TMI Blog2023 (2) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... the loans from which it is received are also has gone to the source from which it emanated. Merely mentioning circular transaction does not show that the entities to provide the loan to the assessee company are shell companies. As held by the decision relied up of Honourable Bombay High court in case of Shodiman Investments [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] and DRM ENTERPRISES [ 2014 (12) TMI 1114 - BOMBAY HIGH COURT] clearly covers the issue as far as reopening is concerned. On the merits also, we find that assessee has provided the confirmation, the audited financial statements, the bank statements, the income tax return and the proof of repayment of the above loan taken from these two entities before the learned AO. Section 133(6) notices were issued on ITBA portal as well as by speed post . Based on information supplied by the assessee, AO did not carry out any further independent enquiry. AO has merely relied upon the statement of the accommodation entry provider and analyzes the annual accounts of the lender companies. Despite having the huge turnover and huge current assets, the learned Assessing Officer itself discredited those financial statements. When the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the reassessment under the provisions of section 147 of the Act. II. Addition of ₹ 3,00,00,000/- u/s. 68 as unexplained loans- 1. On the fact and circumstances and in law, the learned CIT(A) erred in confirming the addition of ₹ 3,00,00,000/- under the provisions of section 68 disregarding that Your Appellant has discharged prima-facie onus to prove the identity, genuineness, creditworthiness of transactions by submitting all the necessary documentary evidences. 2. The learned CIT(A) failed to appreciate that the alleged parties had given confirmations in response to the notice u/s. 133(6) of the Act, that too was given categorically during the impugned reassessment proceedings i.e. precisely after the alleged statements allegedly recorded u/s. 132(4) and 131 of the Act. 3. The learned CIT(A) failed to appreciate that Your Appellant was never allowed to be confronted with the alleged parties who had allegedly given statements based on which the learned Asst.CIT, Circle-2(1)(1), Mumbai [referred as ACIT ] has made the alleged addition of ₹ 3,00,00,000/-. 4. Without prejudice to the above, the learned CIT (A) failed to appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and subsequently, notice under Section 143(2) and 142(1) of the Act were issued. 05. Reasons for reopening states assessee has taken loan of ₹1,50,00,000/- from Mangalmayee Hirise Pvt. Ltd on 13th October, 2011 and ₹74 lacs, on 14th October, 2011 and ₹76 lacs on 14th October, 2011, from another company Khosboo Complex Pvt. Ltd. The information was received from DDIT (Inv), Unit-4(3), Kolkata as per letter dated 1st March, 2019 that on the basis of credible information in case of Mr. Chiranjit Mahanta, who is a director of several companies that bank account of these corporate entities have been used for high value transfer followed by withdrawal through RTGS and fund transfer without any economic rational. It was also noted that same are operated by accommodation entry provider, who on oath under Section 131 of the Act admitted that he used to provide the accommodation entry to the beneficiaries. It is also noted that fund trail shows that assessee is reported to be one of the beneficiaries. In the bank account of the companies, who gave loan to the assessee company, received fund from those companies. Therefore, the companies wherefrom the funds were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties are circular transactions without having any business rational and has no creditworthiness, he made an addition of ₹3 crores under Section 68 of the Act by an assessment order passed under Section 143(3) of the Income-tax Act, 1961 (the Act) read with section 147 of the Act at ₹4,37,89,500/- against the assessed income under Section 143(3) of the Act order dated 30th March, 2015. The assessee aggrieved with that order preferred the appeal before the learned CIT (A). 08. The learned CIT (A) vide order dated 27th June, 2022 held that mere filing of ITR, Permanent Account Number transactions through banking channel, financial statements, confirmation, do not prove identity creditworthiness as well as the genuineness of the transaction and therefore, the addition was confirmed on the merit. On the issue of reopening in paragraph no.30, CIT (A) held that reassessment was based on information received from the office of DDIT (Inv), Kolkata vide letter dated 1st March, 2019, specifically mentioned the modus operandi adopted by accommodation entry provider. Therefore, reopening is valid. Thus, assessment order was confirmed on the issue of reopening as well as on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, reopening of the assessment as well as the addition on the merit is not proper. vi. Lender companies have huge reserve and surpluses, huge turnover therefore; merely having low income do not show that these entities do not have creditworthiness. vii. Learned Assessing Officer does not have any material on record to show that the amount of reserve and surplus invested by these entities in the current assets such as inventories, stock-in-trade, loans and advances, are not existing. viii. Accounts of the lenders i.e. Balance sheets are audited and assessed by the Income Tax Department, therefore, the findings of the learned Assessing Officer does not have any basis. On the contrary, these parties are assessed as stated by LD AO about claim of refund. ix. The learned Assessing Officer without brining any material on record has held that these were circular transactions. He submits that the circular transactions are not defined. The learned Assessing Officer did not explain what they are. The learned Assessing Officer also did not bring any material to show that how these transactions are circular transactions, which make them non-genuine. x. Learned Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trail from these entities. Therefore, in the reasons recorded it was concluded that the assessee company has received through intermediate payments by circular transaction through the lenders in the assessee company. Accordingly, the assessee was assessed originally under Section 143(3) of the Act vide order dated 30th March, 2015 was issued notice under Section 148 of the Act holding that there is failure to disclose fully and truly all material facts by the assessee for A.Y. 2012-13. Therefore, the learned Assessing Officer issued notice us/ 148 of the Act on 30 March 2019. In this case, information received from the DDIT (Inv) by the learned Assessing Officer on 1 March 2019 and reopening was made by issue of notice under Section 148 of the Act on 30 March 2019. The reasons recorded does not show that the learned Assessing Officer has made any enquiry or verification based on the information received from investigation wing. The provisions of Section 148 of the Act clearly shows that if the information is received by the learned Assessing Officer, which is a tangible material, the learned Assessing Officer should apply the independent mind by making necessary enquiries and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res for the respective two assessment years. No doubt, they have shown lesser profits. However, the fact shows that they have traded in shares. The only accounts of the lender shows the inventory of ₹79 crores cash and bank account of ₹39 crores and loans and advances of 16.05 crores. The shareholders of the above company are two different entities i.e. private limited companies wherein not stated to be the companies belonging to an accommodation entry provider. The ICCI bank balances as on 31 March 2012 is ₹29 lacs. The inventory of shares of ₹79 crores and advances of ₹16 crores was not examined by the learned Assessing Officer to show that these assets are non existing. The accounts of the assessee are audited, therefore, without any enquiry it cannot be stated that the assets of these companies are bogus and non-existing. Subsequent repayment of the loan in six tranches is also explained. This company is also stated to be assessed by ITO Ward 9(4), Kolkata. There is no enquiry from AO of The lender company about the existence of these entities. The bank statement furnished by the assessee also shows the repayment in the same bank account and has go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assets, bank balance and the corresponding amount of loan, justifies the creditworthiness of the parties. 018. So far as genuineness is considered ld AO has not brought on record any independent material, by making an inquiry on his own to show the transaction is not real. The documentary evidences produced were not at all inquired. 019. When the assessee discharges its initial onus cast upon him by producing the confirmation, the bank statement, the annual accounts, the income tax returns as well as the details of repayment which is also confirmed by production of the bank account of the lender, the learned assessing officer is duty-bound to make an independent enquiry. Unless an independent enquiry is made by the learned assessing officer, onus does not travel back to the assessee. If the learned AO failed to throw onus back on the assessee, the addition cannot be made by him under section 68 of the act. 020. Further, the learned assessing officer has made the addition only on the basis of the statement recorded of the accommodation entry provided by the investigation wing. The learned assessing officer has not examined the accommodation entry provider. The statement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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