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TMI Blog2019 (4) TMI 2060X X X X Extracts X X X X X X X X Extracts X X X X ..... Impex Pvt Ltd 52,84,625 4 M/s Kothari Impex 77,04,187 5 M/s Mangalam Gems 35,95,287 6 M/s Ratan Gems 2,48,06,432 3. The notices sent to the parties in Sl.No. 1 to 5 were returned unserved from postal authorities and no reply was received from the party in Sl.No.6. The Assessing Officer issued show cause notice to assessee to explain as to why the said unsecured loans should not be added u/s.68 of the Act as unexplained cash credit. In response to the said show cause notice the assessee furnished the following information to prove the identity, creditworthiness of the creditors and the genuineness of the transactions: - (i) Dinesh Gupta Prop. Max India Diamond i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him. iii. Copy of ledger account of the lender in assessee books iv. Copy of PAN Card of the lender (ii) Sunil D Panwar Prop. Xess Gems i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him iii. Copy of ledger account of lender in my books iv. Copy of confirmation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan transactions from the evidences filed by the assessee. 5. Before the Ld.CIT(A) the assessee furnished following further information under Rule 46A of the I.T. Rules. (i) Dinesh Gupta Prop. Max India Diamond i. Copy of confirmation of the lender as per his books of account ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier iii. Copy of Audited schedule of loans & advances in the books of the above lender given by him (ii) Sunil D Panwar Prop. Xess Gems i. Copy of PAN Card of the lender (additional evidence submitted on 04.03.2014) ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier iii. Copy of Audited schedule of loans & advances in the books of the above lender (iii) Namokar Impex P Ltd. i. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier ii. Copy of audited schedule of loans & advances in the books of the above lend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity was given to assessee to produce the evidences and therefore the additional evidences filed by assessee should not be admitted. 8. The Ld.CIT(A) considering the submissions of the assessee, evidences furnished, remand report of the Assessing Officer and reply to remand report by the assessee deleted the addition made u/s. 68 of the Act. 9. Ld. DR vehemently supported the orders of the Assessing Officer. He further submitted that, the notices issued to the parties have come back without service and the assessee could not produce the parties for verification and thus the assessee has not proved the identity, creditworthiness and genuineness of the transaction hence the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act. He strongly placed reliance on the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182]. 10. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the details necessary in respect of these loans obtained from the creditors. It has been submitted that loans have been received through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were offered to taxation for the relevant year. Ld. Counsel for the assessee further in respect of creditworthiness of the lender submitted that the assessee has proved the creditworthiness of all the lenders who lent amounts to the assessee by furnishing Part B of Tax Audit Report, giving summary of Balance Sheet and Profit and Loss Account filed with Revenue along with schedules of loans granted containing name of assessee. The transactions appear in the books of lender and loans are reflected in the tax audit reports filed by the lenders. Therefore, it has been argued that the assessee has established the identity, genuineness and creditworthiness of the creditors and primary onus cast on the assessee has been discharged. It is further submitted that the Assessing Officer disregarded all the evidences and proofs furnished by the assessee and no further enquiries have been made to disprove the evidences furnished by assessee. 13. Ld. Counsel for the assessee submitted that the Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd., (159 ITR 78) held that the assessee is required to prove (i) identity of the lender/party, (ii) the genuineness of the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender vi. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier vii. Copy of audited schedule of loans & advances in the books of the above lender 17. The Assessing Officer not convinced with all the above evidences furnished by the assessee treated the loan transactions as non-genuine simply stating that creditors have not responded, creditors have shown less incomes in their returns, no proof filed to show that the individuals are proprietors of the said concerns from which loans have been taken were given and truncated bank statements were filed. 18. We find that all these submissions and evidences were considered by the Ld.CIT(A) and deleted the addition observing as under: - "5.4.1 From the submission I find that during the assessment proceedings AR of the appellant furnished various details before the AO vide his letter dated 18.03.2013, 20.03.2013 and 21.03.2013 regarding the loan creditors being copy of acknowledgement of return of income filed by them, extract of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 159 ITR 78 has held as under: - "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the Respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence". 20. Hon'ble Delhi High Court in the case of CIT v. Divine Leasing & Finance Ltd. [299 ITR 268] in para nos. 13 & 16 has held as under: " 13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 21. In the case of CIT v. Orchid Industries Pvt. Ltd. (ITA No.1433 of 2014) (Bom.), Hon'ble jurisdictional High Court held as under: "The Revenue has filed the appeal on following questions: "6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs. 95,00,000/- made u/s. 68 of the Act, relying only on the documentary evidence produced by the Respondent Company while ignoring the key factor that these entities were not traceable at their given addresses. 6.4 Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in not appreciating the observations made by the Delhi High Court in Nova Promoters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances. 6.5 The Tribunal ought to have taken note of the fact that the assessee was not able to produce even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case. 7. Considering the above, no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of the transaction. Based on this the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT Vs. Divine Leasing & Finance Ltd., (2008) 299 ITR 268 (Delhi) and CIT Vs. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC)]." 23. In the case of ACIT v. Shri Ramesh Ramswarupdas Jindal in ITA.No. 3091 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to Rs..10,00,000/- and (2) Natsha Enterprises amounting to Rs.10,00,000/- aggregating at Rs. 20,00,000/-. I find force in the argument of the Ld. AR. It is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has merely described the statement of Shri. Pravin Kumar Jain and as communicated by the investigation wing. Thus, it is very evident that the Ld. Assessing officer has not made any independent enquiry in order to establish the in-genuineness of loans if any, with contrary evidence. The statements referred to and relied upon by the assessing officer have never been disclosed to the appellant opportunity for cross examination was also not given, hence such statement could not be utilized against the appellant without giving full and proper opportunity of cross examination as has been held vide Mahesh Gulabral Joshi Vs. CIT(A) (2005) 95 lTD 300 Mumbai ITAT and Hon'ble Supreme Court decision in the case of KishanchandChellaram Vs. CIT (125 ITR 713 (SC)). 6.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating that the party did not exist, he should have summoned the party and recorded the statement. As the AO, has not brought anything in record to show that the evidences filed by the appellant are false, the loan received and repaid by the appellant cannot be treated as bogus. The addition cannot be made merely on the basis of suspicion, surmises and conjectures. There has to be some concrete evidence whether direct or circumstantial. In this case, no such evidence is present. On the contrary, the appellant is showing from the record that he has received loan through account payee cheques from above TWO PARTIES. He has shown that the loans have been repaid through account payee cheque and as long as he was holding the loan, he has paid the interest after deducting TDS. With reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) that the assessee has provided the identity creditworthiness as well as the genuineness of the transactions. The Ld.CIT(A) also elaborately considered the submissions and the averments made by the Assessing Officer in the Assessment Order and the evidence furnished by the assessee and concluded that the assessee has discharged its primary onus on providing complete details in respect of the loan transactions and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loans, this finding in our view is completely justified in view of the facts and circumstances of the assessee's case." 24. In the case ACIT v. M/s. H.K. Pujara Builders in ITA.No. 930/Mum/2017 dated 31.10.2018, the Coordinate Bench held as under:- 6. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.10. As far as the question of validity of the transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are found to be not genuine, it does not lead to the conclusion that all the transactions were non-genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusions drawn therein cannot be applied ipso facto to all other cases. Simply relying on the report of the DGIT(Inv), Mumbai and statement the AO cannot conclude that all transactions are accommodation entries. 5.11. The case of the appellant is covered by the decision of ITAT, T Bench, Mumbai, in the case of Satish N. Doshi HUF Vs. ITO, Ward 21(2)(4), Mumbai in ITA No-2329/Mum/2009 and the decision of ITAT, 'E' Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances. 5.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss the merit of submission made by the appellant and casually brushed aside the details filed by the appellant. Further, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We also find that identical issue came up in the case of DCIT v. Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA. No. 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: - "6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned assessment year, the assessee had taken unsecured loans from the following two parties: Sr. No Name of the Party and Address PAN Loan taken (Rs.) Rate of Interest 1. Javda India Impex Limited CS-1, Silver Anklet, Yari Road, Versova, Mumbal 400 061 AAACA7065L 20,00,000 9% 2. Lexus Infotech Ltd. 626, Panchratna, Opera House, Mumbai 400 002 AAACL4646G 20,00,000 9% When the Assessing Officer asked the assessee to prove the genuineness of these loans, the assessee submitted the following documents: a. Copy of acknowledgment of income tax return filed for A.Y. 2007-08. b. Copy of PAN of the parties c. Copy of bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions. 10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that the said unsecured loans have been repaid in the subsequent financial years. Therefore, we are of the view that there is no reason for the AO to doubt the genuineness of transactions despite furnishing necessary evidences including their financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with 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 the explanation offered by him is not, in the opinion of the AO, satisfactory, then 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 clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held as under: - "8. The next issue relates to the addition of loan of Rs..10.00 Lakhs taken from M/s. Falak Trading company P. Ltd, a company belonging to Praveen Kumar Jain who has confessed that he had provided only accommodation entries. A perusal of the record would show that the AO had issued notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by the AO U/s. 133(6) of the Act. 9. The assessee had taken loan from two of Praveen Kumar Jain's group companies viz., M/s. Josh Trading Co P Ltd and M/s Viraj Mercantile Ltd in the year relevant to AY 2012-13. The AO had assessed the loan amounts on identical reasoning. We notice that the Coordinate Bench of ITAT has deleted the additions vide its order dated 239.12.2017 passed in ITA.No. 5954/Mum/2016, with the following observations: - ... .. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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