TMI Blog2021 (1) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors and also two directors accounts are involved. We considered the findings of the Ld CIT(A) carefully and found that trade creditors M/s Divya Jewels, M/s Jewel Diamond and M/s Kingstar has no business transaction during this assessment year and these are outstanding balances of previous assessment year. Since these are transactions of earlier AY and its settlements were made in the subsequent AY, in our view there is no scope for disallowance u/s 68. Therefore, we are inclined to accept the findings of Ld CIT(A). With regard to M/s Renisha Impex and Varun Gems, it is noticed that these parties are having regular business transactions and without any findings on transactions with them as bogus or accommodation entries, there is no scope for AO to disallow these transactions. Therefore, we are inclined to accept the findings of Ld CIT(A). With regard Mr Girish Agarwal and Poonam Agarwal, these are directors and their accounts shows regular salary payments and tax deductions. Since these are directors, there is issue of identity and genuineness issues. Accordingly, we are inclined to accept the findings of Ld CIT(A) and accordingly grounds raised by revenue is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors. Since most of the parties are not traceable, he issued notice 131 to the assessee to produce the parties. No parties were produced before him, he treated these transactions as not genuine and he made addition u/s 68 of the Act as the genuineness and identity of the creditors are not established. He made addition to the extent of ₹ 3,86,58,127/-. 3. AO observed that Kalash Enterprises is part of Rajendra Jain group concern and he observed that the investigation wing, Mumbai, has investigated thoroughly on this group and found that this group involves in providing accommodation entries. Since, Kalash Enterprises is part of this group, assessee must have received accommodation entries. As the assessee receives the sales bills from Rajendra Jain group, assessee must have arranged or purchased from grey market. Considering the fact that assessee must have earned benefit by booking higher value by taking accommodation entries, AO disallowed the GP embedded in this transaction. Accordingly, he disallowed 5% of the purchase value of the diamonds purchased from Kalash Enterprises. 4. After considering the submission of assessee, AO made the assessment u/s 143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned assessment year and here again it was re-paid in AY 2015-16. As far as Renisha Impex P Ltd. is concerned, it was stated that during the year, regular business transaction with the said entity for purchase and payments were also made and the outstanding balance was re-paid in AY 2015-16. As far as Varun Gems is concerned, it was again stated that there were regular business transactions with the appellant during the AYs 2014-15 and 2015-16 for purchase and payments thereof and hence, it could not be the case of a ceased liability. In respect of Kingstar, it was stated that no business transaction was undertaken during the AY 2014-15 and entire amount was re-paid in AY 2015-16. It was thus stated that Ld.AO had failed to discharge his duty to prove that the transactions were bogus or that it was the case of cessation of liability. In this regard, Ld.AR has relied on the decisions which are cited by him in the submissions made and it was stated that in view of the facts and confirmations submitted before the Ld.AO, no addition should have been made in respect of purchase made in regular course of business. 2.4.9. Having weighed the pros and cons, whereas I find that Ld.AO had him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnjla Pravin S. in ITR 5246/M/2013 to substantiate that even in case of Hawala Dealers in the Sales Tax Department, no addition could be made only on the grounds of suspicion, if payments were duly recorded by account payee cheques and no evidence was available that cash had been received back. 2.4.12. Having considered the pros and cons, I find that the issue at hand is squarely covered by the decisions cited at hand and Ld.AO had not brought anything on record to show that Rajendra Jain had made any statement regarding the payments by stating that he had provided accommodation entries to the appellant. It is also an un-controverted fact that the payment was made for the purchase by account payee cheque and was recorded in regular books of account and Ld.AO had not rejected appellant's books of accounts. In above view of the matter, addition made merely on suspicion cannot be sustained. Accordingly grounds raised is Allowed. 6. Aggrieved with the above order, revenue has preferred the appeal before us on the ground mentioned herein below:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of unexplained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced below:- Submission on ground no. 1: Unexplained Cash Credit on account of outstanding loan balance of Director - Mr. Vivek Surana amounting to ₹ 79,50,000/-. 3. During the year under an appeal, the appellant company has regular loan transactions with one of its director named Mr. Vivek Surana. There was a opening credit balance of ₹ 60,00,000/- and appellant company has received an amount of ₹ 79,50,000/-, made payment of ₹ 57,50,000/- and final closing credit balance of ₹ 82,00,000/-. Copy of ledger account along with bank statements are attached at page no. 63 to 72 of the paper book. 4. While making addition, the Ld. Assessing officer noted; I. That the appellant filed only the copy of bank statement and ITR. II. That copy of confirmation of transaction and balance sheet was not furnished by the appellant and hence, the appellant failed to discharge its onus as laid down u/s 68 of the Act. 5. Assessee's contentions of making addition:- Section 68 of the Act reads as under: - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having any jurisdiction. 9. In para 2.4.7 of CIT(A) order, the CIT(A) had clearly stated that the assessee had satisfied all the 3 ingredients of section 68 of the Act and hence, the addition made cannot be sustained. Further, following legal position/ judicial rulings on the subject under consideration must be considered before arriving at any conclusion:- i. As held by Andhra Pradesh High Court in the case of R.B. Mittal v/s. CIT 246 ITR 283 (AP) in an enquiry u/s 68, the rule of audi alteram parterm has to be observed and the assessee must be given a fair and reasonable hearing to discharge the burden cast on him u/s 68 of the Act. Further, it is settled law that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction along with the identity of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the Assessing Officer to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scredit the evidences and the explanation given by the assessee company and cannot rely only on statement of third parties recorded by the investigation wing. Thus it is settled law that in the matter of cash credit, assessee needs to prove the genuineness of the transaction along with the identity of the lender/investor and his creditworthiness. By submitting the following documents, Identity as well as the creditworthiness have been proved and hence the addition would not be justifiable and would be against the law. viii. In another landmark judgment of Hon'ble Gujarat High Court in the case of Varshaben S Patel vs. ITO,[2O15] 64 taxmann.com 179 (Gujarat) has also held in notice u/s 148 that the issue of notice u/s 148 pursuant to direction by DG Investigation is bad in law as the satisfaction has to be on your own and not a borrowed satisfaction. ix. Similar to above referred judgment, The Appellant would like to humbly submit to learned assessing officer a recent landmark decision given by Jurisdictional Hon'ble ITAT Mumbai in an identical case of ITO -10 (2) (4) Vs. M/s. Superline Construction P. Ltd. (and many others in this consolidated order) pronounced on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis which does not have any stand in law and requires to be deleted. Therefore, we request your honor to kindly rely on CIT(A) order. Submission on ground no. 2 and 3: Unexplained Cash Credit on account of outstanding loan balance of various creditors and under the head of cessation of liability amounting to ₹ 3,86,58,127/- bogus purchase of ₹ 1,26,587.[U/s. 68 and u/s. 41(1) and estimation of profit on bogus purchase u/s 69C] 10. During the year under an appeal, the Ld. AO has made an addition of closing credit balances of following parties Sr. No. Additions Amount Remark 1. M/s. Divya Jewels 45,00,0007- Creditor 2. Mr. Girish Agarwal 16,08,440/- Director Remuneration 3. M/s. Jewel Diamond 1,22,73,273/- Creditor 4. Ms. Poonam Agarwal 5,50,810/- Salary A/c. 5. M/s. Renisha Impex Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and accordingly chargeable to income-tax as the income of that previous year. Explanation l.-For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. Explanation 2.-For the purposes of this sub-section, successor in business means,-i.where there has been an amalgamation of a company with another company, the amalgamated company; ii. where the first-mentioned person is succeeded by any other person in that business or profession, the other person; iii. where a firm carrying on a business or profession is succeeded by another firm, the other firm; iv. where there has been a demerger, the resulting company. The section 41(1) applies where a trading liability was allowed as a deduction in an earlier year in computing the business income of the appellant and the appellant has obtained a benefit in respect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- Salary A/c.: The appellant regularly making payment. TDS was deducted on monthly basis, [paper book - page 54] Paid taxes to government,income tax return filed, computation of total income, Income and expenditure A/c , capital A/c, Balance sheet [paper book -page 190 to 194]. M/s. Renisha Impex Pvt. Ltd 1,45,77,298/- Creditor: There were regular business transaction during the A.Y.2014-15, i.e. regular purchase and payments thereof. Entire outstanding amount was repaid in A.Y.2015-16 [paper book - page 55 56] M/s. Varun Gems 36,48,306/- Creditor There were regular business transactions during the A.Y.2014-15 and A.Y.2015-16, i.e. regular purchase and payments thereof. [paper book - page 57,58 59] Hence, question of payment of outstanding liability does not arise M/s. Kingstar 15,00,000/- Creditor: No business transaction during the A.Y.2014-15. Entire amount was repaid in A.Y.2015-16 [paper book - page 60 61] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suspicious lender to the assessee nor is any cash found over and above the cash as per books. The third party unilateral act cannot be the basis of addition. Your assessee has already submitted the relevant details of party with their confirmations, their banks statements, their ITR Acknowledgement and the payments made by Account Payee Cheque which is also verify by the Ld. AO u/s 133(6). Thus the addition purported to be made is made on suspicious. In present case transactions are duly supported by the documents and AO has not any evidence that cash is received back by the respondent. Therefore, the addition cannot be made. Ratio of the below mentioned judgments: {suspicious cannot take place the evidence} The Ld. AO suspected and noted that as the purchases were from one of the group concern of Mr. Rajendra Jain who was engaged in providing bogus entries. But the Ld. AO failed to appreciate fact that the said statement was retracted by him. Hence, the same cannot be relied in assessee case. LD. AO suspected the transaction, but same cannot be treated as evidence, Hence, the addition made by AO on suspicious is not tenable in law and require to be delete. suspicion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Bank statements showing the debit of the amount paid through account payee cheques to them in the account of assessee and credited in the Bank Account of sellers, had discharged its primary onus, thereafter the onus shifted on the department to rebut the same. Addition under section 69C was held to be not justified. C.G. DIAMOND INTERNATIONAL v. DY CIT (2006) 104 TTJ 809 (MUM) (TRIB) It is not the case of the Revenue that the assessee is not maintaining books of account. The purchases are recorded in the books of account. Payments are made by cheques to the immediate purchasers. They accepted and confirmed the sale. To hold otherwise, there should be some evidence in the possession of the Revenue. Suspicion, however strong, cannot take the place of evidence and that alone cannot be the criteria for deciding the matter. DY. CIT v. KIRTILAL KALIDAS JEWELLERS (P) LTD. (2012) 54 SOT 529 (CHENNAI) (TRIB) During assessment proceedings, Assessing Officer found that for some of purchases effected by assessee, no details or address of vendors were available in purchase vouchers. He, therefore considered such purchases to be non genuine and an addition was made on that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Issue is also decided by the Hon'ble Jurisdictional Tribunal in case GANPATRAJSANGHI SHRI GANPATRAJ A. SANGHAVI v ACIT I.T.A. No 2826/ MUM/2013 Alternatively, Without prejudice to the above, the credit of bogus purchase will be allowed if the same is sold or lying in stock. FREE INDIA ASSURANCE SERVICE LTD v. DCIT (2011) 12 TAXMANN.COM 424 (MUM) Bogus purchases: Fact that suppliers names appear in the list of hawala dealers of the sales tax department and that assesses is unable to produce them does not mean that the purchases are bogus if the payment is through banking channels and GP ratio abnormally high. ASSTT. CIT v. SHRI RAMILA PRAVIN S NO. 5246/MUM/2013 If the payment of purchases are made by account payee cheque and the same has not been received back in any form, even if the seller of the goods declares, that he has simply issued bill and he has not sold goods, still nothing can be added in the case of the assessee. CITv.M.K. BROS 163 ITR The Ld AO cannot conveniently claim the genuineness of business as it's the assessee who is far better acquainted and familiar with the trade practices than the department. CIT v.BHUVANENDRA 303 ITR 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gstar has no business transaction during this assessment year and these are outstanding balances of previous assessment year. Since these are transactions of earlier AY and its settlements were made in the subsequent AY, in our view there is no scope for disallowance u/s 68. Therefore, we are inclined to accept the findings of Ld CIT(A). 12. With regard to M/s Renisha Impex and Varun Gems, it is noticed that these parties are having regular business transactions and without any findings on transactions with them as bogus or accommodation entries, there is no scope for AO to disallow these transactions. Therefore, we are inclined to accept the findings of Ld CIT(A). 13. With regard Mr Girish Agarwal and Poonam Agarwal, these are directors and their accounts shows regular salary payments and tax deductions. Since these are directors, there is issue of identity and genuineness issues. Accordingly, we are inclined to accept the findings of Ld CIT(A) and accordingly grounds raised by revenue is dismissed. 14. With regard to bogus purchase, there is no findings by the AO that these are bogus transaction or findings from any other external agencies that these party is involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10.In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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