TMI Blog2023 (6) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... and dismiss the appeal of the revenue. Addition u/s 68 - bogus unsecured loans - unsecured loan payment from Late Shri Lavji N. Shah - CIT-A deleted the addition - HELD THAT:- CIT(A) gave finding of fact that after perusal of the bank statement of Late Lavji, that there was sufficient balances in his bank accounts before giving loan to the assessee firm. CIT(A) also found that there was no cash deposit in the bank account before advancing the loan to the assessee firm. And that the loan transaction was through the regular banking channel. CIT(A) was of the view that the creditworthiness of the Late Shri Lavji N. Shah also stands proved. And therefore according to him section 68 of the Act cannot be invoked against the assesse and was pleased to hold that the assessee has brought on record necessary evidences to prove genuineness of the unsecured loan payment from Late Shri Lavji N. Shah and therefore deleted the addition made u/s 68 of the Act, which action of the Ld. CIT(A) is sustained because the Ld. CIT(A) has taken the decision on the basis of facts which could not be assailed before us. Since no perversity can be attributed to the action of Ld. CIT(A), we uphold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion entry in the form of unsecured loans from various entities. Thereafter, the AO asked the assessee company regarding its claim of purchase/expenses during the period AY. 2019-20 to the tune of Rs. 33,84,07,390/- and directed the assessee to furnish the list of purchase parties along with their address and PAN etc. In other words, the assessee was directed to produce the list of parties, from whom the assessee has been procuring materials along with documentary evidences like purchase order, ledgers, invoice, e-way bills, delivery challans, lorry receipts, consumption register, purchase and consumption reconciliation statement and bank statement etc to substantiate the genuineness of the purchase expenses claimed during various years. The AO acknowledges that in response the assessee produced a list of purchase parties along with their PAN in a tabular format, ledgers and few invoices. But the AO noticed some deficiencies in it, and was of the opinion that the assessee failed to produce the purchase order, complete set of invoices, delivery challans etc. According to the AO, the inquiries revealed that certain entities from whom the assessee has purchased material are bogus/entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Rushabh Trading, (ii) Rushabh Corporation and (iii) Hitesh Kantilal Shah HUF is deleted. As discussed in para 7.3.5 of this appellate order for A.Y. 2014-15, disallowance of purchases of Rs. 39,86,587/made by the AO in respect of purchases made from (i) V.H. Enterprises (ii) Mahavir Enterprises (iii) Vimalnath Corporation (iv) Vimalnath A sociates is restricted to 5% of total purchases i.e. Rs. 1,99,328/-. Accordingly, ground of appeal No.3 is Partly Allowed. 5. Since the Ld. CIT(A) has followed his own order for AY. 2014-15 (which is emanating from the same search) and discussed in common order, it would be gainful to consider his decision for AY. 2014-15 which is given at page no. 22 of his order, wherein the Ld. CIT(A) took note of the remand report of the AO (which has been reproduced at page no. 16 to 21 of impugned order). The Ld. CIT(A) has noted as under: - A copy of the remand report was sent to the appellant for rejoinder/comments. The appellant has filed a rejoinder to the remand report vide submission dated 30.06.2022. In the rejoinder, the appellant has submitted that all the necessary evidences to prove the genuineness of purchases were furnished befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tmi 662 ~ Bombay High Court (iv) Bholanath Polyfab Limited [2013 (10) TMI 933 ~ Gujarat High court and others. The appellant has further submitted that the AO has relied upon the statement of various persons recorded by the department. However, the opportunity of cross examination was not provided to the appellant by the AO without providing opportunity to the appellant and cross examination of the parties should be deleted. For this proposition, the appellant has relied upon the decisions in the case of (i) Kanwar Natwar Singh vs. Directorate of Enforcement (Supreme Court (October 8! , 2010) (ii) Kishinchand Chellaram vs. Commissioner of Income-tax (iii) High Court of Gujarat Heirs And Lrs of late Laxmanbhai S. Patel vs. Commissioner of Income-tax 174 Taxman 206 and others. The appellant has further submitted that it has proved that the purchases are genuine by bringing all the necessary evidences on record during the assessment proceedings as well as the remand report proceedings. Thus, the purchases made by the appellant from these parties should be considered as genuine. For this proposition, the appellant has relied upon the decisions in the case of (i) Orissa Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject work on behalf of government agency as well as MCGM and the project has been completed by the appellant firm. The appellant firm has received payment from the government agency on execution of project work assigned to it. The sale proceeds have been realized by the appellant firm from the government agencies. The AO has not doubted and disturbed the sales shown by the appellant as bogus or inflated. It is a settled principle of law that the AO cannot disallow 100% of purchases when the sales are not disturbed by the AO. Even the statements of Vinod Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V. Shah (Proprietor of V.H.Enterprises), Kantilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (key person of Vimalnath Associates Divya Corporation) are taken into consideration wherein they have admitted of having provided bogus accommodation entries, there is no evidence that the cash was received back by these parties from the appellant. Thus, the 100% disallowance of purchases made by the AO in respect of these 07 parties cannot be sustained. In this regard, the following case laws are relevant. i. Vs Rishabhdev Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent recorded of four (4) parties who had appeared before AO as well as taking note of the aforesaid facts that six (6) parties address was correct (Inspector Report); and the important fact that the assessee had executed the Contract work on behalf of Government agencies like BMC MCGM etc; and the project undertaken by assessee have been completed as certified by the Competent Engineers; and the fact that the assessee firm has received the payment from the Government agencies; and that the AO has not disturbed the sales (work executed payment thereto), therefore, the Ld. CIT(A) directed the AO to restrict disallowance of purchases to 5% of the total purchases made from seven (7) parties namely R. K. Madhani Co., Vimalnath Associates, Vimalnath Enterprises, Vimalnath Corporation, Mahavir Enterprises and Bhavya Enterprises and V. H. Enterprises. And the Ld. CIT(A) was pleased to delete the disallowance of 100% purchase made from M/s. Hitesh Kantilal Shah HUF, M/s Rushabh Corporation, M/s. Rushabh Trading Co., and M/s. Vimalnath Traders (since they had appeared and the statement was given before the AO during the remand proceedings which have been recorded and no adverse view h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued show cause notice to the assessee and in response to the show cause notice, assessee has submitted the documents which include ledger confirmation and ITR of the creditors/lenders. It was also submitted before the AO that the assessee has returned back loans to various parties either fully or partially. Further, assessee produced the following creditors/lenders before AO viz Ms. Neelima Madhanai, Shri Khelan Madhani and Shri Rajendra Madhani (Karta of M/s. Rajendra Madhani HUF), so that AO can verify from the parties the genuineness of the transactions and their creditworthiness. Their statements were recorded by AO; and the AO understood that the assessee was having personal relationship with them (relatives); and that they had given loans to the assessee. However, the AO added the same u/s 68 of the Act because lenders failed to clarify the source of the funds. And thus added an amount of Rs. 2,21,04,615/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who noted as under: - 55. Ground No.4 is regarding disallowance of Rs. 2,21,04,615/- made by the AO on account of unsecured loans. 55.1. For A.Y. 2019-20, the AO has made addition on unsecured loans of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rushabh Corporation and Rushabh Trading Co. And the Ld. CIT(A) took note of the fact that the assessee company has also provided before the AO the following relevant documents for proving about the creditors/lenders by producing their respective income tax returns and proof of repayment of loans [to whom so the same was re-paid]; and moreover, Shri Rajendra Madhani (Karta of Rajendra Madhani HUF), Shri Ketan Madhani and Ms. Neelima Madhani had attended before the AO and their statements were recorded u/s 131 of the Act. And thus the Ld. CIT(A) noted that the parties/creditors were identifiable and the amounts were received through banking channels. And they had creditworthiness to give loan/ investment in the assessee firm. And the Ld. CIT(A) noted that the AO has drawn adverse inference against unsecured loans given to the assessee since the lenders failed to prove source of the loan given to assessee. The Ld. CIT(A) noted that during the appellate proceedings, the assessee had submitted the loans confirmation along with ITR, copies of invoices of the lenders; and that additional evidences were forwarded to the AO for remand report; and the remand report given by AO has been repr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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