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TMI Blog2019 (2) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... oan entries at the rate of 0.2% of such amount." 4. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored. 5. The appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary. 2. The brief facts of the case are that the assessee is a firm engaged in the share trading business. The assessee e-filed its return of income on 21.08.13 showing total income at Rs. NIL. The case was selected under CASS on the ground that there were large value squared up loans and unsecured loans during the year. Accordingly, notice u/s. 143(2) of the Act dated 04.09.2014 was issued and served on the assessee. Assessment order u/s. 143(3) of the Act was passed by the AO on 29.02.2016 determining total income of the assessee at Rs. 36,78,25,297/- after making certain additions/ disallowances u/s 68, 69C, etc of the I.T. Act. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal of the assessee. Now before us, the revenue has preferred the present appeal by raising the above ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td 20000000 16. Sonam Gems Pvt Ltd 50000000 Hence the revenue carried out Survey operation in the hands of the assessee on 16-10-2014. Subsequently, the return of income filed by the assessee was taken up for scrutiny. Since Bhanwarlal Jain had admitted that he and his group of companies are providing only accommodation entries, the AO took the view that the assessee has introduced its unaccounted cash through the bogus loans stated above. 3. Before the AO, the assessee furnished all the details that were called for including details of loans received, details of interest paid, copies of affidavits given by the lenders, financial statement of lenders etc., in order to prove the genuineness of loans in terms of sec. 68 of the Act. Thereafter, the assessee asked the Assessing Officer to give copies of documents relied upon by him and also copies of statements given by Shri Bhanwarlal Jain and others. The assessee also sought an opportunity to cross examine them. The AO did not furnish the details requested by the assessee and also did not afford opportunity to cross examine the persons. The AO, however, proceed to place reliance on the observations made by search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies are only employees of Shri Bhanwarlal Jain. This group ensured that the transactions are arranged in a perfect manner in order to avoid even slightest of doubt. He submitted that the search team has, however, unearthed the bogus nature of all transactions, which has also been confirmed by Shri Bhanwarlal Jain and other persons. 6. The Ld D.R submitted that the appellate authorities are also duty bound to conduct necessary enquiries, if there is any deficiency in the enquiry conducted by the AO, as held by Hon'ble Delhi High Court in the case of Jansampark Advertising & Marketing (P) Ltd (ITA 525/2014 dated 11-03-2015). He further submitted that the Hon'ble Delhi High Court has highlighted in the case of Pr. CIT Vs. Bikram Singh (ITA 55/2017 dated 25-08-2017) there is constant use of deception of loan entries to bring unaccounted money into banking channels and the device of loan entries continues to plague the legitimate economy of our Country. The Hon'ble Delhi High Court found in the above said case that the loan transactions did not inspire confidence as being genuine and are shrouded in mystery and accordingly confirmed the addition made by the AO u/s 68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versed. Alternatively he suggested that the matter may be restored to the file of the AO for examining it afresh by conducting further enquiries. 10. The Ld A.R submitted that the assessing officer has made the addition u/s 68 of the Act. He submitted that the assessee is required to discharge the initial onus placed upon it u/s 68 of the Act. He submitted that the assessee has furnished all the documents in order to prove the identity and creditworthiness of the creditors. All the transactions have been routed through the banking channels and hence genuineness of the creditors is also proved. The ld A.R submitted that the revenue did not find any incriminating material during the course of survey operations conducted in the hands of the assessee. He submitted that the assessee, vide its letter dated 03-03-2015, has submitted all the documents relating to the loan creditors, viz., copy of their ITR, their financial statements and bank statements, loan confirmation letters obtained from them and thus the assessee has discharged the initial onus placed upon it u/s 68 of the Act. He submitted that the onus to disprove the claim of the assessee was accordingly shifted to the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom him and other employees. The assessing officer, however, did not confront those materials and sworn statements with the assessee. He submitted that the assessee, vide its letter dated 13-03-2015 (copy placed at page 89 of the paper book), has requested the AO to furnish copies of information, statements, reports or any document on which the AO has placed reliance. Further the assessee has also requested the AO to allow reasonable opportunity to give submissions and explanations on those materials. The assessee has also specifically asked for an opportunity to confront and cross examine the parties who gave the Statements. The assessee again made similar request in its letter dated 19-03-2015. The Ld A.R submitted that the AO, however, did not furnish the copies of documents and also did not allow the opportunity to cross examine the parties who gave adverse statements. 13. The Ld A.R submitted that the assessing officer is not entitled to rely upon the documents collected behind the back of the assessee. In this regard, the Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980)(125 ITR 713). He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order. The Ld A.R further submitted the statements given by Shri Bhanwarlal Jain has been claimed to have been retracted. He submitted that the co-ordinate bench of the Tribunal has rendered its decision in the case of M/s Vama International (ITA No.7315, 7316 & 7317/Mum/2016 dated 15-02-2018), wherein the issue was related to the disallowance of purchases made from M/s Bhanwarlal Jain Group. In the said decision, the Tribunal has recorded that the statements have been retracted by them subsequently. The co-ordinate bench has further held that the purchases could not be treated as bogus simply relying on the statements given in the case of Bhanwarlal Group. Accordingly the Ld A.R submitted that the AO could not have placed reliance on the statements given by Shri Bhanwarlal Jain and others. 16. We have heard rival contentions and perused the record. We also notice that the Ld CIT(A) has deleted the additions by making detailed observations. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A):- "6.3 I have carefully considered the issues brought out by the AO in the impugned assessment order and also the submissions made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper entries purchased against payment of unaccounted cash? c. Has the Assessing Officer brought any material on record to show that commission was paid to Shri Bhanwarlal Jain? 6.3.2 First of all, it would be worthwhile to examine the impugned assessment order with regard to material that shows that the hawala racket was run through benami entities of Shri Bhanwarlai Jain, In this regard it may be mentioned that: a. In sub-paragraph 4.18 of the assessment order, the Assessing Officer claims that in their respective statements, recorded u/s 132(4) all Directors/ Proprietors/Partners of the alleged benami entities run by Shri Bhanwarlal Jain have admitted to being dummies, business in whose names was actually being run by Shri Bhanwarlal Jain. b. In the very next sub-paragraph 4.19, the Assessing Officer goes on to name 13 individuals (Lunkaran Parasmal Kothari, Anil Khicha, Rajesh Chopra, Ritesh Siroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Bharat Omprakash Jain, Mahavir Mangalchand Jain, Ramnivas Choyal, Gautam Kumot, Rajesh Chopra and Atul Ladda). According to the Assessing Officer, these persons were dummy Directors/Partners/Proprietors, used by Shri Bhanwarlal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without bothering to bring any concrete material on record. 6.3.5 Survey Action u/s 133A of the Act at the appellant premises: Material, brought on record by the appellant before the Assessing Officer in the course of assessment proceedings clearly shows that about a year after search action of 2013 in the case of Shri Bhanwarlal Jain, the appellant was surveyed by the Investigation Wing on 16-10-2014. The survey party found that the impugned loans of Rs. 24.75 crore from the aforesaid 17 entities were incorporated in the books of account of the appellant. Statement on oath of Shri Hemal Jhaveri, Key Person, was recorded on the 16th, the 17th and the 18th of October, 2014. Shri Hemal Jhaveri maintained that these loans were genuine and were not part of any hawala. He claimed that no commission whatsoever had been paid to Shri Bhanwarlal Jain; that interest had been paid to the creditors; and, that TDS had regularly been deducted and paid into the Government Treasury. The officers conducting the survey showed Shri Jhaveri an alleged confessional statement of 09-10-2013 made by Shri Bhanwartal Jain, admitting hawala operations through benami entities. Shri Hemal Jhaveri did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on in these concerns. It simply explains that balance sheet which explains source of loan doesn't prove credit worthiness of concerns. In view of this please explain why the unsecured loan taken by the M/s Jainam Investments from the group concerns of Shri Bhanwarlal Jain should not be treated as just accommodation entry? Ans. In view of my reply to earlier question I can't comment on this. Q.31 Please go through the Q. No 29 to 34 of Shri. Bhanwar Lal Jain. In this statement Shri. Bhanwar Lal Jain has admitted that concerns operated by him has certain transactions which are not recorded in regular books of accounts. These transactions had not been routed through banks but through angdiya account in cash. Shri. Bhanwar Lal Jain had also admitted that he used to record these transactions in separate parallel books in electric form as well as and in physical form. During the course of search u/s 132 on 03.10.2013 these parallel books of accounts were seized and Shri Bhanwar Lal Jain has also explained in detail the codes under which these accounts were maintained. In post search investigation, these accounts were deciphered wherein your name against transactions through ang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Sheets, and relevant Bank Statements of all the lenders. Obviously, other than a general statement of Shri Bhanwarlal Jain that had reportedly retracted subsequently, no specific material to suggest the loans are hawala entries. There was nothing to show that there was any actual exchange of cash between the appellant and the alleged hawala givers before the impugned loans were incorporated in the books of account of the appellant. Also, there was no material to show that any commission for arranging the hawala had been paid by the appellant to the said Shri Bhanwarlal Jain. The situation remained unaltered in the course of the assessment proceedings and the Assessing Officer did not in any manner improve upon what had been done by the Investigation Wing. 6.3.7 Non-observance of Principle of Natural Justice: Not making available material used aaainst the appellant & denying opportunity to cross-examine witnesses: In the grounds of appeal, first six grounds raised by the appellant are dealing with the issue of AO not observing the principles of natural justice and the material relied upon is not made available to the appellant and denying the opportunity of cross examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various Issues raised and the decisions cited by Mr. Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the A CIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to condude that the loan was a bogus transaction. 17. In our view In the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ensure that law is applied impartially objectively and fairly. These twin Principles are (i) audi alterm pattern and (ii) nemo judex in re sua. Audi alterm partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power." "The maxim audi alterm partem has many facets. Two of there are (a) notice of case to be met and (b) opportunity to explain. "In facts and circumstances of a particular case when non-liance with the implied requirements of the audi alterm partem, rule of natural justice at decisional stage, the impugned order can be struck down as invalid on that score atone" 6.3.13 It has also been held by the Apex Court in the case of Delhi Transport Corporation vs DTC Mazdoor Congress, in 1991 AIR 1O1, that the audi alterm partem rule which in essence enforces the equality clause of Article 14 of the Constitution and is applicable not only to quasi-judicial orders but to administrative orders -affecting prejudicially the party in question. 6.3.14 A similar matter cameup before the Hon'ble Supreme Court in the case of M/s Gira Enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said material, the Assessing Officer has denied to the appellant an opportunity to rebut the evidence by cross-examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.3.16 The case law relied by the assessee of Rushabh Enterprises vs. Asst CIT WRIT Petition No. 167 of 2015 is not applicable to the present case as in that case the assessee filed petition against the reopening u/s 148 of the Act and in present the assessment is made u/s 143(3) of the Act. 6.3.17 Absence of material to show that the Loan Entries are Unexplained: From the forgoing, it is obvious that there is no scope for arriving at a conclusion that the appellant had taken hawala entries to incorporate the impugned loans in its books of account. Hence, the only issue that remains to be seen is whether on the basis of facts brought on record the impugned loans could be treated as unexplained within the fore-corners of section 68 of the Act. At the outset, it will necessary to look at some legal precedents with regard to the intent and application of section 68. It needs no elaboration that through a catena of decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. 6.3.22 In the case of Rohini Builders [2002] 256 ITR 360 /[2003] 127 Taxman 523 (Guj.) it was held that if the identity of the creditors is proved and the amounts are received by account-payee cheques, the initial burden of proving credit is discharged and the source of credits need not be proved. 6.3.23 In the case of CIT vs. Smt. Sushiladevi Khadaria [2009] 319 ITR (Bom), Hon. Bombay HC held that when loans were taken 'by account payee cheques and the record indicated that there was no cash payment in the account of the borrower prior to the issuance of such cheques, the loans and interest paid on such loans were not includible in the total income of the assessee u/s.68 of the Act. 6.3.24 In the case of IT O v. Anant Shelters (P) Ltd, [2012] 051 SOT 0234, the Hon'ble TTAT (Mumbai) held that in matters regarding cash credit the onus of proof was not a static one. As per the provisions of the section 68, the initial burden of proof lies on assessee. Amount appearing in books of accounts of the assessee was considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to non but the assessee. The addition of Rs. 17,27,250 under section 68 was not justified. 6.3.27 In the case of CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del), it was held by the Delhi High Court that the assessee had discharged that initial onus. The assessee was not required thereafter to prove the genuineness of the transactions as between its creditors and the creditors' source of income, i.e. the sub creditors. 6.3.28 In a recent decision given by the Delhi High Court in case of CIT v. Samtel Color Ltd. 64 DTR 46, it was held that by bringing on record every possible information regarding the depositors included in the application form which included particulars of applicant/depositor, telephone No., particulars of demand draft/cheque through which the deposit was made, tax status of applicant and other deposits with the assessee, if any, assessee had dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans of Rs. 24,75,00,000 were obtained. This evidence also proves creditworthiness of the creditors and the genuineness of the transactions. Moreover all the loans were repaid through its bank, in the same year or in the subsequent year and those details were also furnished in a tabular form in the present proceedings which was reproduced as under: Party Name Date MODE LOAN RECIVED LOAN REPAID AASTHA IMPEX 02-06-2011 RTGS 50,00,000 AASTHA IMPEX 27-06-2011 RTGS 50,00,000 AASTHA IMPEX 20-03-2012 RTGS 1,00,00,000 AASTHA IMPEX 20-03-2012 RTGS 1,00,00,000 AASTHA IMPEX 05-03-2012 RTGS 50,00,000 AASTHA IMPEX 24-08-2012 RTGS 40,00,000 AASTHA IMPEX 12-10-2012 RTGS 10,00,000 AASTHA IMPEX 16-10-2012 RTGS 1,00,00,000 AASTHA IMPEX 16-10-2012 RTGS 50,00,000 AASTHA IMPEX 24-11-2012 RTGS 50,00,000 BALAJI IMPEX 04-05-2011 RTGS 1,00,00,000 BALAJI IMPEX 13-06-2012 RTGS 1,00,00,000 IMPEX GEMS 23-06-2011 RTGS 50,00,000 IMPEX GEMS 17-03-2012 RTGS &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 24,75,00,000 24,75,00,000 6.3.33 Thus, it has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. In these circumstances, the onus had shifted to the Assessing Officer. If the Assessing Officer was still not satisfied, he had the option of making inquiries from the alleged lenders by summoning them. However, as seen from the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has discharged the initial burden of proof placed upon it by furnishing all the materials to prove the three main ingredients, referred above. Hence the burden has shifted to the shoulders of the assessing officer to disprove the evidences furnished by the assessee. We notice that the assessing officer, in the instant case, did not conduct further enquiries or bring any material on record to discharge the burden shifted upon his shoulders. Instead, we notice that the assessing officer has simply placed reliance on the alleged incriminating materials found in the course of search conducted in the hands of Shri Bhanwarlal Jain and his group and also upon the sworn statements given by them. 18. The Ld CIT-DR, by placing reliance on the decision rendered by Hon'ble Delhi High Courts in the cases of Jansampark Advertisement and marketing (supra) and Bikram singh (supra), contended that the appellate authorities are duty bound to conduct further enquiries, if there is deficiency in the enquiry conducted by the AO. However, in the instant case, we notice that the addition has been made u/s 68 of the Act and the assessee has discharged the onus placed upon him under that section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown that the transactions entered by the assessee with the group of Shri Bhanwarlal Jain were examined by the search officials and he has deposed against the transactions entered between him and the assessee. On the contrary, the Ld CIT(A) has given a finding that the impugned loan transactions have not been specifically stated to be bogus in nature. The key person of the assessee has reiterated in his statement taken from him during the course of survey that the loan transactions are genuine. When it was pointed out that Shri Bhanwarlal Jain has admitted the bogus nature of transactions, the key person has specifically stated that the said admission related to the sale of diamonds and further specifically stated that the loan transactions are not covered in the statement. Hence the Ld CIT(A) was right in observing that the impugned loan transactions have not been specifically covered by the statement given by Shri Bhanwarlal Jain. Hence in our view, the theory of human probabilities and surrounding circumstances need not be applied in this case. 20. It is a fact that the revenue has conducted survey operations in the hands of the assessee and they did not find any incriminatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness of the impugned loan entries from the 17 creditors, the appellant has furnished to the Assessing Officer the following details copies of which were also furnished in the present proceedings: I. PAN details of creditors II. Constitution and address of the creditors III. Particulars of income-tax returns filed by the creditors [These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant.] IV. Confirmatory letters given by the creditors " V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.] VII. Details of interest paid to the creditors VIII. Details of TDS deducted and paid". Even though the assessing officer did not find any fault with these documents, still the assessee has requested the AO to issue summons to these parties. As stated earlier, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that assessee was one of the beneficiaries of accommodation entries for loan from various concerns/ entities which were benami concerns, managed and controlled by Bhawarlal Jain Group. 8. The Investigating Wing of the department had examined all the loan creditors wherein all the creditors had appeared and confirmed the transactions of loans advanced to the assessee. The AO had primarily made the additions by believing and relying upon the admission of Bhawarlal Jain by ignoring the fact that nowhere in the statement of Bhawarlal Jain or any of his associates recorded u/s 132(4) of the Act had admitted that any of their concerns had ever given accommodation entries by way of unsecured loans to the assessee. From the documentary records, we also noticed that actually, the assessee had already discharged the onus caste upon him to prove the identity, creditworthiness and genuineness of transactions. Even Ld. CIT(A) had discussed in detail in para no. 4.3.3 of its order, the documents submitted by the assessee and their co-relation with the onus, which stands discharged by the assessee. But on the contrary, the AO had not brought on record any evidence to controvert or rebut t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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