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TMI Blog2017 (8) TMI 1549X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri J.P. Bairagra Department by: Ms. N. Hemalatha ORDER Both the appeals have been filed by the revenue challenging the orders passed by Ld CIT(A)-9, Mumbai and they relate to the assessment years 2008-09 and 2011-12. Both the appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. The assessee is engaged in the business of manufacture and sale of sarees. During the year relevant to AY 2008-09, the assessee has received money from the group concerns of Shri Praveen Kumar Jain to the tune of ₹ 40.00 lakhs, consisting of unsecured loan of ₹ 20.00 lakhs and Share application money of ₹ 20.00 lakhs. Similarly in the year relevant to AY 2011-12, the assessee has received unsecured loans to the tune of ₹ 40.00 lakhs from four persons. In the search proceedings undertaken in the hands of Shri Praveen Kumar Jain had admitted that he and his group concerns are engaged in providing only accommodation entries by way of unsecured loans and share application money. Hence the AO reopened the assessments of both the years and assessed the above said am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation received from Investigation wing from search conducted in the case of third party. However AO has not made any further enquiry to corroborate his findings. A perusal of the documentary evidences brought on record by the Appellant show that the onus of proving the genuineness of transaction, identity and capacity of the lenders and share applicants has been discharged by the Appellant. The same is evident from the list of documents submitted by the Appellant vide letter dated 7.12.2015 with respect to both the lenders of the unsecured loans as well as share applicants. Appellant has place on the record of the AO copies of Annual audited reports, Directors report, PAN, share certificates issued, Form 16A demonstrating TDS deducted on interest payments made to lenders, bank statements showing payments received and repayment of loan made by the Appellant, loan confirmations etc. From the details submitted it can be seen that the parties ie share applicants as well as lenders have payments from their bank accounts through account payee cheques, therefore these transactions cannot be treated as bogus. The AO has not been able bring on record any valid material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as copy of income-tax returns of the share applicants, share certificates, return of allotment of shares, ROC filings, Board Resolutions of investor companies, bank statement of investors from where share application money was received by appellant company etc. Appellant has also filed copy of the report of valuation on equity shares of the assessee company as on 1st June, 2008 prepared by Sara Associates, Chartered Accountants according to which estimated value per share is ₹ 89.88/- justifying the value at which shares were issued. Details of share application money 2. Triangular Infocom Ltd. (earlier known as Lexus Infotect Ltd.) Details of share application during the year Keeping in view all these evidence it cannot be held that the assessee did not establish the identity of the share applicants. If it is so, then the law as pronounced by the Hon ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. j20091 319 ITR (St.) is clear that if the share application money-is received by the assessee-company from alleged bogus shareholders whose names are given to the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not is a question of fact and must be decided accordingly and not merely on the basis of assumptions and presumptions. (i) In the case of SheoNath Singh v. Appellate Asstt. CIT [19711 82 ITR 147 it has been held that the words reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and the ITO may Act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The ITO would be acting without acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. (ii) In the case of Babulal C. Borana v. ITO (2006) 282 ITR 251 (Bom)(HC) it has been held that the assessee has recorded the transaction relating to 50 M.Ts. of HDPE in the regularly maintained books of account and the assessee has offered explanation regarding the nature and source of investment but the same was not accepted. However, books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned addition made by Assessing Officer was to be deleted. A.2. Mere suspicion, no matter howsoever strong, is not sufficient treat the purchases as bogus. Reliance is placed on the following judgments: (i) Dy. CIT v. Adinath Industries [2001] 252 ITR 476/ [20021 120 Taxman 822 (Guj.) in this case it was held that Assessing Officer observed that purchases made by assessee from 'CI' were fake and latter was only a billing agent, its S.T. Registration had been cancelled and payments made by bearer cheques to party were withdrawn on same day Assessee however, submitted all details like bills, gate pass, receipt note, weight note, laboratory report, sample report, truck number, etc. Assessing Officer had himself accepted existence of 'GI' in another case for assessment year 1985-86 - Whether since assessee had produced all relevant materials to show purchase of materials and their use in production, Tribunal was justified in deleting addition made - Held, yes (ii) In the case of Babulal C. Borana v. ITO (2006) 282 ITR 231 (Bom)(HC), it was held that where The assessee has recorded the transaction relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were also shown in its stock, in such circumstances merely because those purchases did not carry full addresses of vendors, could not be a reason to treat the said purchases as unexplained. Therefore, impugned addition made bv Assessing Officer was to be deleted. A.3. Further reference is made to various judicial pronouncements and there observations/ decisions :- (i) It has been held by various courts that suspicious cannot take place the evidence for which reference is made to the under mentioned judicial pronouncements a. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No. 6727/M/2012 dt.20/8/2014 b. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC); c. CIT v. Roman - Co., (1968) : 67 ITR 11 (SC); d. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC); e. Umacharan Shaw Bros v. CIT', (1959) 37 ITR 271 (SC) (vi) Various courts have held that observation of Third party cannot be basis of addition. Satisfaction of AO is must for which reference is made to the following cases : a. ITO V/s P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file confirmation with the PAN when the lender is assessed to tax. This was held in CIT v. Orissa Corporation Private Limited (159 ITR 78) (SC). The assessee may not prove the source for the source of income acquired. The Hon'ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd. 159 ITR 78 (SC) held as follows: 13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. (ii) It has become fairly settled law that assessee is not required to satisfy the Assessing Authority of the source of source. It has been held by the Hon'ble Courts Where the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and were examined on oath - Whether since there was no clinching evidence nor Assessing Officer had been able to prove that money actually belonged to none but to assessee himself, action of Assessing Officer appeared to be based on mere suspicion and, thus, addition required to be deleted - Held, yes c. It has been held by the ITAT Lucknow bench in the case of Vishnu Jaiswal vs CIT(A) as reported in (2012] 23 taxmann.com 374 (Luck.) :Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2006-07 - Assessee received unsecured loans from three parties through account payee cheques - Assessee proved identity, genuineness of transactions and also creditworthiness of creditors by producing their respective bank accounts - Assessing Officer did not examine creditors and made addition on assumption that they would not have saved any money to advance loans - Whether it was not a fit case to make addition under section 68 - Field, yes d. It has been held by the ITAT MUMBAI BENCH 'E' in the case of Assistant Commissioner of Income-tax v. Sanjay M. Jhaveri* as reported in 2015] 61 taxmann.com 28 (Mumbai - Trib.) Where asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the 3 ingredients having been satisfied, the impugned loans have to be treated as explained satisfactorily and the AO was not justified in having disregarded overwhelmingly supportive evidence. No cogent material was adduced by him to show that loans were unexplained. Therefore, the impugned additions, made in the assessment order has to fail on several counts - (1) reliance on evidence that is totally inadequate (2) failure to make available any incriminating material (reports, statements etc.) forming basis for action by the AO; (3) failure to give due opportunity to the appellant to cross examine witnesses, whose statement might have been relief upon; and (4) failure to recognize the satisfactory nature of the explanation/evidence tendered by the appellant to explain identity of creditors, creditworthiness of the creditors and the genuineness of the loan transactions. Accordingly, the addition of ₹ 20,00,000/- as share application money is directed to be deleted. Similarly another addition of ₹ 20,00,000/- with regard to the loan is also directed to be deleted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirmations etc. From the details submitted it can be seen that the parties ie lenders have made payments from their bank accounts through account payee cheques, therefore these transactions cannot be treated as bogus. The AO has not been able bring on record any valid material or evidence to discredit the evidences and explanation given by the appellant other than merely relying on a bald statement by alleged Shri Pravin Kumar Jain as recorded by Investigation Department without himself making any efforts to bring on record any valid or corroborative evidence against the parties. The AO has been unable to demonstrate any relationship between PKJ and the lenders. The AO has been unable to refute the clear cut and cogent evidence submitted by the appellant and available on the AO's record, testifying to the genuineness of the loans. The source of the said loans thus stands proven. As has been held in several decisions of superior judicial authorities (MurlidharLahorimal v CIT [280 ITR 512 (guj)], LabhchandBohra v ITO [ 219 ITr 571 (Raj)] and CIT v Dwarkadhish Investment Private Limited [299 ITR 268 (Del)], the assessee cannot be called upon to prove the sou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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