TMI Blog2018 (11) TMI 1593X X X X Extracts X X X X X X X X Extracts X X X X ..... ions which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS, affidavits of the lenders. All those documents prove the genuineness of the transactions. Creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances. Further, we also noticed from the record that the lenders have not only granted loans to the assessee but also to various other persons. We have also considered the affidavits of the lenders and from all those documents we find creditworthiness of the lenders to make payment of loans to the assessee. We have also considered that the loans, which were taken by the assessee has also been repaid and all those repayments have been made by the assessee in subsequent years and those details have also been filed by the assessee in the para mentioned above. Also in the present case the additions were made on the basis of statement recorded during the investigation carried out by the Investigation Wing. Since no opportunity of cross examination was given to the assessee in respect of the persons who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the action of assessing officer in taxing ₹ 12,20,00,000/- as unexplained cash credit under section 68 of the Income Tax Act. The action is unjustified, unwarranted and against the Provisions of the Act. Without prejudice the addition is excessive. (5) The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of assessing officer in not passing the order judicially and in accordance with the Provisions of the Law as he has failed to give show cause notice regarding proposed addition under Section 69 of the Income Tax Act. 3. The brief facts of the case are that the assessee is a RBI registered non banking finance company and is in the business of accepting loans and advancing the same to earn interest income and also engaged in share trading activity. The assessee filed return of income on 28.09.2012 declaring total income of ₹ 51,330/-. The AO treated the amount of unsecured loans received from the concern of Bhanwarlal Jain group during the year under consideration as unexplained investment under Section 69 of the Income Tax Act, 1961 (hereinafter the Act ) and accordingly added back the said amount. Thus, assessment was compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that certain documents confirming the identity of the lenders, capacity and creditworthiness of the lenders and genuineness of the loan transactions, could not be filed before the Assessing Officer by the Assessee Company in absence of proper communication from the Assessing Officer. The Assessee Company now desire to file several documents as additional evidence. The additional evidence in form of affidavits of the lenders, audited accounts and bank statements of lenders are relevant and necessary for deciding the issue involved in the appeal as the additional evidence would further establish the creditworthiness and capacity of the lenders. Under the circumstances, Your Honour is therefore requested to kindly admit the additional (Page Nos. 1 to 109) as our clients were prevented for a reasonable cause in not filing the same before the Assessing Officer. A copy of affidavit of Mr. Vineet Suchanti, Director of the Assessee Company is also enclosed. We trust Your Honour will kindly accede to our request and admit the additional evidence. 7.1 The AR of the appellant vide its another letter dated 18 07 2018 has further submitted, as under:- (i) Whether the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en done through banking channel. b) From the confirmations which are filed in the form of ledger account, you will observe that the Assessee Company has received amounts through RTGS. C) Affidavits of the lenders. All these documents clearly establish the genuineness of the transactions. 3. Credit worthiness of lenders: From the audited accounts, you will observe the credit worthiness of the lenders to grant loans and advances. Further, the lenders have granted loans and advances to various persons including the Assessee Company. Thus Credit worthiness of the lenders is established. Thus, with the above documents and explanation the Assessee Company has established the genuineness of loans and established that the loans are not in the nature of accommodating entries. 4. Affidavits of lenders To further substantiate, affidavits of lenders confirming the temporary loan transactions with the Assessee Company are also attached herewith as a part of additional evidence. In view of the above documents, the Assessee Company has discharged initial burden of proving the genuineness of loan amounting to ₹ 11,00,00,000 received from various lenders by establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e herewith a copy of CIT(A) 44 Mumbai in respect of Reliance Corporation where the CIT(A)on the similar facts has deleted the addition made under section 68 of the Act. In this case also the entire addition was made on the basis of report of Investigation Wing of the Department on the search carried out on the group companies of Bhanwarlal Jain Group. Under the circumstances, Your Honour is therefore requested to kindly consider the appellate order while disposing this appeal. (v) CASE LAWS (a) Decision of Gujarat High Court in the case of CIT Vs Patel Ramniklal Hirji (41 taxmann.com 493) In this Case the Assessee has received loan through account cheque and in support of loan transactions he also brought on record a copy of audited accounts, bank statements and acknowledgement of income tax returns of lender, the Hon'ble Gujarat High Court has therefore held that in such cases, transaction in questions has to be regarded as genuine and thus the loan amount cannot be added to the Assessee taxable income under section 68 of Income Tax Act. Your Honour would appreciate that the Assessee Company has also filed all the documents such as copies of audited accounts, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount cannot bejadded to the Assessee taxable income under section 68 of Income Tot Act merely on the ground that lenders are engaged in providing commodation entries also. In the present case, Your Honour would appreciate that the lenders were regular income-tax assessee with PAN on record and had enough bank balance on the date of granting loan to the Assesee Company. (/) Decision of Rajasthan High Court in the case CIT Vs Jai Kumar Bakliwal (45 taxmann.com 203) Where the identity, capacity and genuineness of transaction stood proved by the Assessee, then he is not required to prove source of amount which has been deposited by the lenders in their bank account. In the present case, as mentioned earlier, the Assessee has proved all the three criteria and therefore the addition made by the Assessing Officer is sought to be deleted. (g) Decision of the Delhi High Court in the case of CIT Vs Lalit Kumar Podda r (56 taxmann 462) In this case the Hon'ble Delhi High Court has held that where identity and creditworthiness of parties have been established from whom Assessee has taken loan and advances, no addition under section 68 can be made. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to prove genuineness of transaction and creditworthiness of the depositor and once it is proved thereafter the burden shifts on the Assessing Officer. 7. It was submitted by the learned A.R. that the assessee had placed on record all the documentary proof before the AO and even certain documents confirming the identity of the lender, capacity and creditworthiness of the lender and genuineness of loan transactions, which could not be filed before the AO, also were filed by way of additional evidence before the learned CIT(A). It was also submitted that the AO had wrongly invoked provisions of Section 69 of the Act as Section 69 can only be invoked when investments made by the assessee being remained unexplained. It was further submitted that since no investments were made by the assessee company, therefore, the question of unexplained investments does not arise and accordingly the learned CIT(A), while admitting the fault on the part of the AO had guided by the said order and confirmed the additions only under Section 68 of the Act. The learned A.R. also drawn our attention to the details of the loan obtained from different parties and it was also submitted that all those l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Copy of bank statement of M/s Megha Gems 4. Copy of Audited Accounts of M/s Megha Gems 5. Affidavit of Mr. Mitesh Pamecha, proprietor of M/s Laxmi Diamonds confirming the loan 5 Mehul Gems Pvt. Ltd. 1. Confirmation of Mehul Gems Private Limited of loan of ₹ 50,00,000 2. Copy of Acknowledgement of return of income for A.Y. 2012-13 of Mehul Gems Private Limited 3. Copy of bank statement of Mehul Gems Private Limited 4. Copy of Audited Accounts of MeTiul Gems Private Limited 5. Affidavit of Mr. Mohit P. Kawdiya director of M/s Mehul Gems Private Ljmjte4 confirming the loan 6 Navkar India 1. Confirmation of Navkar India of loan of ₹ 1,50,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Affidavit of Mr. Pawan F Birawat proprietor of M/s Money Diam confirming the loan 11 Copy of letter dated 18/7/2017 requesting the CIT(A) to admit the additional evidence along with Affidavit of Mr. Vineet Suchanti, Director of Assessee company 12 Copy of written submissions filed before CIT(A) vide letter dated 18/7/2017 13 Copy of written submissions filed before CIT(A) vide letter dated 19/2/2018 The learned A.R. also placed details of loans repaid during the year under consideration and the same is reproduced below: - Sr. No. Name Address PAN NO. Date of Loan Xmotlnt ot loan taken/addition during the year Closing Bal. as on 31.03.2012 Amount repaid Bank Mode of Payment/ Repayment 1 Astha Impex 228/229, Mejestic Shopping Centre, 144, J.S.S.Road, Girgaum, Mumbai 400004 AEOPL0917R 28.03.2012 20,000,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AXIS BANK/ RTGS Total - 110,000,000 110,000,000 Further, the learned A.R. relied on the following judgements: - i) Principal CIT vs. Paradise Inland Shipping Pvt. Ltd Tax Appeal No.66 of 2016 (Bom) ii) CIT vs. Green Infra Ltd. 393 ITR 7 (Bom) iii) CIT vs. Gagandeep Infrastructure Pvt. Ltd. 394 ITR 680 (Bom) iv) Pr.CIT vs. Veedhata Tower Pvt. Ltd.ITA No.819 of 2015 (Bom) v) Patel Ramniklal Hirjri 41 taxmann.com 493 (Bom) vi) CIT vs. Rahul Vineet Traders 41 taxmann.com 86 (All) vii) CIT vs. Apex Therm Packaging (P) Ltd 42 taxmann.com 473 (Guj) viii) CIT vs. Vijay Kumar Jain 41 taxmann.com 433 (All) ix) CIT Vs Jai Kumar Bakliwal 45 taxmann.com 203 (Raj) x) Multiplex Trading Industrial Co. Ltd. 63 taxmann.com 170 (Del) xi) Varinder Rawlley 51 taxmann.com 524 (P H) xii) R W Promotions 61 taxmann.com 54 (Bom) xiii) ACIT Vs Sanjay M Jhaveri 61 taxmann.com 28 (Mum- Trib) xiv) Anil Chhaganlal Jain (Mum-Trib) xv) Jaico Textile Pvt Ltd. (Mum-Trib) xvi) Shri Laxmi E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of loan transactions only in view of the report of ADIT, Inv Wing 7, Mumbai, which has not been shared with the assessee company. At this stage it was submitted by learned A.R. that the Courts in a series of judgments had already held that merely on the basis of some statements addition cannot be made. It was also submitted that the confirmations of lenders filed by the assessee has not been disputed by the AO in the order of assessment. Alternatively it was argued that if at all any addition was to be made by the AO then in that event the same should have been made in the hands of the lenders since all the lenders are assessed to tax. 10. On the other hand, the learned D.R. relied upon the order of the CIT(A) and also upon the judgements, which are contained in the order passed by the CIT(A). 11. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidences in order to show the identity and creditworthiness of the lenders and genuineness of the transactions. We have perused the confirmation filed by the parties, copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and reflected in financial statements of assessee-company since subscription was done through banking channels as evidenced by bank statements - Tribunal examined case of revenue on parameters of section 68 and found on facts that it was not hit by said section Whether since revenue was not able to show that factual finding recorded by Tribunal was perverse, no substantial question of law arose - Held, yes [Para 3(c)] [In favour of assessee]. In the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd. (supra) the Hon'ble High Court held as under: - Section 68 of the Income-tax Act, 1961 - Cash credit (Share Capital) - Assessment year 2008-09 - Whether proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013, would not have retrospective effect - Held, yes - Whether where assessee-company had established identity, genuineness and capacity of shareholders who had subscribed to its shares, Assessing Officer was not justified in adding amount of share capital subscription as unexplained credit Held, yes - Whether where revenue urged that assessee had received share application money from bogus shareholders, it was for Income-tax Officers to procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars, which are inclusive of confirmation with name, address and PAN, copy of income tax returns, balance sheet, etc. in respect of all creditors/lenders then Revenue is not justified in making additions. Similar view has also been taken by the Hon'ble Allahabad High Court in the case of Vijay Kumar Jain (supra) and the Hon'ble Rajasthan High Court in the case of Jai Kumar Bakliwal (supra). 14. In the present case the additions were made on the basis of statement recorded during the investigation carried out by the Investigation Wing. Since no opportunity of cross examination was given to the assessee in respect of the persons whose statements were relied upon by the Revenue, thus the same was considered as breach of principles of natural justice as held by the Hon'ble Bombay High Court in the case of R.W. Promotions (P.) Ltd. (supra). The learned A.R. also drawn our attention to the cases wherein under similar circumstances additions were made and the same were deleted by the Coordinate Bench of the Tribunal in the cases of ACIT vs. Sanjay M. Jhaveri 61 taxmann.com 28, Anil Chhaganlal Jain vs. ACIT ITA Nos. 369 370/Mum/2017, Shree Laxmi Estaste Pvt. Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the present case as the pari materia contained in those cases are different from the pari material contained in the present case. 15. From the records, we further noticed that the AO has not looked into all the records furnished by the assessee and even the CIT(A) has also upheld the additions on the basis of suspicion. It is a settled law that suspicion, howsoever strong, may be but it cannot take place of evidence. In the present case, no evidence was brought on record by the AO to show that at any moment cash deposit was made in the bank account of the lenders before making payment to the assessee. The assessee has also placed on record all the documents pertaining to identity and creditworthiness of the lenders and genuineness of the transaction coupled with the document to show that whatever amount was taken by the assessee as loan, the same had already been returned back. Therefore, in view of the matter and the ratio of the decisions in the case law cited we are of the view that the assessee has discharged the onus of proving identity and creditworthiness of the parties and genuineness of the transactions. Therefore we see no reasons for the AO to make additions towards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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