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TMI Blog2022 (9) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... ment u/s.143(3) of the Act was completed and loss was assessed at Rs..13,67,107/-. Subsequently based on the information received from Investigation wing of the department it was gathered that assessee has taken accommodation entries by way of bogus loans from entities belonging to Shri Pravin Kumar Jain (PKJ) who has been found to be provider of accommodation entry by the investigation of the department. Accordingly, assessment was reopened u/s. 147 of the Act. A satisfaction note was duly prepared in writing, recorded the reasons for issue of notice u/s. 147/148 of the Act and the reasons recorded were supplied to the assessee. The notice u/s. 148 of the Act was duly issued and served on the assessee. 4. Assessee is engaged in the business of construction of property. Subsequently assessee raised various objections in respect of the reassessment proceedings and the Assessing Officer disposed off the objections raised by the assessee and the Assessing Officer after rejecting the submissions of the assessee proceeded to make the addition u/s. 68 of the Act to the extent of loan taken by the assessee from the three parties during this assessment year. 5. Aggrieved assessee preferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onor had received money from one 'C' as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of foreign exchange transactions as claimed by her. The enquiry of a source of source is not the requirement of law." The appellant also vide letter dt. 03.03.2016 (Page 34-40) submitted affidavit of all parties duly confirming the transactions. There is an affidavit of shri Pankaj Jain sworn on March 1st 2016 as a director of M/s. Easy Mercantile Pvt. Ltd, confirming advancing of loan of Rs. 1,00,0,000/, he has also referred to retraction dtd 15/5/2014 of Shri Praveen Jain (Pg. 35-36). The affidavits of other two lenders, being proprietors of their respective concerns, were submitted. These affidavits also refers to retraction of Shri Pravin Jain (Pg 37-40). These affidavits contains their current addresses. The Ld. Assessing Officer only took a ground that notices as issued u/s 131, on registered addresses could not be served. A reference to the statement of Shri Pravin Jain show that nowhere a reference is made to the appellant, hence it is a general statement having no evidential value as judicially held. A reference to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davits of the loan creditors confirming the genuineness of the transactions. The Ld. Assessing Officer has just ignored such affidavits, once the transactions are confirmed under affidavit, same cannot be disregarded. 4.5.1 In the case of Mehta Parikh & Co. vs. CIT - 30 ITR 181 (SC), ..... 4.5.2 High Court of Bombay in the case of Dilipkumar Roy s. CIT 94 ITR 1 (Mumbai). ..... 4.6 The Ld. Assessing Officer has just relied upon the statement of Shri Pravin Jain U/s.132(4) without providing a copy of the statement and even not evaluating the statement and its retraction during assessment proceeding. No cross examination is allowed. It is well recognized that no statement can be used against the appellant without giving an opportunity of cross-examination. High Court of Delhi in case of C/T vs. Sunil Aggarwal 237 Taxman 512 (Delhi) deleted the addition made of Rs, 1.38 crore based on statement of Mr. S who furnished various details which were incriminating to the assessee. The court held it was incumbent on the Assessing Officer, in those circumstances, to afford the assessee an opportunity of cross-examination of 'S'. Similarly, the Mumbai ITAT in case of 4.6.1 Yamu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aba Mandir Road, Borivali (West), Mumbai-400 092, In case of Seven Star Gems, proprietor Shri Mukesh Kumar Gadhiya, filed an affidavit giving its residential address at A302, Rajlaxmi CHS Ltd, Padma Nagar, Bldg No.8, Chikuwadi, Borivali (West), Mumbai-400 092. Similarly M/s. Ryan International, Proprietor Shri Pankaj Kumar Dani gave his residential address at 1105-Bm Upvan Tower, Upper Govind Nagar, Mated (East), Mumbai-400 097. Thus all the addresses were available, acknowledgement of income tax returns as filed in case of 3 creditors along with their PAN as well as their bank statements were submitted. Hence it cannot be said that parties are not available for verification. The Hon'ble Supreme Court in the case of Orissa Corporation 159 1TR 78 (SC) held that merely issuing summon u/s.131 and not perusing, it further is not a proper compliance of legal provision. The Assessing Officer could have made due enquiries from Income Tax records and bank authorities for effecting proper service of notice on the parties. These are search cases where orders should have been passed under provisions of sec 153A and related sections and it can not be just presumed that parties are not avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant, hence it is a general statement ,of no evidential value, there is a retraction on record, in view of Ld Assessing Officer, the same is rebutted by wing, haw ever there is no evidence brought on record for such rebuttal, in assessment proceeding confirming affidavits are filled (Pg. 35-40). Ld. Assessing Officer has not brought any evidence on record to show any wrong doing on appellant pad. Section 68 casts the initial burden of proof on the assesse to show prima facie and to explain the nature and source of credit found in its books. When the statute places the burden of proof in income tax cases on the tax payer, it is understood to be only the initial burden. When the tax payer explains the credit by providing evidence of identity, confirmation and credit worthiness, the burden shifts on the revenue to show that the explanation is not satisfactory or incorrect. An addition can not be made only for the fact of search. The appellant has discharged its initial onus to prove genuineness of loan transactions as transactions are through banking channel, loan creditors are assessed to tax ,proof of returns being filled submitted ,proving identity and genuineness of loan cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the allegation as made in search report that the loan creditors have taken accommodation entries without bringing anything on record to show that in compensating payment is being made by appellant. It is well recognized that merely an allegation of cash payment is not sufficient for making the addition, cash payment is to be proved by the Ld. Assessing Officer by bringing a definite evidence on record, which is lacking. A reliance is placed on the decision of MOD Creations (P) Ltd, (Delhi) (5.1.5) as well as Gangeshwari Metal Pvt. Ltd (Delhi) (5.1.6). It is also submitted that non-service of notice u/s.131 should not be a ground for rejection of the appellant's claim, as no further enquiries has been made by Ld. Assessing Officer after return of the notice u/s.131, necessary facts and circumstances under which the notices were received back are submitted in para 4.7 above. Appellant's claim is that it has proved genuineness of the transactions, identity as well as creditworthiness of the loan creditors by submitting all the requisite details as mentioned in para 5 hereinabove and claim of the appellant can not be rejected, merely based on unverified statement by Shri Prav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar amount is deposited in the bank account of the lender company through unknown source a few days earlier. Company has disclosed a minimum income. The various brokers engaged in providing accommodation entries from bogus concerns have confirmed on oath to be so engaged in accommodation entries. The Assessing Officer concluded that three lenders were the companies belonging to Pravin Kumar Jain were engaged in providing accommodation entries stating so made an addition of 2 Crs. to the income of the appellant. 2.1 The appellant during course of assessment proceeding submitted following evidences and claimed that it has discharged its onus fully to prove identity, creditworthiness and genuineness of transactions. "(a) Copy of loan confirmation of parties from whom loan has been received. (b) Copy of bank statement of the assessee company, duly highlighting the amount of loan received. (c) Copy of bank statement and return of income of concerned 3 parties. It may be seen from the bank statement of the parties, that the name of the company is duly reflected in the transaction particulars, with the amount of withdrawal. (d) Loan confirmation for the period ended 31.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 12/02/2016. However appellant claims same not being provided. It was also submitted that all the parties are income tax assesses having bank account hence their presence should be enforced and parties should be made available for cross examination. The Affidavits of the lenders were submitted under submission dated 03/03/2016 wherein Shri Pankaj Kumar Jain director of M/s. Easy Mercantile Co(p).Ltd. provided his current address, identity, no. of the company, PAN, reference to retraction of Pravin Kumar Jain and confirmed the loan transactions under its Affidavit dated 01/03/16, Similarly Shri Mukesh Kumar Ghadiya of M/s. Seven Star Gems and Shri Pankaj Kumar Dhani of M/s. Ryan International confirmed the transactions of loan under their respective Affidavits. A copy of Retraction Affidavit of Shri Pravin Kumar Jain is also submitted. It is argued that statement of Praveen Jain being a general statement in which appellant is not named is of no evidential value and can not be a basis for making addition. AR placed reliance on Lakhmani Melvadas 103 ITR 437 (SC), PS Vir Vradappa 127 ITR 247 (Madras) and others submitted that evidences produced cannot be disowned just by an oral st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three lenders are assessed to tax, acknowledgement of their respective returns of income are submitted. Loans are short period loan and were repaid through cheques, much earlier to search action. The AO has not brought on record any material to show any payment of compensatory payment by appellant. Loans are confirmed under duly sworn affidavits of three lenders which are nor rejected. Thus appellant has duly discharged its obligation to prove identity, genuineness as well as credit worthiness of parties. Assessing Officer made assessment rejecting three borrowings solely, reeling upon the statement of Shri Pravin Kumar Jain. Statement of Pravin Kumar Jain is being retracted under his sworn affidavit dated 15/05/2014, a copy placed in compilation. I find that similar issue of sustaining addition based on confessional statement during search of providing accommodation entries is being considered by Hon'ble ITAT Mumbai in certain decisions, some of which are referred hereunder: I. M/s. Reliance Corporation ITA No.1069 to 1071/Mum/2017 'D' Bench, Mumbai dtd.12/04/17. In this case, assessee raised loan from certain companies belonging to Shri Bhanwarlal Jain Group on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical addition was made in the case of MIs Reliance Corporation (supra) and the assessee therein also furnished all the relevant details in order to discharge the burden of proof placed upon it u/s 68 of the Act. The creditor also appeared before the AO and confirmed the transactions. The AO, however, made the addition by placing reliance on the statement given by Shri Bhanwarlal Jam. When the matter reached the Tribunal, the division bench deleted the addition. (Para 11) In AY 2010-11 and 2011-12, the AC had disallowed interest expenses. Since the addition made u/s 68 of the Act in AY 2007-08 did not survive and the addition made in AY 2008-09 had been deleted, the disallowance of interest expenses made in both the years was liable to be deleted. Accordingly tribunal set aside the order passed by Ld CIT(A) on the issue of disallowance of interest in AY 2010-11 and 2011-12 and direct the AC to delete the same in both the years." iii. Keynote Fin. Organisation Ltd., ITR 1643/146 2018 dated 5/11/2018(mum)ln this case based on statement of Shri Bhanwarlal Jam additions were made of Rs.12.20 Crs. The Bench observed after considering various decision as under: "11. "We have per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made by Assessing Officer - Tribunal upheld order of Commissioner (Appeals) - Whether on facts, impugned addition made in hands of assessee was rightly deleted - Held, yes [Papa 5] [In favour of assessee]." In the case of Varinder Rawlley (supra) the Hon'ble High Court has held as under: - "Section 68 of the Income-tax Act, 1961 - Cash credit (Sale of goods) - Assessment year 2002-23 - Whether where assessee received and returned amount in question by way of account payee cheques and transactions were reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated ass assessee's income when department failed to prove to contrary - Held, yes [Paras 9 and 10] [In favour of assessee]." In the case of Apex Therm Packaging (P) Ltd. (supra) the Hon'ble High Court has categorically held that when the assessee had placed on record full particulars, which are inclusive of confirmation with name, address and PAN, copy of income tax returns, balance sheet, etc. in respect of all creditors/lenders then Revenue is not justified in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Industries Pvt. Ltd. in ITA No. 1433 of 2014 wherein the Hon'ble High Court, after considering the relevant facts and also following the judgment in the case of Gagnadeep Infrastructure Pvt. Ltd. (supra), upheld the above said proposition. The assessee has also relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (2008) 2016 CTR 195 wherein the Honble Supreme Court, while deleting the addition made under Section 68 of the' Act, observed that 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 this amount of share application money cannot be recorded as undisclosed income under Section 68 of the Act. As far as the case law relied upon by the Revenue is concerned, we have considered those case law, but they are not applicable to the facts and circumstances of the present case as the pari material contained in those cases are different from the pari material contained in the present case. 15. From the records, we further noticed that the AO has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Mumbai The bench held " In the present appeal, we note that the assessee has duly proved the identity of the party from where loan was taken, therefore, identity is not in dispute, since, the loan was taken through banking channel, and therefore, its genuineness cannot be doubted. So far as, explanation is concerned, the assessee duly explained the same that the loan was received from M/s. Encee Securities Pvt. Ltd. The totality of facts, clearly indicates that the assessee duly discharged the onus cast upon the assessee." vi. M/s. Shreedham Construction Pvt. Ltd ITA No. 37541Mum/2017 A.Y. 2008-09 'E' Bench, Mumbai dt.14/11/2017The addition was made of Rs.1.5 crore on account of share premium/share application money received from one of the concerns of Shri Pravin Kumar Jain termed as a leading entry provider operating in Mumbai. In assessment proceeding notice issued u/s.131 was not complied. The Ld. Assessing Officer made addition as the shareholder was belonging to Shri Pravin Kumar Jain group. The Assessing Officer held that Shri Pravin Kumar Jain is the witness of the assessee. The assessee argued that the Ld. Assessing Officer has failed to demonstrate any specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng regular return of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in possession. Over such issue there are plethora of judgments to support the appellant." Ld CIT(A) allowed the appeal. As per para 13 the Appellate Tribunal dismissed the Revenue's appeal. vii. Shri Ganesh Developers ITR 177/MUM/2017 dated 20.11.2018 in this case addition was made of 1.75 Cr. bassed on statement of Shri Pravin Kumar Jain being loan from following concerns: Sr.No. Name PAN Amount 1 Duke Business P.Ltd., (JPK Trading I. Pvt.Ltd) AABCJ6245N 50,00,000/- 2 Duke Business P.Ltd., (JPK Trading I. Pvt. Ltd.) AAB06245N 35,00,000/- 3 Casper Enterprises P. Ltd (Ostwal Trading I. P. Ltd.) AAAC07955M 40,00,000/- 4 Sumukh Commercial Pvt. Ltd AACCC400M 50,00,000/- Total Rs.1,75,00,000/- The claim of the department was that Shri Pravin Kumar Jain alongwith associate engaged in fraudulent billing activities and giving accommodation entries. In para 5.10 Bombay High Court decision, in this case of "Rakesh Ent. in Writ Petition No.167 of 2015 is referred: in that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus shifts on him to prove these as non-genuine or bogus. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. "Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transactions cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine or bogus. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries." The bench further observed: "5.13 As far as the question of validity of the transaction done through M/s.Duke Business P.Ltd. (JPK Trading I Pvt.Ltd., Casper Enterprises P.Ltd. (Ostwal Trading P.Ltd. and Sumukh Commercial Pvt.Ltd. (Capstown Mer.P.Ltd. are concerned, even if some of the transactions entered into by Shri.Pravin kumar Jain Group are found to be not genuine, it doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f return of income and bank statements. The creditworthiness of the parties is proved by bank statements, transactions being through banking channel and no cash being found deposited in either of their bank account before the issue of cheques, genuineness also stand proved. The Assessing Officer has also not brought on record any proof of any compensatory payment being made by appellant or name of appellant found mentioned in any of the seized material to show any wrong doing on appellant part. Further, the loan was repaid subsequently. The ITAT Mumbai in the case of M/s.Ganesh Developer (Supra) considered similar transactions and allowed assessee's appeal. Hon'ble jurisdictional benches of ITAT having considered the cases on similar facts in favour of assessee, additions made based on similar facts have to be deleted. Therefore, addition made u/s 68 of Rs. 2,00,00,000/- is directed to be deleted. The assessee's ground no. 3 to 6 are allowed." 7. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - "1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance/addition of Rs.2,00,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the genuineness of the transactions. He prayed that the finding of the Assessing Officer may be sustained. He submits that the other appeal filed by the revenue is also having similar facts and issues. 9. On the other hand, Ld.AR submitted that, no doubt PKJ accepted that he provided accommodation entries, however, later he retracted his statement. Therefore, the statement given by PKJ lost its credibility. He submitted that PKJ is not involved in the companies in which assessee has taken loan. He brought to our notice Page No. 1 and 2 of the Paper Book which is the submissions of the assessee before the Assessing Officer wherein assessee has submitted all the documents relating to the loan transactions which includes loan confirmations of party, bank statement of the assessee, bank statement and return of income of the three parties who has lent the loan to the assessee and loan confirmations. Since assessee has submitted all the relevant information before the Assessing Officer to prove the genuineness of the transactions and he submitted that assessee has no power to bring the parties before the tax authorities. However, assessee filed all the details which is required to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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