relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany with Shri Bhanwarlal Jain. As per finding given by the AO in assessment order even Shri Bhanwarlal Jain and the directors of the cash creditor company is not the common director in the said company. The AO alleged that the cash creditor company is a benami company of Shri Bhanwarlal Jain. It is well settled law that the onus to prove benami is on the person who alleges. The AO has not brought any positive material to show that cash creditor company is benami company of Shri Bhanwarlal Jain. Further, on carefully examination of assessment records, it is seen that the AO has issued a letter dated 06.01.2015 u/s 133(6) of Act (by speed post) for direct enquiry to the cash creditor company. From the perusal of assessment records, it is also seen that the aforementioned cash creditor company has complied with its letter dated 19.01.2015 to the notice issued by the AO and the same was received in the office of AO on 21.01.2015. From the above it is seen that AO has not controverted the documentary evidences submitted by the assessee nor conducted any fruitful enquiry on that. Even compliance from M/s Mehul Gems Pvt. Ltd. was not taken into cognizance when the same was received i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, therefore without being shareholder/director of a company how anyone can control the affairs of the company. The name of the son of Shri Bhanwar Lal Sharma is not known to the assessee, therefore no comments can be made on the controlling of son of Shri Bhanwar lal Sharma in this company. Further the AO has not brought any positive material to prove that M/s Mehul Gems Pvt Ltd is benami company of Shri Bhanwar Lal Jain Group. The Ld AO has listed name of various companies in para 4.5, and your honor would find that the directors of M/s Mehul Gems Pvt Ltd and Shri Bhanwar lal Jain are not common partner in any company. e) As regard to contention of ld AO that various incriminating documentary evidences were seized during the course of search on Bhanwar Lal Jain and statement of several persons were recorded which proves that the entry of the assessee is accommodation entry this is to submit that the ld AO has not provided the copy of so called incriminating document or statement the assessee and opportunity of confrontation was not given to assessee. The assessee has specifically demanded to ld AO to provide the copy of so called incriminating documents and statements but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to the assessee itself. (ii) Genuineness of Transaction:- The assessee has filed confirmation letter and affidavit of director of the company who admit the giving of loan. The assessee filed copy of bank statement of cash creditors where the amount of payment is reflected in bank statement. The assessee has filed sworn affidavit of Shri Mohit Pukhraj Kawadiya director of cash creditor company wherein he has admitted the giving of money to the assessee as loan. Further, the assessee has paid interest and deducted TDS. Furthermore, the assessee has repaid the loan by account payee cheque. The AO has not rebutted the contents of the affidavits. The contents of affidavits, which are not vague should be accepted correct. Reliance is placed on the following decisions:- (i) Mehta Parikh & Co v CIT [1958] 30 ITR 181 (SC) (ii) Dilip Kumar Rao Vs CIT (1974) 94 ITR 1 (Bom); (iii) Malwa Knitting Works Vs CIT (1977) 107 ITR 379, 381 MP and (iv) Sri Krishna Vs CIT (1983) 142 ITR 618 (All). (iii) Capacity proved:- The assessee has filed copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing decisions: a) CIT vs Daulat Ram Rawatmull 87 ITR 349 (SC) b) Jaydayal Poddar vs. Bibi Hazra, AIR 1974 SC 171 Hon'ble Supreme Court has held that it is well settled that the burden of proving that a particular sale is Benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. c) Prakash Narain Vs CIT 134 ITR 364 (ALL) d) Lal Chand Agarwal vs. ACIT 21 Tax World 213 Hon'ble ITAT Jaipur Bench has held that to hold a person as benami of another, one ought to have concrete evidences in contrast to sheer presumptions and suspicion and in such cases initial burden lies on revenue ; e) ITO vs. Shree Ladani Family Trust 21 Tax World 351 Hon'ble ITAT Jaipur Bench has held that burden to prove Benami nature heavily lies on the department. f) DCIT vs. PSM Family Trust 21 Tax World 553 To hold benami Character of a business, it is essential to prove interlocking, interlacing and inter controlling between the two business. g) Ravi Mathur & Others vs. ACIT 22 Tax World 245 Held that burden to prove Benami nature of transaction heavily lies on the department. h) Ramjas Nawal vs. ACIT 22 Tax World 126 Held that A person cannot be he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried away under some report. Hon'ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-" that one who hears must decide the case." 2.7 The ld DR is heard who has vehemently argued the matter and supported the order of the AO. 2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs. 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the said Group has provided. This admission is sufficient to reject the contentions of the asseesse." Further, regarding cross examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the crossexamination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad a fair hearing." The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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