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TMI Blog2015 (8) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order that the main grievance of the AO in the assessment order that although the assessee had made the payments to the above parties by account payee cheque, however, since the assessee could not produce the bank account of those suppliers, therefore, it is not clear as to whether cash has been withdrawn after the cheques were deposited. We find the AO in the remand report has mentioned that complete details/evidences in respect of the purchases effected from the said 2 concerns were furnished. He has not raised any such doubt now. Copy of the remand report has already been reproduced in the preceding paragraphs. Therefore, we do not find any infirmity in the order of the CIT(A) in deleting the additions made on account of purchases from the above 2 parties. So far as the argument of DR that the parties did not appear before the AO is concerned, we find this was not the case of the AO. It was the doubt of the AO that the assessee might have withdrawn cash from those bank accounts after making payment through account payee cheques since 133(6) notices were returned unserved. He has no other doubts. Since the AO in the remand report has specifically mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies namely Cybertech Online Ltd., Mumbai and M/s. SAR Engineering Ltd., Mumbai could be confirmed. It was stated that the above 2 parties exist on the given addresses and as per their balance sheet and profit and loss account, the transactions with the assessee are reflected. However, in respect of the other 21 creditors the ADIT(Investigation) Mumbai reported that the addresses given are bogus/non-genuine and no concern with the stated name is running on these addresses. 3. It was further stated that in respect of parties at Sl.No.1 to 9 these companies form part of the Khandar Group of cases and are income-tax defaulter companies with huge arrears of tax and no source of income. On being confronted by the AO, the assessee filed the copies of income-tax return/acknowledgement form in respect of some of the creditors to support the claim regarding the genuineness of loans received by it. However, the AO noted that the income returns revealed that the concerned parties have negligible or no income, the details of such parties are as under : Sr.No. Name of the party Income Returned Loan given during the year (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the absence of the bank accounts of those parties. The AO, therefore, treated the purchases from M/s. Ajay Enterprise, Amit Traders and Raja Traders as inflation of purchases and made addition of ₹ 1,93,66,348/- the details of which are as under : M/s. Raja Traders Rs.1,18,16,453/- M/s. Amit Traders Rs.27,13,144/- M/s. Ajay Enterprises Rs.48,36,751/- Total Rs.1,93,66,348/- Thus, the AO made addition of ₹ 7,09,38,357/- to the total income of the assessee. 6. Before CIT(A) the assessee filed detailed written submission along with certain new evidences. It was submitted that the AO asked the assessee to furnish confirmation letters from the loan creditors and details of party-wise purchases for the first time on 18-11-2009 and with respect to certain parties grouped under the head trade deposits etc. on 14-12-2009 and 18- 11-2009. Those details were submitted on 14-12-2009, 18,12- 2009 and 23-12-2009. It was submitted that only on 23-12-2009 the AO informed the assessee that the loan parties could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted since these companies were not maintaining the books of account and the last return filed by these companies was for A.Y. 2000- 01. The AO further noted that these assessees deposed before the AO that consequent to search action u/s.132 in their group of cases (Khandar group) conducted in the year 1992 at Mumbai, group had offered ₹ 2.10 Crores in the name of 108 entities which was accepted by the Hon ble High Court of Bombay. After the search the entire financial affairs of the companies/entities of the group were in total mess as a result of which none of the companies of the group have filed their income-tax returns. Subsequently, it was deposed before the AO that there was a fire in the office at Masjid Bandar of Mumbai on 02-11-2001 which damaged all the books of account. In respect of this claim copy of the FIR report was submitted. It was accordingly claimed that after that incident none of the group companies have finalized their accounts nor filed their incometax returns. On a query in respect of the credits seen in the bank accounts prior to advancing loans, it was deposed before the AO that the same are through internal fund arrangements. 10. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .133(6) no more survives. Since sufficient evidences were produced before the AO during remand proceedings in respect of the purchases made he held that the disallowance of purchases aggregating to ₹ 1,33,66,348/- cannot be sustained. He accordingly deleted the addition. 13. Aggrieved with such part relief given by the CIT(A) the Assessee as well as the Revenue are in appeal before us with the following grounds : Grounds by Assessee : Wherever context so require, the following grounds of appeal prayers are without prejudice to one another and in alternative - 1 . In view of the facts and circumstances of the case, evidences on record and the provisions of law, the learned CIT (Appeals) erred in confirming the addition u/s 68 of the IT. Act, 1961, of ₹ 2,40, 00,000/- on the ground of failure of the assessee to establish the credit worthiness of the concerned loan creditors and the genuineness of transactions, with respect to the loans of ₹ 2,40,00,000/-, from the companies belonging to the Kandhar Group. Therefore, it is prayed that the addition of ₹ 2,40,00,000/-, confirmed by the learned CIT (A) u/s 68, may please be cancelled/deleted. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Khandar group of companies submitted that the assessee has taken loan from 9 concerns of the Khandar group amounting to ₹ 2,40,00,000/-. All the 9 private limited companies have confirmed to have given loan to the assessee and their confirmation letters are placed at page 58 to 119 of the paper book. Referring to various pages of the paper book the Ld. Counsel for the assessee submitted that the certificate of incorporation of all these companies are placed in the paper book. He submitted that except in the case of Kapil Marketing Pvt. Ltd. and Kushal Dye-Chem Pvt. Ltd. the PAN Number of all the creditors are furnished in the paper book, copy of bank statements of all the creditors are also placed in the paper book. He submitted that the loan taken from these parties have been received through bank cheques. All the above parties have appeared before the AO and confirmed to have given the loans to the assessee company and this fact is also noted by the AO at para 4.4 to 4.6 of the remand report a copy of which is placed at pages 700 to 703 of the paper book. He submitted that the copies of the statements recorded u/s.131 of these parties are not available with the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee since the assessee has discharged the burden cast on it. The assessee is not required to prove the source of the source. He accordingly submitted that the addition made by the AO and sustained by the CIT(A) is not justified since the assessee has proved the source of the cash credit and he is not required to prove the source of the source. 16. So far as the appeal of the Revenue is concerned he submitted that the AO disallowed the purchases from Ajay Enterprises amounting to ₹ 48,36,751/-, Amit Traders amounting to ₹ 27,13,144/- and M/s. Raja Traders amounting to ₹ 1,18,16,453/-. Although the CIT(A) has deleted the purchases made from the above 3 parties, the Revenue has filed the appeal in respect of deletion of purchases from M/s.Amit Traders and M/s.Ajay Enterprises amounting to ₹ 27,13,144/- and ₹ 48,36,751/- respectively. Referring to para 5.1 to 6.1 of the remand report, the Ld. Counsel for the assessee drew the attention of the Bench to the findings given by the AO in the remand report and submitted that although the 2 trade creditors, i.e. Ajay Enterprises and Amit Traders did not attend the proceedings by filing the adjourn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case has failed miserably to substantiate the credit worthiness of the above companies especially when they have not filed their return of income after A.Y. 2000-01. He accordingly submitted that the order of the CIT(A) on this issue be upheld. 19. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the appeal filed by the assessee is concerned, we find the AO made addition of ₹ 4,72,15,000/- u.s.68 of the I.T. Act in respect of 21 creditors on the ground that the assessee failed to discharge the onus cast on it regarding the ingredients of section 68 such as the identity and capacity of the creditors and the genuineness of the transaction. We find the Ld.CIT(A) deleted the addition in respect of 12 creditors amounting to ₹ 2,32,15,000/- for which the Revenue is not in appeal. So far as the amount sustained by the CIT(A) amounting to ₹ 2,40,00,000/- is concerned, the assessee is in appeal before us. 19.1 We find in the instant case on the basis of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, Mumbai 2600000 17 Senior Marketing Private Limited, Mumbai 3100000 18 IndiaGate Soft Tech Ltd., Mumbai 2500000 19 Naheshri Marketing Ltd., Mumbai 4750000 20 Saffron Surgical System Pvt. Ltd., Mumbai 1100000 21 Namrata Exports Pvt. Ltd., Mumbai 1400000 Trade Creditors : 22 M/s. Amit Traders Prop. Smt. Mayavati G. Verma, Mumbai 2713144 23 M/s. Ajay Enterprises Prop. Gyanchand Verma, Mumbai 4836751 24 M/s. Raja Traders Prop. Rajmohal Assomal Dodeja, Ulhasnagar, Dist : Thane 11816453 3. The Principal officers of all the above companies/concerns were summoned u/s 131 of the I.T. Act, 1961 for attendance on 07/03/2011 and 08/03/2011. BGTL was also informed about the above proceedings vide this office lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has further furnished information of the loans advanced, repayments during the. year under consideration which are given in the note (**) below Cyber tech Interactive Private Ltd, Thane (AABCC7746H) -do- BPC Financial Services Pvt .Ltd. Mumbai AABCB8612M -do- Samayak Multitrade Private Ltd., Mumbai (AAFCS9135A) -do- Syonara Properties Private Ltd., Mumbai AAFCS6125A -do- (**) Name of company Details of filing of returns Roselin Plastics Pvt. Ltd., Mumbai Bandar, Mumbai (AABCR2098D) In compliance to the summon issued Shri Kumd R Vyas, Accountant of the company duly authorized by the Director of the company attended. His statement was recorded u/s.131 of the I.T. Act. The deponent confirmed that loan amount as mentioned in para 2 above was advanced to the BGTL and also confirmed receipt of interest. In support of the identity and genuineness of the transactions, Memorandum and Article of association, certificate of incorporation, copies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yak Share and Stock Brokers Pvt. Ltd., Mumbai (AAKCS3497C) -do- Skytouch Infrastructure Pvt. Ltd. Mumbai (AAJCS9934R) -do- (**) Name of company Details of Loans Opening Addition Interest (Net) Repayment Total as on 31/3/2007 Shri Anekant Shares and Securities Pvt. Ltd., Mumbai 00 2000000 00 00 2000000 Palasiya Leasing and Investment (P) Ltd., Mumbai 00 2500000 00 00 2500000 Samayak Share and Stock Brokers Pvt. Ltd., Mumbai 00 2000000 00 00 2000000 Sky touch Infrastructure Private Ltd., Mumbai 00 1000000 00 00 1000000 Unno Industries Ltd., Mumbai 00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M4652M) -do- (**) Name of company Details of Loans Opening Addition Interest (Net Repayment Total as on 31/3/2007 Amrut Marketing Private Ltd 3552762 5050000 605874 2060302 7148334 Senior Marketing Pvt. Ltd., 1755674 3100000 294018 2005674 3144018 Kapil Marketing Pvt. Ltd 2009052 2600000 346887 1509052 3446887 Kausal Dyechem Pvt. Ltd., 501275 900000 123645 1275 1523645 Mona Traders Pvt. Ltd., 1004080 2600000 293444 504080 3393444 4.5 Name of company Details of filing of return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2500000 322628 2011157 3072628 Saffron Surgical Systems Pvt. Ltd. 502805 1100000 106791 2805 1706791 Naheshri Marketing Limited 4050740 4750000 699430 550740 8949430 4.6 Name of company Details of filing of returns Namra Exports Pvt. Ltd., 96, Kazi Sayyad Street, Masjid, Mumbai (AAACN2079F) In compliance to the summon issued Shri Amrut N. Khose, employee duly authorised by the Director of the company attended. His statement was recorded u/s.131 of the I.T. Act, 1961. The deponent confirmed that loan amount as mentioned in para 2 above was advanced to the BGTL and also confirmed receipt of interest. In support of the Identity and genuineness of the transactions, Memorandum and Article of Association, certificate of incorporation, copies of bank accounts relating to advancing the loan, repayment etc were submitted during the proceedings. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, VAT audit report, audited financial statements, copy of Income Tax returns and copies of all the sale bills along with the Material receipt note of BTGL, Weigh bridge slips etc. were produced in support of the transactions. 5.1 In respect of the Trade Creditors M/s. Ajay Enterprises and M/s. Amit Traders, both of Mumbai, adjournment letters were received from the above concerns duly signed by the proprietors Shri Gyanchand R. Verma and Smt. Mayavati G. Verma, respectively. In the said letters both received on 07/03/20011, while requesting for adjournment on 08/03/2011 due to unavoidable reasons, the proprietors have requested for date after 21/04/2011. Shri Ravindra Kumar Jain of BGTL was shown the above mentioned adjournment letters and in the matter of the transactions with the said concerns, his statement was recorded on 08/03/2011. In support of the impugned transactions, Shri Ravindra Kumar Jain furnished copies of confirmation of the accounts of the said parties, copy of income tax return of the said persons obtained by him from them for the purpose of the submitting the same to the CIT(A)-II, Nashik. Copies of purchase bills along with debit/ credit (deduction ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome after A.Y. 2000-01. It is also an admitted fact that in the statement recorded during the course of remand proceedings the authorised persons of these companies have confirmed that the financial affairs of the companies/entities of the group were in total mess for which these companies have not filed their return of income. Therefore, in our opinion, in absence of any financial statements and audited books of account, it is not possible to find out the assets and liabilities of the creditor companies. Since the loan creditors are private limited companies and since they have neither maintained books of accounts nor got it audited and since they have not filed their returns of income, therefore, it is impossible to find out the capacity of those loan creditors. 19.3 It is the settled proposition of law that for accepting any cash credit as genuine the onus is always on the assessee. The assessee has to prove to the satisfaction of the AO regarding the identity and capacity of the loan creditor and the genuineness of the transaction. Although in the instant case by producing various documents such as ROC Incorporation Certificate, PAN No., bank statement of the lender compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed advancing of loans to the assessee. It is also clear that such persons explained their sources of income. Apart from blandly dis-believing their capacity, the Assessing Officer has not led any evidence to prove that funds for the impugned credit could be traced to the assessee itself. It will also not be out of place to mention here that all the lenders are agriculturists, who have sold their cotton produce to the assessee company, which is engaged in the business of ginning and pressing of cotton. It is also a stated position that the lenders are not strangers to the assessee company, inasmuch as they are its shareholders. Moreover, it is also found by the Commissioner of Income-tax (Appeals) that all the creditors have been repaid subsequently through account payee cheque. Considering the entirety of the aforesaid circumstances, in our view, the assessee had duly discharged its burden cast under section 68 of the Act so as to prove the three ingredients, namely, identity, creditworthiness of the lenders as well as genuineness of the transactions. The Assessing Officer having regard to the material on record and in law proceeded on mere presumptions and surmises to disbelieve t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns were furnished. He has not raised any such doubt now. Copy of the remand report has already been reproduced in the preceding paragraphs. Therefore, we do not find any infirmity in the order of the CIT(A) in deleting the additions made on account of purchases from the above 2 parties. 21. So far as the argument of the Ld. Departmental Representative that the parties did not appear before the AO is concerned, we find this was not the case of the AO. It was the doubt of the AO that the assessee might have withdrawn cash from those bank accounts after making payment through account payee cheques since 133(6) notices were returned unserved. He has no other doubts. Since the AO in the remand report has specifically mentioned that the assessee has filed the complete details/evidence in respect of the purchases effected from the said 2 concerns, therefore, we do not find any infirmity in the order of the CIT(A). We also concur with the finding of the Ld.CIT(A) that in absence of the impugned purchases it would not have been possible to attain the sales made and the inventory maintained. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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