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2019 (9) TMI 603

..... loans - HELD THAT:- Assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties. AO has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer except relying on the statements of PKJ and the investigation report. Even the statements were not provided to the assessee for its rebuttal. Addition made u/s. 68 which is purely based on the statements recorded from PKJ and without any enquiry is liable to be deleted. Further, since the statement of PKJ on which much reliance was placed to treat the loan transaction as non-genuine was not provided to the assessee for rebuttal, it is in violation of principles of natural justice and further we observe that no sort of enquiries were made by the AO to disprove the evidences furnished by the assessee. Addition made u/s. 68 cannot be sustained. We direct the AO to delete the addition made u/s. 68 of the Act. - Decided in favour of assessee. - ITA NO.1184/MUM/2018 - 29-3-2019 - N.K. PRADHAN, ACCOUNTA .....

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..... ital in the assessee company. On appeal, the Ld.CIT(A) considering the evidences furnished by the assessee and also the submissions and various decisions, deleted the addition made u/s. 68 of the Act. He also deleted the addition made by the Assessing Officer towards commission expenses relating to these transactions. 4. Ld. DR vehemently supported the orders of the Assessing Officer. He further submitted that, based on the information received by the investigation wing and the statements recorded in the course of search in the case of PKJ group who have categorically stated that they have provided only accommodation entries, the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act. He strongly placed reliance on the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182]. 5. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the details necessary in respect of these loans obtained from the creditors. It has been submitted that loans have been received through account payee cheques, confirmations from the co .....

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..... the assessment order, we see that the Assessing Officer based only on the statement purportedly given by PKJ in the course of search/survey proceedings in PKJ Group, concluded that the assesse has obtained only accommodation entries from PKJ and in view of such evidence, the Assessing Officer treated the loan transactions as non-genuine though the assessee has filed various evidences to prove its claim that there cannot be any addition u/s. 68 of the Act. 9. In the course of the assessment proceedings the assessee furnished the following details: a. Confirmation of A/c. by the parties b. Income-tax returns of the parties for A.Y. 2013-14. c. Bank statement of the parties showing the loan transactions. d. Audited Balance sheet & Profit and Loss Account of the creditors along with the schedule wherein credit in the name of the appellant is outstanding in their books. e. Payment of interest to creditors after subjecting the amount to TDS. f. Confirmation from the loan creditors. g. Affidavit confirming the loan transaction. 10. In response to notices issued u/s. 133(6) of the Act to the creditors, the creditors have filed the following information to substantiate the transactions .....

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..... o involved in bogus transactions in an organised way are meticulous in arranging these make-believe documents. He further believed that the office bearers/key persons of Pravin Kumar Jain group have given categorical and unequivocal statements stating that they have involved only in bogus transactions by giving loan by cheque for exchange of cash through the companies/firms floated by them. 2.4.1.7 No doubt the AO had a valid starting point to inquire into the transactions viz. the statements given by the very authors of the fictitious firms/companies under oath under section 132(4)7131 of the Act during the course of search and seizure operations and in subsequent statements, admitting the activity of giving accommodation entries for purchases, loans and investment and share application money to various parties seeking such accommodation by following unethical practices to defraud the revenue. Also, the appellant is one of such companies who have taken such accommodation entries since some of the concerns floated by entry operators (about 79 such concerns) are very much appearing in the books of the appellant company. 2.4.1.8 In the instant case, however, as seen from the details .....

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..... l. Further, the said statements are not accompanied by any independent investigation by the AO. Even though, the transaction is from a tainted group, the AO has not gathered any additional/independent evidence to show that the transaction with the appellant company was sham, fictitious or artificial except believing the statements given by the entry operators. He has failed to gather evidence to show that the unaccounted cash of the appellant had changed hands subsequently replacing the cheque payments. 2.4.1.10 Coming to the other fact of the case. The Appellant, u/s 68, is required to establish the identity, creditworthiness of the parties and the genuineness of the transaction to demonstrate that the cash credit is genuine and that the same cannot be added u/s 68. In the present case, from the records, it can be seen that the Appellant has established the identity of the parties by giving its name, address, PAN and copy of Return of income for A.Y.2012- 13. "Further, the appellant has established the creditworthiness of the parties by filing the Financials of all the parties as on 31.3.2012 and the Bank statement of the parties reflecting payment made to the appellant. From .....

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..... e AO, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is found unbelievable or false the AO is not required to bring positive evidence on record to treat amount in question as income of the assessee. While considering the explanation of the assessee, the AO has to act reasonably-application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits -should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not o .....

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..... g the.loan transactions. 4. Audited Balance sheet & P & L A/c of the creditors along with the schedule wherein credit in the name of the appellant is outstanding in their books. 5. Payment of interest to creditors after subjecting the amount to IDS. 6. Confirmation from the loan creditors. 7. Affidavit confirming the loan transaction 2.4.1.13 As seen from the above, the appellant has furnished all the details proving conclusively the three ingredients of identity and creditworthiness of the creditors and the genuineness of the transaction. Further, the Appellant obtained such unsecured loan during it normal course of business. The amounts were paid by the creditors from their running bank accounts which were accounted in the books of the appellant as well as the creditors as seen from the audited accounts filed. The transactions were also confirmed by all the creditors who are assessed to tax. Further, the appellant has paid interest through banks to the creditors by duly subjecting the interest amount to TDS. Nowhere the AO has challenged the identity, creditworthiness of the lenders and the genuineness of the transactions with any tangible material. I find that the AO was .....

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..... that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the .....

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..... regarding the unsecured loans as mentioned above. The Ld.CIT(A) considering the submissions and the findings furnished by the assessee deleted the additions observing as under: - 6.2 HELD: - I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit International amount to ₹.10,00,000/- and (2) Natsha Enterprises amounting to ₹ 10,00,000/- aggregating at ₹ 20,00,000/-. I find force in the argument of the Ld. AR. It is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has merely described the statement of Shri. Pravin Kumar Jain and as communicated by the investigation wing. Thus, it is very evident that the Ld. Assessing officer has not made any independent enquiry in order to est .....

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..... lusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant s claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied. 6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued only bogus bills/accommodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating that the party did not exist, he should have summoned the party and recorded the statement. As the AO, has not brought anything in record to show that the evidences filed by the appellant are false, the loan received and repaid by the ap .....

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..... in Kumar Jain to the assessee for its rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and repayment in subsequent years to establish the genuineness of the transactions copy of ITR -V filed establishing creditworthiness of the lender are non-genuine. It was also noted by the Ld.CIT(A) that the assessee has provided the identity creditworthiness as well as the genuineness of the transactions. The Ld.CIT(A) also elaborately considered the submissions and the averments made by the Assessing Officer in the Assessment Order and the evidence furnished by the assessee and concluded that the assessee has discharged its primary onus on providing complete details in respect of the loan transactions and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loans, this finding in our view is completely justified in view of the facts and .....

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..... proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.10. As far as the question of validity of the transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are found to be not genuine, it does not lead to the conclusion that all the transactions were non-genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusio .....

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..... f such credits or the explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances. 5.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been e .....

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..... t in the books of account of appellant stands explained. Consequently, addition u/s. 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of ₹ 1,27,50,000/-. This ground of appeal is allowed. 8. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue. 16. We also find that identical issue came up in the case of DCIT v. Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA.No. 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: - 6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned assessment year, the assessee had taken unsecured loans from the following two parties: Sr. No Name of the Party and Address PAN Loan taken(Rs.) Rate of Interest 1. Javda India Impex Limited CS-1, Silver Anklet, Yari Road, Versova, Mumbal 400 061 AAACA7065L 20,00,000 9% 2. Lexus Infotech Ltd. 626, Panchratna, Opera House, Mumbai 400 002 AA .....

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..... e orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions. 10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan .....

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..... the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. While holding so, it has been observed as under: - 4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact .....

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..... o disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that the said unsecured loans have been repaid in the subsequent financial years. Therefore, we are of the view that there is no reason for the AO to doubt the genuineness of transactions despite furnishing necessary evidences including their financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation ab .....

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..... e assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there is no reason for the AO to make addition towards loan u/s 68 of the Act. Hence, we direct the AO to delete addition made towards loans alongwith interest u/s 68 of the Act. 18. Similar view has been taken by the Coordinate Bench in the case of M/s. Shree Laxmi Developers v. JCIT in ITA.No. 6090/Mum/2017 dated 07.03.2018, wherein it has been held as under: - 8. The next issue relates to the addition of loan of ₹.10.00 Lakhs taken from M/s. Falak Trading company P. Ltd, a company belonging to Praveen Kumar Jain who has confessed that he had provided only accommodation entries. A perusal of the record would show that the AO had issued notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by .....

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..... the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 20. In so far as the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., (supra) relied on by the Ld.DR, we are of the view that this decision is not applicable to the facts of the case on hand. Further, we find that in the case of ITO v. M/s. Vulvan Traders in ITA.No. 4137/Mum/2015 and 4144/Mum/2015 dated 30.01.2019 the Coordinate Bench considered this decision of Hon'ble Delhi High Court and observed as under: - 4.4. …….. In the case before Hon'ble Delhi High Court, NDR Promoter Pvt. Ltd.((supra)), cited by Ld. DR, it was found that the cash was deposited in the bank account of one such company .....

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