TMI Blog2016 (12) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. - Decided against revenue. - ITA No.159/JP/2016 - - - Dated:- 16-12-2016 - SHRI KUL BHARAT, JM SHRI VIKRAM SINGH YADAV, AM For the Appellant : Shri Vijay Goyal (CA) For the Respondent : Shri Rajendra Singh (Addl.CIT) ORDER PER SHRI VIKRAM SINGH YADAV, A.M. This is an appeal filed by the Revenue against the order of Ld. CIT(A)-4, Jaipur dated 23.12.2015 wherein the sole ground of appeal is as under: Whether on the facts and in the circumstances of the case, the CIT(A) was right in deleting the addition of ₹ 1,00,27,500/- made by the AO u/s 143(3) of the IT Act, 1961 on account of bogus unsecured loan taken by the assessee from M/s Mehul Gems (P) Ltd. which is a benami concern of Shri Bhanwarlal Jain ignoring the fact that the piece of information that the said company is involved in providing bogus accommodation unsecured loans and advances, was admitted by Shri Bhanwarlal Jain in statement recorded u/s 132(4) of the IT Act, 1961. 2. The facts for the issue under consideration are that during the year under consideration, the assessee too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any or how anyone can control the affairs of the company. Regarding various incriminating documentary evidences seized during the course of search and statements of Shri Bhanwarlal Jain and other persons were recorded, the assessee submitted that copies of such incriminating documents or statement on the basis of which the AO is forming this opinion has not been provided to the assessee. Therefore the contents of such documents and statement is not known to the assessee. Therefore, the assessee requested the AO to kindly to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. It was further submitted that if the entries and material 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 the substance of all such material though not sources thereof to the assessee and if this is not done, the principles of natural justice stand violated. 2.1 It was further submitted that the assessee has taken actual loan from M/s Mehul Gems (P) Ltd through a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the assessee was considered by the AO but he did not find the same acceptable for the reasons stated as under: (a) The unsecured loans was received by cheque does not make the transaction genuine. The Hon ble ITAT Jaipur n the case of M/s Kanchwala Gems vs. JCIT, ITA No. 134/JP/02 dated 10.12.2003, and affirmed by the Hon ble Supreme Court in 288 ITR 10 (SC) has held that even payment by account payee cheque is not sufficient to establish the genuineness of the transaction. (b) The contentions of the assessee that neither Bhanwarlal Jain nor his sons are directors of the company, is also not relevant to the material fact that in the statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the information with the investigation department, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the said group on 03.10.2013, and the existence of nexus as briefed above cannot be considered as a coincidence specially when Shri Bhanwarlal Jain has categorically admitted that his group was indulged in providing accommodation entries of bogus unsecured loans and advances through Benami concerns (70) operated and managed by him and his sons. Thus, under such facts and circumstances M/s Mehul Gems (P) Ltd. is nothing but a Benami concern of Shri Bhanwarlal Jain group. Based on case laws and discussions, it was further stated by the AO that: (a) The primary onus is on the assessee to establish the genuineness of the transaction claimed by it. (b) If the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. (c) Payment by account payee cheque is not sacrosanct. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the source of payment as per the bank statement is also deposits of cheque by clearing. On careful perusal of bank statement of M/s Mehul Gems Pvt. Ltd. no instances of cash deposit prior to issue of cheque to the assessee by the cash creditor have been found. Further, the assessee has also filed sworn affidavit of the director of the cash creditor company. On receipt of these documentary evidences, it is also seen that AO has not brought on record any positive material to controvert the evidence and documents furnished by the assessee. Instead AO insisted on physical presence/attendance of the directors of the cash creditor company particularly when they are not based in Jaipur. It is true that cheque does not make the transaction genuine but in this case the assessee has submitted several documents including the bank statement and sworn affidavit of cash creditors, which have not been controverted by AO on the basis of positive evidence. Merely on the basis of statement of Shri Bhanwarlal Jain before Investigation Wing, Mumbai, the addition cannot be confirmed particularly when the copy of the sworn statement of Shri Bhanwarlal Jain was not provided to the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration the assessee has taken unsecured loan of ₹ 1,00,00,000/- from M/s Mehul Gems Pvt. Ltd, 228-229, Majestic Shopping Centre, Girgoan Road, Mumbai. PAN:- AAGCM9256M on 20.03.2012 through a/c payee cheque and paid interest of ₹ 27,500/- thereon after deducting TDS of ₹ 2,750/-. c) The assessee has submitted before the ld AO that the assessee does not know who is Shri Bhanwar lal Jain and never be in contact of Shri Bhanwar lal Jain. The Bhanwar lal Jain group not known to the assessee, therefore the modus operandi of this group is not known to the assessee and assessee not carried out any transaction through this person. The assessee has actually taken the unsecured loan from M/s Mehul Gems Pvt. Ltd and the same repaid in July-14. The receipt and repayment of loan both are through account payee cheques. d) The assessee explained to ld AO that he has taken loan from M/s Mehul Gems Pvt. Ltd and during the FY 2011-12 Shri Mohit Pukhraj Kawadiya, 702, Satyam Apartments, Opp. Navyug College, Surat and Shri Rajesh Chopra, 204, Nilpa Apt., Kalpeshi Street, Timliyawas, Nanpura, Surat were director and shareholders of this company. This inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the giving of loan to the assessee in response to direct inquiry of the AO. The ld CIT(A) has reproduced the copy of inquiry letter of AO and reply of cash creditor to the AO in the appeal order, which proves that the ld AO has no material to hold that the cash credit was unexplained. h) The assessee has discharged his initial onus. The assessee has discharged his initial onus laid down u/s 68 of Income Tax Act. The assessee has filed confirmation letters and affidavit of cash creditors before the AO who has admitted giving of money to the assessee as a loan. The ld AO has erred in making addition of ₹ 1,00,00,000/- even in the facts and circumstances of the assessee and the learned AO has no material to reject the evidences filed before him. (i) Identity:- The identity of cash creditor stood proved in as much as copy of PAN card and copy of Income Tax return were filed. Hon ble Rajasthan High Court in the case of Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199 has held that once the existence of the creditors is proved and such persons own the credits, the assessee s onus stands discharged and the assessee is not required to prove the source from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter further- it did not examine creditworthiness of the creditors- assessee could not, under the circumstances do anything further. Held that the additions were rightly deleted. (ii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans. j) The ld AO mentioned that cheque transaction is not sufficient to prove the genuineness of transaction. But in the case of assessee, the assessee is claiming the genuineness of the transaction not merely on the strength of cheque but he has submitted several other evidences such as sworn affidavit, income tax return and bank statement of cash creditor and Profit and loss account and balance sheet of cash creditor, which prove that the transaction of assessee is genuine. k) The ld AO held that M/s Mehul Gems Private Ltd is benami company of Shri Bhanwar Lal Jain but the ld AO has not brought any positive material to show that M/s Mehul Gems Pvt Ltd is benami of Shri Bhanwar Lal Jain. To hold a person as Benami of another, one ought to have concrete evidences in contrast to sheer presumptions and suspicion and in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. ITO 28 Tax World 435 held that burden to prove benami nature heavily lies on the department. o) Vijendra Kumar Mamodia vs. DCIT 29 Tax World 51 held that burden to prove Benami nature heavily lies on the department and burden to prove an investment as Benami is on the person who alleges as such. p) Rajesh Jain vs. ITO 32 Tax World 72 held that burden to prove benami transaction lies on the person who asserts its and sharing of same business place and employees is not sufficient to hold one person as Benamidar of another. q) Radhey Shyam Ojha vs. ACIT 32 Tax World 81 held that it is the duty of AO to bring on record sufficient material to prove Benami nature. (l) The AO appeared to be bent upon making the addition under the influence of some report without application of mind. The AO cannot be guided for his decisions by what the officer preparing the report says. As per section 119 (1) (a) even the CBDT cannot issue directions or instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. The SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it. It was held in that case that In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 2.10 In light of above proposition in law and especially taking into consideration the decision of the Hon ble Supreme Court in case of C. Vasantlal Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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