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TMI Blog2016 (11) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor companies is concerned, it has been explained that the creditor companies are legal entities and are already assessed to income tax. The assessee has also explained the source of the creditors also. He has invited our attention to a table to show that an amount of ₹ 10 crores had been advanced by Niranwal Credit and Holding Pvt. to the assessee. The said Niranwal Credit and Holding Pvt. had amalgamated with Flair Engineering Pvt. Ltd. and further that the source of this ₹ 10 crores was the amount received from Sulabhya Engineering Pvt. Ltd. Similarly, an amount of ₹ 16.02 crores was advanced to the assessee by Ved Investments and Trading Company Pvt. which has amalgamated with Wisdom Engineering Pvt. Ltd. The assessee has also explained the source of credits in the account of Ved Investments. Additions made by the AO treating the loans as unexplained is not held to be justified. The same is accordingly ordered to be a deleted. - Decided in favour of assessee - ITA No. 6368/M/2014 - - - Dated:- 28-9-2016 - Shri G.S. Pannu, Accountant Member And Shri Sanjay Garg, Judicial Member Assessee by : Shri Sunil M. Lala, A.R. Revenue by : Shri Alok J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he introducers at the time of opening of the bank accounts of Ved Investments and Trading Company Pvt. Ltd.; that in the annual report submitted in the name of Ved Investments Ltd. and Niranwal Credit and Holding Pvt. Ltd. to the Registrar of Companies there was no mention of advance given to the assessee company; that such loan of ₹ 26.02 crore shown to have been taken from Flair Engineering Pvt. Ltd. and Wisdom Engineering Pvt. Ltd. or in the name of Ved Investments and Trading Company Pvt. Ltd. or Niranwal Credit and Holding Pvt. Ltd. was not from any explained source nor was there any genuine transaction; that the proper identity of such parties had also not been established. The AO, therefore, found that all these companies had been floated in connivance with each other to channelize black money through bank and utilize the same by giving white colour by way of filing return of income, filing annual A/c with ROC and by filing of other related documents. The AO came to the conclusion that these companies had been floated for entry operation and did not have any business of their own. All the money appearing in their bank accounts originated from some other accounts. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to record the loan transaction in the name of Flair due to the impending amalgamation between Niranwal and Flair. Further, the paying party viz. Niranwal had received funds from Sulabhya Engineering Pvt. Ltd. Since Niranwal was to be amalgamated with Flair, the balance in the account of Sulabhya along with the balance in the account of the assessee was transferred to the books of Flair, which has been reflected in the Grouping of assets and liabilities of both these companies. He has, therefore, stressed that due to the amalgamation between Niranwal and Flair, the accounts of the creditors and debtors in Niranwal s books were squared off and transferred to Flair and therefore merely because the name of the assessee was not reflected on the face of the balance sheet of Niranwal, the genuineness of the loan taken by the assessee could not be doubted. He has further submitted that the assessment orders had been passed under section 143(3) of the Act in the case of Ved, Flair Niranwal and a notice under section 148 of the Act has been issued in the case of Wisdom. Though as per settled law, the assessee is not obliged to explain the source of source, the assessee has submitted the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) 5. CIT v Meera Engg Commercial Co. P. Ltd. (1998) 96 Taxman 234 (Jabalpur) (MAG) 6. Kamal Engineering Works v ITO (1995) 52 TTJ 75 (Del) 7. GG Films v ITO (1993) 45 TTJ 0644 8. Subbiah Ramanathan and RM Janaki v ITO TS-352-ITAT-2015 (CHNY) 9. DCIT v Overseas Infrastructure Alliance (I) Pvt. Ltd. (ITA No.1470/Mum/2011) The ld. Counsel for the assessee has further submitted that in order to fasten liability on the assessee by including such credits as income from unexplained source, a nexus has to be established that the sources of creditors deposit flow from the assessee. In the absence of any such link, additions of cash credits found in the books of account of the assessee could not be considered to be unexplained income of the assessee. That where the AO has drawn adverse inference finding some discrepancies, the issue could not be converted into an addition of income under section 68 of the Act in the hands of the assessee and appropriate cause was that the AO of the assessee could have informed the concerned Assessing Officer, assessing the respective cash creditors for appropriate action in their case. He, in this respect, had relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to the assessment order dated 30.03.15 passed under section 143(3) of the Act in the case of Ved Investments and Trading Company Pvt. wherein an amount of ₹ 16,02,00,000/- has been added into the income of the said company under section 69A of the Act for the A.Y. 2010-11. The Ld. A.R. of the assessee has further brought our attention to the assessment order dated 03.03.15 in the case of Flair Engineering Pvt. Ltd. passed under section 143(3) read with section 147 of the Act vide which an addition under section 68 of the Act of an amount of ₹ 20,00,00,000/- has been made in the hands of the Flair Engineering Pvt. Ltd. for A.Y. 2010-11. In the case of Niranwal Credit and Holding Pvt., the assessment had been completed under section 143(3) read with section 147 of the Act for A.Y. 2010-11 and addition of ₹ 20,00,00,000/- has been made by the AO. In the case of other party i.e. Wisdom Engineering Pvt. Ltd. the Ld. Counsel has invited our attention to the notice under section 147 of the Act dated 29.03.16 issued in the name of Wisdom Engineering Pvt. Ltd. and has stated that assessment in the case of said company has been reopened and the reassessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO, however, has failed to establish the link or the chain or route of funds from the assessee to the creditors or even to their source despite adequate investigations. The Hon ble Rajasthan High Court in the case of Aravali Trading Company (supra) has held that once the existence of persons in whose names credits are found in the books of the assessee is proved and such persons own such credits with assessee, assessee is not required to prove source from which creditors could have acquired money to be deposited with it. Similar view has been taken by the Hon ble Rajasthan High Court in the case of Jai Kumar Bakliwal (supra). In the case of Dharmadevi Finance Pvt. Ltd. the Hon ble Gujarat High Court has observed that where it was found that in respect of the creditors the assessee had filed PAN of creditors, their confirmation and their bank statement which established their creditworthiness and the transactions were made through banking channel then additions under section 68 cannot be made in the hands of that assessee. Almost similar observations have been made by the different Hon ble High Courts in various decisions as relied upon by the Ld. A.R. of the assessee as men ..... X X X X Extracts X X X X X X X X Extracts X X X X
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