TMI Blog2019 (7) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... also deducted tax at source at the time of payment/crediting of the interest on the loans raised from the aforementioned companies. Accordingly, in the backdrop of the aforesaid facts, we are of a strong conviction that the assessee had sufficiently discharged the onus that was cast upon him as regards proving the authenticity of the loan transactions under consideration. A.O except for harping on the fact that the assessee had raised the loans from the companies which were controlled by Shri Praveen Kumar Jain, had absolutely done nothing which would conclusively prove that no genuine loans were raised by the assessee from the aforesaid companies. On the contrary, the notices which were issued by the A.O under Sec.133(6) to the aforementioned companies, wherein they were called to share certain information viz. nature of activities of the lender companies, source for giving the loans etc., were duly complied with by the said concerns and the requisite documents were placed on the record of the A.O by the aforementioned companies. We find that the A.O who ought to have made necessary verifications as regards the authenticity of the loan transactions by summoning the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not carrying out any genuine business activity and indulge only in providing accommodation entries. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in concluding that treated the loans receipt as genuine since they are receive by cheque. Further, though the assessee had established identity of creditors by filling their affidavit, but in those affidavits they had not mentioned any specific source of money which was advance by them, it was to be held that assessee had failed to prove capacity of its creditors to advance money and genuineness of transaction. If such evidence of genuineness of transaction was given the same should have been remanded to the AO for his examination and comments. 5. The appellant prays that the order for the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored. 6. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. Briefly stated, the assessee had filed his return of income for A.Y. 2010-11 on 09.10.2010, declaring total income at ₹ 19,52,246/-. The retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,05,00,000/- On the basis of the aforesaid details the A.O called upon the assessee to explain as to why the aforesaid loan transactions, which as per the information received were in the nature of accommodation entries, many not be added to his total income. In reply, the assessee objected to the said proposed action of the A.O on multiple grounds viz. (i) that, in the absence of any specific mention by Mr. Pravin Kumar Jain in his statement recorded during the course of the search proceedings that he had provided any accommodation entry to the assessee, no adverse inferences were liable to be drawn; (ii) that, even otherwise Mr. Praveen Kumar Jain had retracted from his statement that was recorded during the course of the search proceedings; (iii) that, the confirmations of the lender companies along with their financial statements substantiating the genuineness of the loan transactions were placed on record in order to substantiate the veracity of the loan transactions; (iv) that, the copy of the bank statement evidencing the raising of the loans and the repayment of the same duly substantiated the genuineness of the loan transactions; (v) that, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in providing accommodation entries of various nature viz. bogus unsecured loans, bogus share application money and bogus sales (purchases for the beneficiaries) etc; (ii) that, in the course of the search proceedings it was found that the group concerns of Shri Praveen Kumar Jain were not carrying out any genuine business at their respective premises, which was in contradiction of their claims raised in their respective income tax returns, MCA websites and bank documents; (iii) that, in case of many concerns formed by Shri Praveen Kumar Jain group, various persons who were shown to be the directors/proprietors were non-existent at the given addresses; (iv) that, in certain cases the name sake directors/proprietors had in their statements recorded under Sec.132(4)/131 of the I-T Act admitted that they were merely dummy directors/proprietors and used to sign the papers for a nominal consideration given by Shri Praveen Kumar Jain; (v) that, a perusal of the information gathered in the course of the search proceedings revealed that Shri Praveen Kumar Jain was controlling, operating and managing a large number of dummy concerns which were not carrying on any genuine business; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT was of the view that in case the A.O was not satisfied with the documents which were filed by the assessee, then, it was open for her to have made necessary enquiries from the lenders by summoning them, which however was not done on her part. It was observed by the CIT(A) that the A.O had not carried out any independent verifications from the lender companies. On the basis of the facts as were discernible from the records, it was observed by the CIT(A) that the A.O had neither issued any summons under Sec. 131 to the lender companies, nor recorded their statements as regards the genuineness of the specific loan transactions which were carried out by them with the assessee. Apart there from, the CIT(A) observed that the A.O had not brought on record any documentary evidence which would controvert the claim of the assessee that he had raised genuine loans from the aforementioned companies. Further, the A.O had also not recorded any such observations, which would reveal that the documentary evidence placed on record by the assessee were untrustworthy or lacked credibility. In sum and substance, it was observed by the CIT(A) that the A.O had not made any attempt to discharge the bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n transactions, no adverse inferences could have been drawn in his hands, reliance was placed by him on the order of the ITAT SMC bench, Mumbai in the case of ITO-(2)(5) Vs. Payal Nitesh Hedpara (ITA No. 4668/Mum/2017). 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee had raised loans aggregating to ₹ 1,05,00,000/- from six companies which are allegedly stated to be controlled by Shri Praveen Kumar Jain. On a perusal of the orders of the lower authorities, we find, that the assessee on being called upon to substantiate the genuineness and veracity of the loan transactions that was entered into by him with the aforementioned companies, had placed on record substantial documentary evidence in support of the same viz. (i) confirmations of the lender companies; (ii) copies of the financial statements of the lender companies; and (iii) copies of the bank statements evidencing the advancing of loans by the lender companies to the assessee through normal banking channel. Apart there from, the assessee had submitted before the A.O that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application and bogus sales (purchases for the beneficiaries), etc. 2. During the course of the search at various premises which were shown by the assessee group to be the place of operation and registered addresses as per the Income tax Returns, MCA website and bank documents, it was found that the entities at these and no genuine business was being carried out at any of these premises. 3. In many concerns formed by Shri Praveen Kumar Jain Group, various persons shown to be the directors/proprietors were nonexistent on the given addresses. In certain cases, in the statements recorded u/s.132(4)/131 of the I.T Act these directors/proprietors admitted that they were merely dummy directors and used to sign different papers for nominal consideration given by Shri Jain. 4. In view of the above, it is seen that through various dummy directors/proprietor, he controls, operates and manages a large number of concerns. All such concerns are not carrying out any genuine business. They do not have any physical stock of goods, which they claimed to be dealing in, all such concerns have no employed persons except the few common account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is discernible from the records, the assessee in discharge of the onus that was cast upon him as regards proving the Nature and Source of the amount aggregating to ₹ 1,05,00,000/- which was claimed by him to have been raised as loans from the aforementioned six companies, had therein placed on record supporting documentary evidence viz. (i) copies of the returns of the lender companies; (ii) copies of their audited financial statements; (iii) copies of the bank accounts of the lender companies; and (iv) the affidavits of the principle officers of the lender companies, wherein they had confirmed the loan transactions. Further, on a perusal of the bank accounts of the aforementioned lender companies, all of which we find were being assessed to income tax, therein revealed that there was no immediate cash deposits in their respective bank accounts in order to facilitate advancing of the loans to the assessee. In nutshell it is neither the case of the revenue, nor a fact borne from the records, that the assessee had routed his own money in the garb of the unsecured loans raised from the aforementioned parties. As observed by the CIT(A), the assessee had also deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rather, only on the basis of his observations that the search proceedings conducted on Shri Praveen Kumar Jain group revealed that he was engaged in the business of providing accommodation entries, that the A.O had hushed to the view that the loan raised by the assessee from the aforementioned companies were to be dubbed as accommodation entries. We are unable to persuade ourselves to subscribe to the aforesaid view so arrived at by the A.O. In fact, a perusal of the assessment order reveals as if the A.O was framing the assessment in the case of Shri Praveen Kumar Jain, and not in the case of the assessee. It is in the backdrop of the aforesaid factual position, we find, that the CIT(A) observing that as the assessee had duly discharged the onus that was cast upon him under Sec. 68 for proving the authenticity of the loan transactions, therefore, in the absence of any material placed on record by the A.O to dislodge the said duly substantiated claim of the assessee, there was no occasion for him to have to re-characterised the loans raised by the assessee as accommodation entries. The CIT(A) while so concluding had observed as under: 4.1.2 I have consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. 4.1.3 It is now to examine whether the appellant has been able to discharge the onus placed on him u/s 68 of the Act in light of the aforesaid legal principals or propositions. As stated above, the appellant has furnished copies of returns of lender companies accompanied by their audited financial statements, bank accounts of the lender companies and sworn affidavits of the lender companies confirming the loan transactions. All the lender companies had duly filed their returns for A.Y. under consideration. A perusal of bank accounts of the lender companies clearly reveals that there were no immediate cash deposits therein prior to the issuance of cheques towards unsecured loans to the appellant. It is noticed that the unsecured loans were received vide account payee cheques through normal banking channels. It is also noticed that interest was duly paid/credited lender companies and TDS thereon was deducted in accordance with law. In these circumstances, it can by no means be said that the appellant had not discharged the initial onus cast upon him to establish the identity and creditworthiness of the creditors as well as genuineness of the transactions. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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