TMI Blog2022 (4) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 (2) TMI 850 - BOMBAY HIGH COURT ] has held that provision of section 68 cannot be invoked for outstanding sundry credit balance found in account books of the assessee for FY 2006-07 to income of assessee for AY 2009-10.Once, it is clear that the amount involved has not been received during the year, the same cannot be added u/s. 68. Undisclosed unsecured loan - disallowance of interest on these loans - The facts of the case clearly indicate that AO has not made any investigation of his own. He solely relied upon the examination by the investigation wing in the Bhanwaralal Jain case. Further, ld.CIT(A) has correctly observed that by not giving assessee the statements for rebuttal and an opportunity to cross examine coupled with the retraction by the party, the evidentiary value of the said statement is diminished. The AO has not even issued notice u/s. 133(6) to the parties. Once, it is undisputed that no independent verification was done by the AO and the assessee has provided all the basic documents, the onus upon the assessee stands discharged. Hence, we do not find any infirmity in the order of ld.CIT(A). Hence, we uphold the same. On the same reasoning, the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Department : Shri A.K.Kardam,CIT-DR ORDER PER SHAMIM YAHYA (AM) :- This appeal by the Revenue is directed against the order of learned Commissioner of Income-tax(Appeals)-47 dated 15.04.2021 and pertains to Assessment Year 2012-13. 2. The grounds of appeal are as under:- 1. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition u/s. 68 of share application money of ₹ 2,35,00,000/-without appreciating the fact that money has been received from bogus parties with no liabilities, 2. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of ₹ 2,35,00,000/- holding that same is capital receipts without appreciating the fact that same is accommodation entry received from hawala operator and liable to be taxed u/s. 68 of the I.T. Act, 1961. 3. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of ₹ 5,95,00,000/- received as unsecured loan without appreciating the fact that same is accommodation entry received from hawala operator Sh. Bhanwarlal Jain. 4. Whether On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grounds that these parties failed to pay subsequent payments as per schedule. The AO therefore asked the appellant to furnish the party wise details of share applications and return of allotment in Form 2 filed with Registrar of Companies (ROC). Further the AO had also issued notices u/s 133(6) to all the above share-applicants at their given addresses. However he noted that all the notices were returned unserved by the postal- authorities. The AO therefore directed the appellant to furnish the I.T. returns, Ledger account, PAN card and bank statements of share applicants. In response, the appellant filed the submissions and documents on record. The appellant requested the AO to issue fresh notices u/s 133(6) due to change in name of the company from Orbit Heights P. Ltd to Neminath Homes P Ltd . However, the Id. AO rejected the appellant's request and held that the appellant had not proved the identity and credit-worthiness of the share applicants and genuineness of transactions and there after relying on certain judicial pronouncements, the AO treated this share application as unexplained and made an addition of ₹ 2,35,00,000/- u/s 68 of I.T. Act, 1961. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare premium is a capital receipt. In this connection, he referred to following case laws i) M/s. Apeak Infotech 397 ITR 148(Bom.HC) ii) Orchid Industries Pvt.Ltd. 397 ITR 136 (Bom.HC) iii) Gagandeep Infrastructure Pvt.Ltd. in ITA 1613 of 2014 (Bom.HC) iv) Green Infra Ltd. (2017) 392 ITR 7 (Bom.HC) v) G.S.Homes Hotesl Pvt.Ltd. 7 tamxann.com 120 (Bombay High Court) vi) Vodafone India Service Pvt.Ltd. vs Addl.CIT 368 ITR 1 (Bombay High Court) 8. The order of ld.CIT(A) in this regard as under:- There is also force in submission of Ld. AR that addition u/s.68 cannot made of share capital and premium since such is a receipt on capital account and is not of revenue nature. It is observed that the provision of Sec.56(2)(viib) inserted by Finance Act, 2012 had been made applicable from A.Y.2013-14 at does not apply to the year relevant to A.Y.2012-13. The said view had bet adopted in the jurisdictional High Court decisions in the cases of M/s. Apeak Industies (397 ITR 148) Orchid Industries Pvt Ltd (397 ITR 136), Gagandeep Infrastructure Pvt Ltd and M/s., Green Infra Ltd cited supra and by Hon'ble Apex Court in the case of M/s G. S. Homes Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation entries only. The AO held that transactions had been entered with such entities wherein cheques are given in exchange of cash for commission and the directors of such entities are name sake persons. In response, the appellant filed the written submissions before AO along with supporting documents to prove the identity and credit-worthiness of the lenders and genuineness of the loans received during year and interest paid thereon. The appellant also submitted that all lenders are assessed to Income Tax and had filed their Income Tax returns and entire loans had been received through banking channel by A/c payee cheques/ RTGS. However, Ld. AO rejected the appellant's contentions and held that the lender entities are run, controlled and operated by Shri Bhanwarlal Jain who is engaged in providing accommodation entries wherein the cheques/RTGS had been given in exchange of cash for commission. Accordingly, AO made the addition u/s.68 of the unsecured loans received from the entities belonging to Shri Bhanwarlal Jain of ₹ 5,95,00,000/-. Consequently, AO also made the disallowance of interest paid to the concerns/ entities belonging to Shri Bhanwarlal Jain of ₹ 52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of Pr.CIT v. Veeedhata Tower Pvt. Ltd. (ITA No. 819 of 2015) ii) Hon ble Apex Court in the cae of Pr.CIT vs. Vaishnodevi REfoils Solvex 96 taxmann.com 469(SC) iii) Nemichand Kothari v CIT (264 ITR 254-Gauhati) iv) Hon ble Bombay High Court in the case of CIT vs. Haresh D. Mehta 86 taxmann.com 22 v) CIT v. Nikunj Exim Enterprises (P) Ld. 35 tamxann.com 384 vi) Hon ble Bombay High Court in the case of CIT vs. Orchid Industries (P) Ltd. 88 taxmann.com 502 12. He also referred to several other case laws and held as under:- As discussed above, the appellant had furnished all relevant documents to prove the genuineness of the transactions like; PAN of lenders, Confirmation of account, own bank statement disclosing receipt and repayment of loans through A/c payee cheques/RTGS, I.T acknowledgment receipt, Balance sheet and Bank statements of the lenders, TDS certificates of interest paid on such loans to prove the identity and credit worthiness of lenders and genuineness of loan transactions. Accordingly, the appellant had discharged its onus to prove the identity and credit-worthiness of the lenders and genuineness of the loans, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest bearing funds had been utilized for and appellant had not justified the commercial expediency for which the interest free loans were given to its associate concerns. Thus, AO held that there is diversion of interest bearing funds for non-business purpose and accordingly, made the disallowance of interest on prorate basis of ₹ 8,88,000/- @ 12% of interest free loans given of ₹ 74,00,000/- u/s. 3(1)(iii) of I.T.Act, 1961. 15. Upon assessees appeal, the ld.CIT(A) has held in this issue as under:- I have considered ' the facts of the case and the submissions' of the assessee. It is undisputed fact that the appellant had given the interest free loans to its associate concerns of ₹ 74,00,000/- during the year .and on the other hand, had made the interest payments on borrowings. The appellant had not proved the commercial expediency for which the interest free loans were given to the associate concerns. Also, appellant had not brought any evidence on record to prove that the interest free loans were given to the associate .for business purpose. The onus lies on the appellant to prove that non-interest bearing funds had been utilised for providin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been received by the AO along with documentary evidences such as PAN, confirmation of account, I.T return, bank statements, - balance sheet, Joint venture agreement and other documents. The appellant also submitted the documents such as ledger account, own bank statement, Joint venture agreement and evidence of repayment of their investments to justify the identity and credit worthiness of the investors and genuineness of the transactions. However, the Id. AO did not accept the appellant's contention and replies u/s 133(6) received from Joint Venture investors and held that the appellant had not proved the genuineness of the amounts received as investments towards Joint Venture. The relevant finding of the AO is as under :- a) Out of total 17 parties, around 9 to 10 parties are maintaining their bank account with Bank of Baroda, which appears to be highly improbable. b) High value credits in the bank account and subsequent circular transactions between the related accounts and immediate withdrawals. c) These transactions do not appear to be in the normal course of business. d) The date of amount of deposits received into the bank accounts of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai jointly with the assessee and their share in profits will be 40% ; 17 parties put together, while that of the assessee would be 60%. As per the terms of Agreement for Joint Ventfare dated 08.04.2011 between Orbit Heights Pvt. Ltd. (now known as Neminath Homes Pvt. Ltd.) and seventeen investors, they will re-develop land bearing CTS no.1374/B/293 in village Versova, Andheri (West), Mumbai, which was owned by Swagat Cooperative Housing Society Ltd. That in this regard, society had entered into a development agreement dated 23.03.2009 and granted development rights in respect of the property to the present assessee. That as per clause (d) of the Joint Venture agreement, the assessee was unable to commence and complete the said project through its own means and was looking for some financial assistance to join the said project to commence and complete the said project on Joint Venture basis. Further, (e) the part of the Second Part have to give financial assistance to commence and complete the said project on Joint Venture basis. That further, (f) the Part of the First Part had other and Party of Second Part had agreed to jointly develop such property particularly described in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of addition in this regard. Thereafter, ld.CIT(A) observed that coming to remaining 13 parties, which either did not reply or notices sent to them returned as unserved, it is seen that the appellant had intimated the AO vide letter dated 09.03.2015that as the name of the company had changed from Orbit Heights Pvt Ltd to Neminath Homes Pvt. Ltd, there was some confusion/misunderstanding at the end of the investors because of which they failed to respond to the notices u/s 133(6). That therefore the assessee requested the AO to issue summons u/s 131 in the names of these parties again, by mentioning the name of the assessee company as Neminath Homes Pvt Ltd. That these facts have been clearly mentioned by the AO also in the body of the assessment order in para7.4. That however the AO chose not to issue any summons to these investors. That simultaneously it appears that these parties had submitted detailed replies to the AO, confirming their investments in joint venture project as also furnishing their IT. Returns, Bank statements, financial accounts and other relevant details and also furnished the documents such as PAN and CIN of investors, Confirmation of account, Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the office of the AO as on 10.03,2015 and had submitted all relevant details. Likewise, Jagvi Development Pvt. Ltd. submitted a reply dated 26.02.2015 as on 10.03.2015. The Company had a net worth of ₹ 21.95 crs. during the relevant period and is being assessed to tax. Similarly, Lunkad Textile Pvt.Ltd. which has made an investment of ₹ 50 lacs, had filed its reply dated 02.03.2015 with the AO as on 09.03.2015. As per their ITR they have shown an income of ₹ 13,47,435/- during the year. Similarly, Nimbus Industries Ltd. which has made an investment of ₹ 25 lacs has filed its reply dated 04.03.2015, which is received in the office of the AO as on 05.03.2015. As per the Income Tax return it has shown an income of ₹ 45,64,450/-. Similarly, P. Saji textiles Ltd. had filed its reply with the AO as on 10.03.2015 and as per Income Tax return it has shown an income of ₹ 12,64,134/-. Similarly, Santoshimi Lease Financial Investment Ltd. filed its reply dated nil with the AO as on 10.03.2015. As per their ITR its returned income is ₹ 21,19,100/- for A.Y.2012-13. The company has invested a sum of ₹ 25 lacs in the Joint Venture project. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 208.80 13,47,435 9 Nimbus Industries Ltd, 25,00,000 406.80 45,64,450 10 Originet Technologies Ltd. 2,17,60,000 352.97 5,98,124 11 P. Saji Textile Pvt. Ltd. 75,00,000 309.68 12,68,134 0.00 12 Santoshima Leasing Finance Inv. (1). Ltd. 25,00,000 2276.02 21,19,100 13 Shipra Fabrics Pvt. Ltd. 1,00,00,000 304.75 17,48,038 14 Siwana Agri Marketing Ltd. 2,45,00,000 807.92 (7,61,81,313) 0.00 15 Snazzy Export Ltd. 30,00,000 36.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment record. The AO's finding that appellant had not initially responded to notice u/s 133(6) is not of much relevance since the erstwhile name of the appellant M/s. Orbit Heights Pvt Ltd was changed to M/s Neminath Homes Pvt Ltd and, in any case, all investors had subsequently filed their respective replies in response to notice u/s 133(6) and acknowledged copies of such replies is filed on record. The AO, in assessment order, has also accepted that the replies from these parties had been filed in tapal. The AO's finding that certain investors were holding bank accounts in same bank account, similarity of auditor, cross share-holding, etc. would not disprove the transaction since the funds are stated to have been received from group/related entities of the investors, which would naturally have same auditor or the bankers and among group entities cross holdings is also not unusual. Further the slight mismatch in closing balance as per ledger account filed by the appellant and confirmation of account filed by the investors, is due to interest disclosed by the investors, however there is no variation of the amounts received during the year. Therefore the obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 256 ITR 360. 23. He concluded as under:- The other judicial decisions relied by Ld. AR also support the case / of the appellant. The appellant had furnished the documents such as PAN and CIN of investors, Confirmation of account, own bank statement disclosing receipt and repayment of funds through A/c payee cheques/RTGS, Joint venture agreement, I.T acknowledgment receipt, Balance sheet and Bank statements of the investors and replies furnished by the investors in response to notice u/s 133(6) to prove the identity and credit worthiness of lenders and genuineness of transactions and AO had not found any defect in such documents filed on record and had not brought any contrary material on record to disprove the transaction. The judicial decisions relied by Ld. AR also supports the case of the appellant. The appellant had discharged its onus to prove the identity and credit-worthiness of the investors and genuineness of the transactions, accordingly the addition made by the AO u/s 68 deserves to be deleted. I accordingly direct the AO to delete the addition of Joint venture investments made u/s 68 of I.T Act, 1961. Therefore, the Grounds no. 8 9 are Allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (para 7.4) 5 6 Addition u/s.68 of ₹ 26,17,60,000/- of monies received under Joint Venture housing project from 17 contributors. a) Assessee had proved the complete, identity, genuineness and credit-worthiness of all Joint Venture Contributors; b) Replies to notice u/s.133(6) had been responded by all 17 Joint Venture Contributors with supporting documents filed on record; c) Joint Venture Contributors are not related to any tainted person/group; d) Assessee had repaid the Joint Venture Contributions to respective contributors in subsequent year; e) Hon'ble ITAT had deleted similar additions u/s 68 in assessee's own case for A.Y-2013-14 2014-15; f) CIT(A) had deleted similar addition in case of associate companies M/s Neminath Enterprises, M/s Nemichand Associates and Star One Realcon Pvt Ltd. The Hon'ble ITAT had dismissed the Revenue's appeal. 27. Upon careful consideration, we note that in the present case, the fist issue is addition u/s. 68 of share application money amounting to ₹ 2.35 crores, which was received in the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt.Ltd. (Supra) and Green Infra Ltd.(supra). Accordingly, we do not find any infirmity in the order of ld.CIT(A) directing for deletion of addition of ₹ 2.35 crores, which was not received during the year. 29. Apropos, issue of unsecured loan. On this issue, the AO noted that assessee has disclosed unsecured loan in the balance sheet of ₹ 22.85 crores. He noted that ₹ 5.95 crores were received from six parties belonging to Shri Bhanwarlal Jain group of cases. The AO observed that in the case of Bhanwarlal Jain group investigation wing of income tax department had made search and survey, wherein it has found that companies controlled by Bhanwarlal Jain group were engaged in providing accommodation entry. On AO s enquiry, assessee provided all the necessary details including the income tax returns of the parties and it was submitted that the amounts were received through account pay cheque etc. However, AO was not satisfied, he did not even issue notices to the said parties and solely relying upon the examination done in the case of Bhanwralal Jain group made the disallowances. 30. Upon assessee s appeal, ld.CIT(A) has examined the issue thoroughly.He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific case. In the present case, we are also having a decision of ITAT in assessee own group case, in which similar issue was decided in favour of the assessee. The decision in the said case cannot mandate us not follow decision of the ITAT in assessees sown case. It is also noted that the facts of the case clearly indicate that AO has not made any investigation of his own. He solely relied upon the examination by the investigation wing in the Bhanwaralal Jain case. Further, ld.CIT(A) has correctly observed that by not giving assessee the statements for rebuttal and an opportunity to cross examine coupled with the retraction by the party, the evidentiary value of the said statement is diminished. The AO has not even issued notice u/s. 133(6) to the parties. Once, it is undisputed that no independent verification was done by the AO and the assessee has provided all the basic documents, the onus upon the assessee stands discharged. Hence, we do not find any infirmity in the order of ld.CIT(A). Hence, we uphold the same. On the same reasoning, the disallowance of interest on these loans have been deleted by ld.CIT(A). We also uphold the said order. 33. Apropos issue of disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and immediate withdrawals. These observations by the AO are dehors any actual figures or finding therein. Further, AO observed that these transactions are not normal. He further made general statement that there are cross holdings in the company that most of the companies were newly registered that most of the companies are not maintain substantial profit. This was again without reference to specific facts and findings. The Ld.CIT(A) has given a finding that there is a proper joint venture agreement that assessee is not engaged into bogus activity, it is engaged into re-development project in the heart of Mumbai city. That AO has issued notice in the earlier name of the company. That after assessees request fresh notice in the new name of the company was not given by the AO. AO himself desired the documents to be submitted and the same may duly submitted to the AO. The Ld.CIT(A) has duly examined the documents and found that all the necessary details of the parties i.e PAN card, CIN master data, confirmation, joint venture agreement reply to notice u/s. 133(6), IT acknowledgment receipt, bank statement, balance sheet of the parties were all produced. Ld.CIT(A) has also given sequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on record showing that they had sufficient funds for investing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of Commissioner of Income Tax vs. Gagandeep Infrastructure (P.) Ltd., reported in [2017] 80 Taxmann 272 (Bombay) and the order of the Apex Court in case of Commissioner of Income Tax vs. Lovely Exports (P.) Ltd., reported in [2008] 216 CTR 195 (SC). 4] We have considered the submissions. 5] The Assessing Officer added ₹ 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 6] The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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