TMI Blog2020 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... held that if, the share application money is received by the assessee company from alleged bogus shareholders, the names are given to the Ld. AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but the sum found credited in its books cannot be regarded as undisclosed income of the assessee. - Decided in favour of assessee. - ITA No.6832/Mum/2019 - - - Dated:- 24-6-2020 - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : Shri Haridas Bhat, AR For the Revenue : Shri V.Vinod Kumar, JCIT -DR ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals) 24, Mumbai, dated 23/08/2019 and it pertains to Assessment Year 2016-17. 2. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the case, and in law, the Income Tax Officer, Circle 15(1)(2), Mumbai ( The AO. ) erred in adding unsecured loans of ₹ 1,23,00,000/- as unexplained cash credits u/s 68 of the IT Act. 2. On the facts and circumstances of the case, the Income Tax Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to ₹ 15 Lacs and in total a sum of ₹ 1.38 crores cannot be treated as unexplained cash credit within the meaning of section 68 of the I.T.Act. In response, the assessee has filed confirmation letter from all the parties, but could not file any other details, including financial statements and their ITR copies. The Ld. AO was not convinced with the explanation furnished by the assessee, insofar as, loans taken from three parties amounting to ₹ 1.23 crores, on the ground that the assessee has failed to file necessary details in order to prove the identity, genuineness of transactions and creditworthiness of the parties. Insofar as, loan taken from the M/s Garware Finance Corporation Pvt. Ltd, the Ld. AO has observed that although, the assessee has filed necessary details, but as per the confirmation filed by the party, there is a difference of ₹ 15 Lacs in the loans shown to have taken from the party and accordingly, made additions towards difference of ₹ 15 Lacs u/s 68 of the I.T.Act, 1961. The AO, while, doing so has taken support from the report of Investigation wing, Mumbai, as per which M/s. Arya Global Shares Securities Pvt.Ltd. is a shell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank statements, ledger confirmations, etc. has been filed to substantiate the above said unsecured loans taken received. 5.5 Further, Ms Garware Finance Corporation Ltd., vide its letter dated 05/12/2018 has filed the copies of return of income and its financials along with bank statement. However, ledger confirmations has not been filed to substantiate the outstanding loans as on the date of 31/03/2016. Therefore, the bank statements has been verified, wherein it was found that during the year the M/s. Garware Finance Corporation Ltd., has given loan to the assessee company to tune of ₹ 1,20,00,000/-. However, as per assessee records, the loan received during the year is show as ₹ 1,35,00,000/-. The difference of ₹ 15,00,000/- is unexplained. 5.6 Since there is no response from the assesee nor any details to prove the genuineness and credit worthiness of the creditor has been filed, the assesee was once gain an opportunity vide this office letter dated 09-12-2018, by bringing the above facts to the notice and since the matter is getting barred by limitation of time on 31-12-2018, the assessee was asked to show cause in the absence of any details, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial relation so as to obtain the loan confirmation in their totality. Such huge amount of loans from 3 parties, if genuine, must be supported with proper documentation, which clearly indicates that the onus cast upon by the section 68 of the I.T.Act, 1961 has not been discharged by the assessee. 5.10 Further, it is not out of place to mention here that inquiries has recently been conducted by the Investigation Wing, Mumbai which has revealed that M/s Arya Global Shares Securities Pvt. Ltd. Is a bogus company that has been used by the entry operators to provide accommodation entries to various beneficiaries . Shri Deepak Rathod, Director of M/s Arya Global Shares Securities Pvt. Ltd has stated in his statement recorded on oath on 21-06-2018 before the DDIT (Inv.) Unit VIII(2), Mumbai that he is working as a tempo driver and has no idea of the operations of the company. He also stated that he does not even know about the directorship fo the company. He has just even his credentials (PAN, Ration card, Photo etc.) and signs certain documents for which he gets some amount as income. In effect , he is a dummy director and the company has been created to provide accommodati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents on record and the factual matrix of the case. Before I proceed to decide on the matter, it is imperative to look at section 68 of the Act, which is reproduced hereunder for ready reference and analysis:- 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Provided that where the assesee is a company (not being accompany in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a)The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that it is income of the appellant and no further burden lies on the revenue to show that income is from any other particular source. Where the appellant failed to prove satisfactorily the source and nature of such credit, the revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 632/A. GovindaRajuly Mudaliar (34 ITR 807)(SC) and also CIT v Durga Prasad More (72 ITR 807) (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. 5.2.6 The Delhi High Court in the case of Principle CIT v. Bikra Singh ITA No.55/2017 has held that where the transactions herein do not inspire confidence as being genuine and are shrouded n mystery, as to why so-called creditors would lend such huge unsecured, interest free loans-that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness. In this case, the assessee has been able to submit only its own documents like bank account, ledger, etc and has not preliminary discharged the obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2-Addition of ₹ 15,00,000 u/s 68 5.3.1. Of the parties from whom the loan was taken by the appellant, as detailed in the above ground, M/s Garware Finance Corporation Limited filed the copies of return of income and financials along with the bank statement in response to the notice issued u/s 133(6) of the Act. No loan confirmation was filed. The AO perused the bank statement and noted that loan of ₹ 1,20,00,000 was advanced by this party to the appellant, however, the appellant reflected the same at ₹ 1,35,00,000. Accordingly, the AO made an addition of ₹ 15,00,000 as unexplained cash credited u/s 68 of the Act. 5.3.2 I have perused the facts of the case and submissions filed by the appellant. There appears to be discrepancy in the opening and the closing balance of the loan confirmations filed by the Garware Finance and the appellant. It is worthy to note here that both these are part of the same group entities and hence, the discrepancy, if any, in the loan balance ought to have been reconciled or explained for during the course of the assessment as well as appellate proceedings. The appellant has failed to discharge its duty of providing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 (2001) 69 CCH 0287 Guj HC (2003) 182 CTR 0373, (2002) 256 ITR 0360 (2003) 127 TAXMAN 0523 5. H.R.Mehta vs Assistant Commissioner of Income tax High court Bombay ITA No.58 of 2001 Jun 30, 2016 96 CCH 0049 Mum HC (2006) 289 CTR 0561 (Bom) 6. Commissioner of Income Tax vs Ashwani Gupta High court of Delhi IT Appeal No.1264 of 2008 Feb 16, 2010 (2010) 78 CCH 0179 DelHC 322 ITR 0396 (2010) 191 TAXMAN 0051 7. Commissioner of Income tax vs K. Buvaendraan Ors. High Court of Madras Tax case (Appeals) Nos. 26633k to 2665 of 2006 Dc 14, 2006(2006) 74 CCH 1028 Chen HC (2008) 303 ITR 0235 8. Deputy Commissioner of Income tax vs Bairagra Builders Pvt.Ltd. (2017) 51 CCH 0107 Mum Trib. 9. Commissioner of Income tax vs Sahibgnj Electric Cables P. Ltd. (1978) 46 CCH 0212 KolHC (1978) 115 ITR 0408 7. The Ld. DR, on the other hand strongly supporting order of the Ld.CIT(A) submitted that it is a clear case of taking accommodation entries from entry providers, which is proved from the fact that the investigation wing of Income tax department has brought out modus operandi of entry providers as per which, M/s Arya Global Shares Securities Pvt.Ltd. is a shell comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged its initial onus cast upon in the relevant provisions of the Act or not. In this case, on perusal of details available on record, there is no dispute with regard to the fact that the assessee has filed primary evidences relating to unsecured lions taken from four parties, including name and address of the parties and PAN numbers and also it has filed confirmation letters from the creditors. The assessee has also filed necessary evidences to prove that said loans have been taken through proper banking channels and also, necessary interest payment has been made after deducting applicable TDS as per law. Further, insofar as, additions made by the Ld. AO towards M/s.Garware Finance Corporation Pvt.Ltd. amounting to ₹ 15 Lacs, the Ld. AO has drawn adverse inference, only on the basis of bank statement filed by the assessee for the relevant financial year to come to the conclusion that the assessee has taken loan to the tune of ₹ 1.20 crores, whereas as per the letter of confirmation, the loan has been shown at ₹ 1.35 crores. But, fact remains that on perusal of confirmation letter filed by the assessee, we find that the assessee having a running account wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO cannot be a sole ground for taking adverse inference against the assessee, more particularly, when the assessee has filed necessary evidences to prove loans taken from above parties. This legal position is supported by the decision of Hon ble Supreme Court, in the case of CIT vs Lovely Exports Pvt.Ltd. (2008) (2016 CTR 195) (SC), where the Hon ble Supreme Court clearly held that if, the share application money is received by the assessee company from alleged bogus shareholders, the names are given to the Ld. AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but the sum found credited in its books cannot be regarded as undisclosed income of the assessee. This legal proposition is further strengthen by the decision of Hon ble Bombay High Court, in the case of CIT vs Goa sponge Power Ltd.(supra), where the Hon ble High court by following the decision of Hon ble Supreme court, in the case of CIT vs Lovely Exports Pvt.Ltd (supra) held that once, the authorities have got all the details, including name and address of the shareholders, their PAN / GIR number, so also, the name of the bank from which the alleged investors re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no order shall be pronounced after expiry of 90 days from the date of hearing. This appeal was heard on 24/02/2020 and ordinarily, the order shall be pronounced on or before 22/05/2020. But, this order could not be pronounced on or before 22/05/2020, due to the fact that the Govt. of India has imposed nationwide lockdown from 25/03/2020 and the same has been extended timt to time up to 31/05/2020 and because of this the office was closed up to 21/05/2020. Further, if the above lockdown period is exclued for the purpose of limitation, then the order can be pronounced on or before 17/07/2020. Further, whether lockdown period can be excluded or not has been exhastively dealt by the co-ordinate bench of ITAT, Mumbai, in the case of DCIT vs JSW Limited, in ITA No. 6264/Mum/2018, dated 14/05/2020, where it was held that due to corona virus pandamic, the period of limitation automatically gets extends till such period the lockdown is in force. We, therefore, are of the opinion that considering the prevailing situation and also, by respectfully following the decision of coordinate bench in the case of DCIT vs. JSW Limited (Supra), the order pronounced in the month of June 2020, is well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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