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TMI Blog2015 (6) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... le. No discrepancy was found by the AO in the documents filed by the assessee. Therefore,upholding the order of the FAA, we decide the first limb of the first ground of appeal against the AO. Second part of the first ground deals with deletion of interest amount of ₹ 40.37 lakhs.While deciding the appeal filed by the assessee,we have upheld the decision of the FAA in restricting the interest disallowance.Second ground of appeal is also decided against the AO. - ITA No293/Mum/2013,ITA No.976/Mum/2013 - - - Dated:- 10-6-2015 - S/Sh. I. P. Bansal, Rajendra,JJ. For the Petitioner :Shri Vimal Punmiya For the Respondent :Shri Premanand J. (DR) Order u/s.254(1)of the Income-tax Act,1961(Act) PER RAJENDRA, AM Challenging the order dt.21.11.2012 of the CIT(A)-33,Mumbai,Assessing Officer(AO) and the assessee have filed cross appeals.The assesee has raised following Grounds of Appeal: ITA No.293/Mum/2013 1.The ld. CIT(A) -33 had erred in law and in fact by confirming addition of ₹ 36,00,000/- out of total unsecured loans of ₹ 3,35,00,000/- u/s. 68 of the Income tax Act, 1961. 2. The ld. CIT(A) -33 had erred in law and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass book were kept by DK.The AO found that in case of Girish M.Kothari-HUF(GMK)the creditor confirmed of having given loan to the assessee, but could not specify as to how much loan was given and when and his bank documents were kept with DK.In the case of Rameshchandra K. Ganatra (RKG),the facts were same as that of GMK.On the basis of enquiries made in the Mulund area,the AO held that the pattern adopted by the assessee indicated that cheque books and pass books were kept by DK. A survey action,u/s. 133A of the Act,was carried out at the business premises of DK on 01.12. 2011 and his statements were record. In his statement, DK agreed that he had provided entries for loan in lieu of cash received for the assessee and others. He further explained that the assessee approached through one Shri Valjibhai Bhanushali (VB) for arranging bogus unsecured loans,that it was handing over the cash to VB and he was issuing cheque to the persons concerned, that the cheques for the interest amount were give to DK through VB, that he was deducting commission @ 0.6%, that interest was paid through cheque and TDS was made in few cases.The AO further mentioned that similar pattern was found duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove identity, genuineness and credit worthiness of those persons, that the loan creditors had confirmed their PAN and other details,that the AO made the addition u/s 68 of the Act without having discharged his onus of making any enquiry to show that the details given in confirmations were not correct,that even if it was considered to draw adverse inference in some other cases it should be confined to only those cases, that there was no loan outstanding in the name of one person on the date when enquiries were conducted that loan was repaid to him in September 2010,that other 3 persons had confirmed the loans,that it had discharged the onus, that the assessee had filed confirmation of the creditors namely Mansukh P. Sheth , B.N. Doshi, Hiralal P. Patel, Pushpa P Solanki and Jagdish V Ratnani, that out of 90 loan-creditors 75 were repaid in the succeeding assessment years, that non-production of creditors could not by itself be considered a good ground for making addition u/s. 68 of the Act,that DK had retracted his statement also subsequently,that VB had stated that he did not had any professional or business relationship with the assessee,that it had also been stated that he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in position to state as to why in all those cases for income below taxable limit form No.15G/H were not obtained, that in other cases such confirmation were filed during the assessment proceedings. The FAA referred to the case of Orient Trading Co. of Bombay High Court and Oasis Hospitality (P) Ltd. of Delhi High Court. He held that the explanation of the assessee about these 13 Parties was not satisfactory and was liable to be rejected. Referring to the cases of MK Brother (163 ITR 249) ; Durgaprasad More (82 ITR 540); Sumati Dayal (214 ITR 801); he upheld the addition of ₹ 31.00 lacs. He also held that the capacity and credit worthiness of those parties had not been proved by the assessee, that primary onus remained undischarged.He also held that the figure of unsecured loan included squared up loan amount amounting to ₹ 26 lacs during the year itself, that the AO had conducted on the spot enquiries in Mulund and Malad areas,that he had specifically mentioned the outcome of the enquiries in case of JVK, LKG, GMK (HUF) and RKG, that out of the four persons three had confirmed of having given loans to the assessee ,that they had also stated that cheque books and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O had issued show cause notice to the assessee mentioning about outcome of enquiries in those four cases to which the assessee had replied,that in case of three persons cheque-books and pass books were kept by their CA,that they had said that it was between them and the CA,that the AO had given a copy of the statement recorded of the chartered accountant to the assessee wherein it had been admitted that he did the job of providing entry on the request of assessee,that the assessee had approached him by one of the acquaintances its namely VB,that the parties did not say that loans were bogus,that DK termed the loans bogus,that from the statements of DK no where it was clear that those parties said that those were bogus loans,that in the questions asked to DK there was no question pertaining to finding of pass books and cheque books at his office,that statements four persons were not corroborated by findings of survey proceedings,that in absence of any such findings the statement of CA remained mere statement not supported by any finding to support the same,that 3 out of those 4 unsecured creditors identities were proved,that they had confirmed having given the loans, that their pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te proceedings,that no cognizance of the same had to be taken,that DK was silent almost for nine months,that the assessee had simply relied upon the loan confirmations,that the AO had stated that it had purposely chosen not to cross examine those four persons who had given their statement as well as also had not asked for the opportunity to examine DK.Finally,she confirmed the addition of 36.00 lacs (31 lacs +5 lacs ),as against the addition of ₹ 3.35 crores made by the AO.With regard to the interest disallowance of ₹ 40.37 lakhs,the FAA directed the AO that interest paid to 14 creditors only should be disallowed. 4.During the course of hearing before us,the Authorised Representative (AR)argued that the creditors of the assessee were genuine,that there was no involvement of cash,that DK had retracted his statement,that the statement recorded during the survey, u/s/133 A of the Act,had no evidential value,that income could not be assessed on a mere retracted statement if there was not enough material, that the statement of DK was wrong and contradictory, that the assessee had discharged his onus by proving the identity, capacity and genuineness of the lenders, that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f providing the entries was done in the names for the reason that they were having requisite build up capital,that he paid a commission of 0.6% by the assessee, that on the basis of the statement given by DK additions of ₹ 89 lacs was made with regard to 18 parties,that the FAA upheld the addition of ₹ 36 lakhs and deleted the remaining addition, that the FAA held that interest paid to 14 parties only should be disallowed that were held to be non-genuine. As stated earlier,the AO did not make any inquiry about 76 creditors out of the 77 Creditors. The FAA has given a categorical finding of fact that no inquiry was made and hence the addition made by the AO for those creditors was not justifiable,excpet one case.It is said that in the matters related to section 68 burden of proof cannot be discharged to the hilt-such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation,not the materiality of evidences, is the basis for deciding the cases falling under section 68.The assessee had produced all the required documentary evidences and discharged its onus as far as those 76 credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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