TMI Blog2021 (7) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... ala For the Department : Shri Tharian Oommen ORDER PER C.N. PRASAD (JM) 1. All these three appeals are filed by the Revenue. Appeal in ITA.No.8028/Mum/2019 for the A.Y. 2011-12 is against order of the Learned Commissioner of Income Tax (Appeals) 47, Mumbai [hereinafter in short Ld.CIT(A) ] dated 23.10.2019 for the A.Y.2011-12 is arising out of Assessment Order passed u/s. 143(3) r.w.s. 147 of the Act. Two appeals arises against common order of the Ld.CIT(A) dated 23.10.2019 for the A.Y.2013-14 and A.Y.2014-15, in deleting the penalty u/s. 271(1)(c) of the Act. ITA NOs. 8028/MUM/2019 (A.Y: 2011-12) 2. The only issue in this appeal is in respect of deletion of addition u/s.68 of the Act made on account of alleged bogus loans obtained by the assessee and consequential disallowance of interest thereon on such loans. 3. Briefly stated the facts are that, the Assessing Officer reopened the assessments u/s. 147 of the Act based on information received from DGIT(Inv.), Mumbai that the assessee has taken accommodation entries in the form of loans from various parties as mentioned in the Assessment Order. Assessing Officer was of the view that these parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s. 68 of the Act observing as under: 22.3 I have noted that the facts and circumstances of the present case at hand are exactly similar to that of the A.Y. 2013-14 A.Y.2014-15 in Appellant's own case. This issue is not new in the case of the Appellant and the same has travelled to the Hon'ble ITAT, Mumbai B Bench. Further, this issue has been decided by the Hon'ble ITAT in their order dated 08.07.2019 in ITA Nos. 2641, 2480, 2388, 2360, 2501, 3018, 2436, 2591, 2661 2718/Mum/2018. The Hon'ble ITAT has, after detailed discussion, deleted the addition made on account of unsecured loans and consequent additions on account of interest and commission with the following observations: 7. The solitary issue that needs to be resolved under given facts and circumstances of this case is whether unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain is unexplained cash credit, which comes under the provisions of section 68 of the Act or not. The AO has made additions of ₹₹..15,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain under Section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured loan received from certain companies controlled and managed by Shri Bhanwarlal Jain. The AO never disputed the fact that the assessee furnished various evidences to prove identity of the loan creditors. The AO has categorically admitted that the assessee has filed various details including PAN Card, ITR acknowledgment, financial statements, bank statements, confirmation letters and affidavit from the parties from whom loan has been taken. The AO has disputed the genuineness of transactions and creditworthiness of the parties. The sole basis for the AO to doubt the genuineness of transaction is search conducted in the cases of Bhanwarlal Jain by the DGIT(Inv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal Jain and his associates were involved in providing accommodation entries and the assessee is one of the beneficiaries of such accommodation entries. The AO has taken note of statement recorded by the department from Shri Bhanwarlal Jain and his associates. The AO has taken note to survey proceedings conducted in the group cases of assessee and statement recorded from directors and employees of the assessee group cases. Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken through proper banking channels. The assessee has paid interest after deducting applicable TDS as per the law. These loans have been repaid during next financial year, All these documents are part of assessment proceedings. The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 132(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions u/s 68 of the Act No doubt, the AO is having every right to suspect the transactions but, that by itself would not give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank. It was expected on the part of the AO to make proper investigation and reach the shareholders. The AO did nothing except issuing summons which were ultimately returned back with an endorsement not traceable In our considered view, the AO ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the AO. In the above circumstances, the view taken by the Tribunal cannot be faulted. CIT vs. Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC) If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. CIT vs. Steller Investment Ltd (2001) 251 ITR 263 (SC) (civil appeal) That the increase in subscribed capital of the respondent company could not be a device of converting black money into white with the help of formation of an investment company, on the round that, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th observations that the department is free to proceed to reopen their individual assessments of the shareholders whose names and details were given to the Assessing Officer. ACIT vs. Venkateshwarlspat Pvt Ltd (2009) 319 ITR 393 (Chhatisgarh-High Court) If the share applications are received by the assessee from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as the undisclosed income of the assessee. Mod Creations Pvt Ltd vs. /TO (2013) 354 ITR 282 (Del-High Court) Held, allowing the appeal, (i) that the assessee had discharged the initial onus placed on it. In the event the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no avail. The Revenue was required to prove this all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case also, the respondent assessee has received share application money from different sub scribers. It was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits. In some cases such replies were not received through posts. ₹ 9 lacs represented those assessees who denied having made any investment altogether. The issue thus would fall squarely within the ambit of the judgment of the Supreme Court in the case of Lovely Exports (supra). No error of law can be stated to have been committed by the Tribunal. Tax Appeal is therefore dismissed. CIT vs. Peoples General Hospital Ltd (2013) 356 ITR 65 (MP-High Court) Held, dismissing the appeals , that it the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made tinder section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part o f the share capital represented the company's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication money for the shares was given through account payee cheques. The creditworthiness has also been established, as indicated by the Tribunal. The subscribers have given their complete details with regard to their tax returns and assessments. In these circumstances, the Department could not draw an adverse inference against the assessee only because the sub scribers did not initially respond to the summons. The subscribers, however, subsequently gave their confirmation letters as would be apparent from the impugned order. The identity of the subscribers stands established and it is also a fact that they have shown the said amounts in their audited balance sheets and have also filed returns before the IT authorities. The decision of the Tribunal deleting the addition cannot be faulted. 11. The assessee has also relied upon various decision of the Co-ordinate Bench of ITAT, Mumbai. We find that the coordinate Bench of ITAT Mumbai, in number of cases has considered an identical issue in light of search and seizure operations as well as survey conducted by the department in light of statement of Shri Bhanwarlal Jain recorded during the course of search u/s 132(4) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuineness of transactions were filed. However, the learned Assessing Officer treated the loan as unexplained cash credit on the plea that the assessee could not produce the parties. Thereafter, the learned Assessing Officer computed the peak of unsecure loan amounting to ₹ 1,91,00,000 and made addition of ₹ 40,00,000 u/s 68 of the Act. On appeal, before the learned CIT(A), the addition so made was directed to be deleted. The assessee is in appeal before the Tribunal. 4. If the observations made in the assessment order leading to the addition and the conclusion arrived at in the impugned order, if kept in juxtaposition, and analysed there is a factual finding in Para-5.3 that the assessee discharged the primary onus as the lender had responded to notices issued u/s 133(6) of the Act confirming the transaction. The learned Assessing Officer did not controvert the claim of the assessee. The loans were taken through banking channel and the receipt of taking the loan has been duly examined in Para-5.3 (Page-13) of the impugned order. The loans were duly reflected in the loans and advances column in the Balance Sheet and there is further factual recording that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA Nos. 1069 to 1071/ Mum/2017 3. Order dated 26.05.2016 passed by Ld. CIT(A) - 44, Mumbai in the case of Reliance Corporation vs. Income Tax Officer 4. Order dated 23.05.2017 passed by Hon'ble ITAT, Mumbai in the case of Income Tax Officer vs. Vikram Muktilal Vora in ITA No. 842/Mum/2017 5. Order dated 05.1 1.2018 passed by Hon'ble ITAT, Mumbai in the case of Keynote Fincorp Ltd. vs. DCIT in ITA Nos. 1643 1647/Mum/2018 6. Order dated 24.05.201 7 passed by Hon'ble ITAT, Mumbai in the case of Income tax Officer vs. Gujarat Construction in ITA No. 7040/M/2016 7. Order dated 30.05.2018 passed by Hon'ble ITAT, Mumbai in the case of ACIT vs. Vashu Bhagnani in ITA No. 5648/M/2016 8. Order dated 10.08.2018 passed by Hon'ble ITAT, Mumbai in the case of DCIT vs. Jainam Investments in ITA No. 6099/M/2016 9. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Pabal Housing Pvt. Ltd. in ITA Nos. 2687 to 2689/Mum/2018 10. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Skyline Construction in ITA Nos. 2692 to 2694/Mum/ 2018 11. Order dated 03.05.2019 passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or companies, the result of which has been tabulated in the said para. Notice was served which has been tabulated in the said para. Notice was served on few entities but the same were not replieon few entities but the same were not replied to. In few cases, d to. In few cases, the notices were returned back Submissions were received in the notices were returned back Submissions were received in few cases through DAK wherein the company only provided few cases through DAK wherein the company only provided the mode of investment but no reasons were supplied for the mode of investment but no reasons were supplied for paying a huge premium of ₹ 190/paying a huge premium of ₹ 190/-- per share. Another striking per share. Another striking featfeature was that most of the investors had reflected meagre ure was that most of the investors had reflected meagre income during assessment year under dispute. The two income during assessment year under dispute. The two companies in Mumbai as well as Guwahati were found to be companies in Mumbai as well as Guwahati were found to be nonnon--existent. With respect to Kolkata companies, the existent. With respect to Kolkata companies, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the action of the AO in making notional addition on account of alleged commission by invoking section 69C of the Act. The AO has disallowed interest paid on unsecured loans on the ground that once loans have been treated as bogus accommodation entries, then any interest paid on such unsecured loans also needs to be treated as bogus and accordingly disallowed total interest paid on unsecured loans. Similarly, the AO has estimated 0.2% commission on total unsecured loans taken from companies on the basis of statement of Shri Bhanwarlal Jain where he had admitted that he charged 0.2% commission on all accommodation entries. We noted that the issue of unsecured loans has been decided in preceding paragraphs, where we held that the transactions between the parties are genuine which cannot be considered as unexplained cash credit u/s 68 of the Act, consequently, additions made towards disallowance of interest and estimation of commission on such unsecured loans is also needs to be considered in the light of discussions in the preceding paragraphs. Therefore, we are of the considered view that the AO as well as the Ld. CIT(A) was erred in making additions towards interest on unsecured l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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