TMI Blog2021 (11) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions but, that by itself would not give rise an occasion for the AO to make additions u/s 68 of the Act, when the evidences filed by the assessee clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed u/s 68 - Decided in favour of assessee. - ITA no.1837/Mum./2020 - - - Dated:- 29-10-2021 - Shri S. Rifaur Rahman, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Revenue : Shri Vijay Kumar Menon For the Assessee : Shri Prakash Jhunjhunwala ORDER PER S. RIFAUR RAHMAN, A.M. The aforesaid appeals have been filed by the Revenue challenging the order dated 28th February 2020, passed by the learned Commissioner of Income Tax (Appeals) 47, Mumbai, for the assessment year 2011 12. 2. The Revenue has filed the present appeal on the following grounds: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that transaction in question is bogus. 6. Whether on the facts and in the circumstances of the case and in law, in consequence to the question of law at 1 (supra), the ld. CIT(A) was justified in not upholding the additions made by the A.O. amounting to 3,57,534/ on account of interest paid on bogus loan and 1,20,000/ on account of commission. 3. Brief facts are, the assessee is a company engaged in the business of real estate development and construction activities. The assessee had filed its original return of income under section 139(1) of the Income Tax Act, 1961 (for short the Act ) on 29th September 2011, declaring the total income of Nil. A search and seizure action was conducted by the Investigation Wing, Mumbai, on 3rd October 2013 on Bhanwarlal Jain group of cases. On the basis of information deciphered during course of search on Bhanwarlal Jain group, a survey action under section 133A was carried out on 16th October 2014 at premise of the Neminath group. The assessee is one of the entity belonging to Neminath group. Subsequently, the assessment of the assessee was re-opened under section 148 of the Act, after recording the reasons. The assessee fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO contained in the assessment order and the other materials on record on this issue. As discussed a search and seizure action u/s 132(1) of the Act was conducted by the office of the DGIT(Inv.), Mumbal on Shri Bhanwarlal Jain group of cases on 03.10.2013. On the basis of information gathered during the course of search operation on Bhanwarlal Jain group, a survey u/s 133A was conducted on the Neminath Group of cases on 16.10.2014. The appellant is a group company of the Neminath Group. Subsequently the assessement proceedings were initiated. In the assessment order, AO observed that the appellant had obtained the unsecured loans from certain entities belonging to Shri Bhanwarlal Jain and his employees/associates. The AU relied on the investigation report and observed the Shri khanwarlal Jain and his employees/associate are engaged in providing the accommodation transactions and the appellant is one of the beneficiary of the non- genuine transactions. The AU relied on the statements of Shri Bhanwarlal Jain and his employees/associates Shri Basant D. Jain and Shri Lunkaran Parasrnal Kothari. The AU held that the retraction statement filed by Shri Bhanwarlal Jain and others i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I T Return Acknowledgement receipts, bank statements and balance sheet of the lenders are filed to prove the credit worthiness of the lenders. It can be seen from the details that the sources of lenders funds is not out of cash deposits but otherwise. The Ld. AR also filed the copies of retraction statement of Shri Bhanwarmal Jain and submitted that the addition made in assessment merely on the basis of retracted statement is unjustified. The Ld. AR submitted that the appellant's director Shri Nernichand jain in the statement recorded u/s 131 had explained the genuineness of the loans received. The Ld. AR further submitted that the appellant had repaid the major loans to such parties in subsequent years. It is observed that AO had not pointed any fault in the documentary evidences filed by the appellant and AO had not rejected the appellant's books of accounts u/s 145(3), thus is not justified in making the addition of the loans and consequential disallowance of interest thereon. The Ld. AR also relied on various judicial decisions to support the case of the appellant. 7.3 During the year under consideration the AO added an amount of ₹ 2,00,00,0001- as unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor companies before the AD. The bank accounts are showing significant cash balances all along and it is not the case that some amounts have been deposited just before the loan entries to the assessee. It is also seen that the money in the said bank accounts have come from sales operation to other big companies. The sales turnover of these companies is more than ₹ 100 crores and their accounts are duly audited and significant income has been shown there in, year on year basis. These companies have duly confirmed the loan transactions. In fact it has been found that the assessee even offered to the AO to issue notices u/s 133(6), to examine the genuineness of the transactions and at no point of time expressed its inability in producing any details or relevant persons. 7.6 In this regard it is also relevant to see as to what did the assessee said at the time of survey in his statement on oath, which is reproduced as under, for the sake of clarity:- Ans to Q 15 :The loans from the above mentioned parties .rere arranged by Shri RaranlaUi Sankhla. I do not know the nature of business carried out by any of these parties. I have no idea regarding their identity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are exactly similar to that of the Appellant's associate companies/concerns named M/s. Neminath Homes Pvt. Ltd, DCIT, M/s. Neminath Associates,M/s. Neminath Enterprises and its director Shri Nemichand P. Jain related to A.Y.2010-11 to 2014-15. The issues involved in the above stated appeals also related to the addition of unsecured loans obtained, disallowance of interest on such loans and addition of commission paid thereon. The additions/disallowance were sustained by my predecessor initially. However, Hon'ble ITAT, 'B' bench, Mumbai side order dated 08,107/2019 in all above stated cases belonging to appellant's group and its director Shri Nemiichand P. Jain had deleted the additions of the unsecured loans and also had deleted the disallowance of interest of such loans and commission estimated thereon. The relevant appeal numbers of the appellant's associate companies and in director are ITA- 2641. 2480 2388/Muni/2018 in the case of Shri Nemichand P. lain for A.Y.2010-11, 2011-12 2014-15, bearing ITA No.2360,2501 3018/Mum/2018 in the case of M/s, Neminath Enterprises for A.Y.2012-13, 2013-14 2014-15, bearing ITA No.2436 2591/Mum/2018 in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and source there of or explanation offered by the assesse is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assesse of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided u/s 68 of the Act, then the onus shifts to the AO to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings recorded by the AG in his assessment order; one has to examine whether the assesse has discharged burden caste upon it u/s 68 of the Act in respect of unsecured loan received from certain companies controlled and managed by Shri Jhanwarlal Jain. The AO never disputed the fact that the assesse furnished various evidences to prove identity of the loan creditors. The AG has categorically admitted that the assesse has filed various details including PAN Card, ITR acknowledgment, financial statements, bank statements, confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group Companies for arranging loans. The AG did not controvert this fact by bringing any other evidences. On the other hand, the assesse has filed complete details including confirmations from loan creditors, their PAN details, masterdata, affidavit from the directors/partners/proprietors of those companies, income tax acknowledgments receipts along with financial statements, hank statements of loan creditors in order to prove the identity, genuineness of transaction and credit worthiness of the parties. We, further, noted that all these loans have been taken through proper banking channels. The assesse 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 genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. CIT vs. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom- High Court) The questions ought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P)Ltd(2008) 216 CTR (SC) 195. Wherein the apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AG, then the Department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assesse had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the AG to make proper investigation and reach the shareholders. The AG did nothing except issuing summons which were ultimately returned hack with an endorsement 'not traceable In our considered view, the AG ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders in all the relevant material details and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in CIT vs. Lovely Exports (P.) Ltd wherein it was held that if the assesse produces the names, addresses, PAN details of the shareholders then the onus on the assesse to prove the source of Share application money stands discharged. If the Assessing Authority was not satisfied with the creditworthiness of the shareholders, it was open to the Assessing Authority to verify the same in the hands of the shareholders concerned, The Tribunal has relied upon an order of the Supreme Court in case of CIT vs. Divine Leasing Finance Ltd. In view of the decision of the Supreme Court, we dismiss the appeals with observations that the depart mentis free to proceed to reopen their individual assessments of the shareholders whose names and details were given to the Assessing Officer. ACIT vs. Venkareshwar Ispat Pvt Ltd (2009) 319 ITR 393 (Chhatisgarh High Court) If the share applications are received by the assesse from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voke s.68- Revenue has all the power and where with all to trace any person- Moreover, it is settled law that the assesse need not to prove the 'source of source'-In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assesse has been able to prove the identity of the share applicants ancl the share application money has been received by way of account payee cheques. CIT vs. Naniasrey Chemicals Pvt Ltd (2013)33 Taxmann..com 271 (Gui- High Court) In the present case also, the respondent assesse has received share application money from different subscribers. 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 assesses 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the C'ITA), one cannot conclude that the purchases were not made by the respondent-assesse . CIT vs. Samir Bio-Tech Pvt Ltd (2010)325 JTR 294 (Del-High Court) Identities of the subscribers are not in doubt. The transactions have also been undertaken through banking channels in as much as the application 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 assesse only because the subscribers 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse was reopened u/s 4 on the basis of information that the assesse has received accommodation entry of unsecured loan from M/s. Laxmi Trading Company, M/s. Mouli Gems, M/s. Minal Gems, M/s. Naman Exports and M/s. Prime Star, pertaining to Jhawarlal Jain Group. As per the assessee, during the assessment proceedings, documentary evidences pertaining to loan from aforementioned parties like confirmation, bank statement and acknowledgment of return of income of loan, bank statement of the assesse reflecting the amounts and genuineness 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 ₹ 40,00000 uls 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 I he conclusion arrived at in the impugned order, if kept in juxtaposition, and analysed there is a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the conclusion drawn in the impugned order is upheld. 13. We have also considered the judgments relied upon by the learned A.R. such as:- 1. Order dated 12.03.2018 passed by Hon'ble ITAT Mumbai in the case of ACIT vs. Sumit Jain in ITA No. 145/Mum./2017 2. Order dated 12.04.2017 passed by Hon ble ITAT, Mumbai in the case of Reliance Corporation vs. Income Tax Officer in ITA No.1069 to 1071/ 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 05.11.2018 passed by Hon'ble ITAT, Mumbai in the case of Keynote Fin Corp Ltd. vs. DCIT in ITA Nos. 1643 164 7/Mum/2018 6. Order dated 24.05.2017 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 'b/c ITA T, Mumbai in the case of ACIT vs. Vashu Rhagnani in ITA No. 5648/M/2016 8. Order dated 10.08.2018 passed by Hon 'b/c [FAT, Mumbai in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata companies, the response came through DAK only and nobody appeared. Further, the bank statements were not produced in most of the cases to establish the source of funds for making huge investment. However, the factual matrix, before us, in the present case is quite different. In the present case, we find that the assesse has duly discharged the Initial onus of proving the identity of the investors, creditworthiness of the transactions and genuineness of the transactions, Notice u/s. 133(6) have been responded to. In such a scenario, the onus to dislodge the assessee's claim, in our opinion, was shifted back to Ld. AO and he was duty bound to investigate the case further. However, the facts on record nowhere establishes that such further inquries/investigations have subsequently been conducted by Ld. AO in the present case. For the said proposition, we draw strength from the landmark case of Kale Khan Mohammad Hanif Vs. CIT [50 ITR 1] and Roshan Di Hatti Vs. CIT (107ITR938] as already cited in the above decision of Hon'ble Apex Court. Similar is the ratio of Hon'ble Apex Court rendered in CIT vs. Orissa Corporation [159 ITR 78). It is trite law that additions coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds disallowance of interest and estimation of commission. In the result, the appeal filed by the assessee is allowed. 18. In all the other appeals the assessee has raised identical grounds. Therefore, the findings in the paragraphs above are mutatis mutandis and is apply to all the appeals. 19. In the nutshell all the appeals of the assessee are allowed. 7.9 1 find that the facts of appellant's case are Identical to the cases decided by Hon'ble Tribunal and accordingly I respectfully follow the binding decision of the higher judicial authority, reproduced above. The appeals decided by the Hon'ble ITAT in the case of appellant's associate companies/concerns and its director also relate to similar addition made u/s.68 of unsecured loans received from the entities belonging to Shri Bhanwarlal Jam, disallowance of interest on such loans and commission paid thereon. The AO, in such cases of appellant's group companies/concerns and its director, had made the additions/disallowance on similar reasons as made in appellant's case. 7.10 Further my Id. predecessor in a recent appellate order dated 23/10/2019 of appellant's associate compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable' to the department- in itself an objectionable phrase-and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court- If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws. 7.13 The law on judicial Precedents has been elucidated upon by the Hon ble Supreme Court in the case of CIT vs Raison Industries Ltd(2007)288ITR322SC, where in it has been held that when an order is passed by a higher authority, the lower authority is bound there by keeping in view the principles of judicial discipline. This aspect has also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould nor disregard it; here recognised the sanctify and importance of the basic principle that a subordinate tribunal must carry out the directions of a superior tribunal. He argued, however, that the order of the Tribunal was unintelligible and the respondent did his best to understand it according to his light. This argument advanced on behalf of the respondent appears to us to be somewhat disingenuous..... 7.14 Accordingly, respectfully following the decisions of the Hon'ble ITAT, Mumbai (supra), and also on following the order passed by my ld. predecessor in the case of M/s Neminath Homes Pvt. Ltd. for A,Y 2010-11 and 2011-12, I direct the Ld. AO to delete the addition made u/s 68 of unsecured loans. 7.15 Since the addition on account of unsecured loan stands deleted, there is no question of disallowance of interest paid by the assesse. Therefore I also direct the Id. AO to delete the disallowance of consequential interest of ₹ 3,57,534/- and to delete the consequential addition of commission paid of ₹ 1,20,000/-. Accordingly, the Grounds Nos.1 to 6 related to A.Y.2011-12 are Allowed. 5. The Revenue is aggrieved with the order of the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further was of the opinion that mere furnishing certain paper documents is not sufficient enough in light of various facts gathered by the department during the course of search. The AO further was of the opinion that payment through proper banking channel and interest payment to those unsecured loans is not sacrosanct because all these shell companies/hawala operators would keep necessary paper document in order to give colour of genuineness to their transactions. Therefore, he opined that the transactions between the parties are failed to pass the test of genuineness and accordingly made additions under Section 68 of the Act. 8. The provisions of section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the income tax authorities. Therefore, there is no reason for the AO to go only on the basis of statement of Shri Bhanwarlal Jain so as to treat unsecured loan taken by the assessee from the firm and companies controlled and managed by Shri Bhanwarlal Jain and his associates. 9. Having said so, let us examine what is the basis for the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwaral Jain except statement of Shri Bhanwaral Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group Companies for arranging loans. The AO did not controvert this fact by bringing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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