TMI Blog2018 (8) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... fail. Even in respect of documents relied upon by the AO, the Ld CIT(A) has found the same to be inadequate to warrant the additions made u/s 68 of the Act. Hence, we are of the view that the Ld CIT(A) has passed a reasoned order by considering the facts of the case, applicable case laws and has taken a justifiable view in this matter - thus confirm the order passed by Ld CIT(A) in deleting the addition of ₹ 24.75 crores made u/s 68 of the Act. Since we have confirmed the order of Ld CIT(A) in deleting the addition made u/s 68 of the Act, the interest disallowance is also liable to be deleted. - Decided in favour of assessee. - I.T.A. No. 6099/Mum/2016 (Assessment Year 2012-13) - - - Dated:- 10-8-2018 - Shri B.R. Baskaran And Shri Ramlal Negi, JJ. Assessee by Shri S.C. Tiwari Department by Shri Abhijit Patankar ORDER B.R. Baskaran The appeal filed by the Revenue is directed against the order dated 28.7.2016 passed by the learned CIT(A)-30, Mumbai and it relates to A.Y. 2012-13. The Revenue is aggrieved by the decision of the learned CIT(A) in deleting the addition of ₹ 24.75 crores made by the Assessing Officer u/s. 68 of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 team in respect of Bhanwarlal Jain and accordingly concluded that the above said borrowings aggregating to ₹ 24.75 crores is unexplained and creditworthiness of the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt. 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. 7. The Ld D.R further submitted that the discharge of initial onus by the assessee alone will not disentitle the AO to make additions u/s 68 of the Act. He can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessing officer in view of furnishing of all the details. However, the assessing officer has failed to conduct any further enquiries to disprove the claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, 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 submitted that the assessing officer has not provided opportunity to cross examine the parties who gave adverse statements. He submitted that the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinate 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 the AR on behalf of the appellant. From the material, the AO has brought out in the body of the assessment order, his case against the appellant which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Jain in running his hawala racket. However, no details of the evidence, if any collected from these persons regarding their role in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses: 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 ₹ 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 dispute the said statement of a third party but he asserted that the statement in question had been retracted by Shri Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthiness 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 angadiya channel were also recorded. During the course of survey in your premise in the books of accounts of M/s Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence, that these loans are accommodation entries. 6.3.6 As is obvious, Shri Hemal Jhaveri stuck to his contention that even from the statement of Shri Bhanwarlal Jain, it was not possible to draw an adverse inference of hawala regarding the Impugned loans. The appellant, subsequently furnished to the Investigation Wing various details regarding the lenders - their names, PAN, constitution, names of Proprietor/Partner/Director. Further, the appellant provided confirmatory letters issued by the lenders, copies of acknowledgement of respective income tax returns, Balance 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 remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provide to H R Mehta a copy of the appraisal report third party statement etc. and proceeded to treat the loan as unexplained. The Hon'ble High Court struck down the order of reassessment by observing that revenue was not justified in making the addition without having first given the assessee an opportunity to cross examine the deponents on the statements relied upon by the ACIT. The relevant discussion, contained in paragraphs 16 and 17 of the High Court's order, is reproduced below: 16. In the instant case although the appellant assessee has called upon us to draw an inference 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 revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6.3.12 On Principles of Natural Justice it has been held by the Apex Court in the case of Swadeshi Cotton Mills vs Union of India in 1981 AIR 818 that phrase Natural justice is not capable of a static and precise definition. Two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as preeminently necessary 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 alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said computer printout are comparable o the transaction of the appellant, The appellant will have to be given reasonable opportunity to establish (if he can) that the transactions are not comparable. 6.3.15 Going by the discussion contained above, it is obvious that the inference drawn by the Assessing Officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statements etc.) used against it. Secondly, by withholding the said material, the Assessing Officer has denied to the appellant an opportunity to rebut the evidence by crossexamining 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature [Govindarajulu Mudaliar vs. CIT[1958]34 ITR 807 (SC)]. 6.3.21 In the case of Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 /2S Taxman 80F (SC), the assessee gave the names and addresses of the creditors. It was in the knowledge of the Revenue that the creditors were income-tax assessees. The revenue apart from issuing notices under section 131 did not pursue the matter further. It did not examine the source of income of the alleged creditors to find out whether they were creditworthy. Therefore, it was held that in these circumstances, assessee could not do any further and it had discharged the burden laid on 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged the burden and when burden clearly shifted to the Department to prove to the contrary and when AO failed to invoke the provisions of section 131 of the Act to prove the contrary, it was sufficient reason to delete the addition. 6.3.26 In the case of CIT v. Jal Kumar Bakliwal [2014] 366 ITR 217 (Raj), it was held by the Rajasthan High Court that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating 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 ₹ 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 onu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors 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 6.3.32 As such, in so far as the appellant is concerned, it has provided all possible documentary evidence to prove identity of the creditors from whom the impugned loans of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MALHAR EXPORTS 06-02-2012 RTGS 50,00,000 MARVIN ENTERPRISES 20-03-2012 RTGS 1,00,00,000 MARVIN ENTERPRISES 09-10-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 13-07-2012 RTGS 1,50,00,000 MEHUL GEMS PVT. LTD. 08-11-2012 RTGS 50,00,000 MINAL GEMS 23-06-2011 RTGS 50,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PRIME STAR 06-12-2012 RTGS 50,00,000 ROSHAN GEMS PVT. LTD. 29-02-2012 RTGS 2,00,00,000 ROSHAN GEMS PVT. LTD. 08-11-2012 RTGS 2,00,00,000 SONAM GEMS PVT. LTD. 29-02-2012 RTGS 1,50,00,000 SONAM GEMS PVT. LTD. 29-02-2012 RTGS 1,50,00,000 SONAM GEMS PVT. LTD. 01-03-2012 RTGS 2,00,00,000 SONAM GEMS PVT. LTD. 09-11-2012 RTGS 5,00,00,000 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus, then the onus to disprove the same is shifted to the shoulders of the assessing officer. These legal principles have been reiterated in the cases of Bhan sons (supra) and M/s Precision Finance P Ltd (supra), which were referred to by Ld CIT-DR. In the instant case, there is no dispute that the assessee 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), conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inferences drawn by the search officials, particularly the assessee could rebut those presumptions drawn by the search officials. Though the sworn statement given by Shri Bhanwarlal Jain may be a relevant piece of evidence, yet it is stated that the said statement has been retracted. Further the AO has not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made u/s 68 is not justified. The assessee herein, in our view, stand on a stronger footing. The assessee has furnished all the relevant details, which has been summarized by the Ld CIT(A) in paragraph 6.3.31 of his order as under:- 6.3.31 In the case before me, the record also shows that to prove the 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 movemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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