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TMI Blog2019 (6) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. See M/S SHREE LAXMI ESTATE PVT LTD, M/S SHREE LAXMI DEVELOPERS VERSUS ITO, WD. 15 (3) (3) , WD. 26 (3) (2) , MUMBAI [ 2017 (12) TMI 1699 - ITAT MUMBAI]. The decision relied on by the Ld. DR in the case of CIT v. NRE Iron and Steel (P.) Ltd [ 2019 (3) TMI 323 - SUPREME COURT] is distinguishable on facts. Thus we uphold the order of the Ld.CIT(A) in quashing the reassessment order and deleting the addition made u/s. 68 - Decided in favour of assessee. - ITA NO. 6311/MUM/2017 - - - Dated:- 9-4-2019 - SHRI C.N. PRASAD, JUDICIAL MEMBER And SHRI M. BALAGANESH, ACCOUNTANT MEMBER Assessee by: Shri Birju S. Shah Department by: Shri D.G. Pansari ORDER PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Ld.Commissioner of Income tax (Appeals) 4, Mumbai [hereinafter in short Ld.CIT(A) ] dated 16.08.2017 for the A.Y. 2009-10. 2. The Revenue in its appeal challenged the order of the Ld. CIT(A) in quashing the reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) 2 of Kolkata wherein the statements were recorded stating that Mantosh Kumar Yadav is the Director of 66 Companies and all the companies are paper companies and M/s. Arena Textiles and Industries Pvt. Ltd., is one of such company. Thus, the Assessing Officer proceeded to treat the share application money as unexplained cash credit. 5. On appeal the Ld.CIT(A) quashed the re-assessment on the ground that there is no proper service of notice u/s. 148 of the Act and the notice was served beyond the time limit and therefore, assessment is time barred. Ld.CIT(A) also considering the evidences furnished by the assessee in respect of the shareholders, held that the assessee has proved the identity, genuineness and creditworthiness of the shareholders and deleted the addition made u/s. 68 of the Act in respect of both the shareholders namely M/s. Arena Textiles and Industries Pvt. Ltd., and Shri Madanlal Paliwal. Before us, the Revenue filed appeal challenging the order of the Ld.CIT(A) in quashing the re-assessment order and on merits challenged the order of the Ld.CIT(A) in deleting the addition made only in respect of the share application money received from M/s. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved unserved notice on 04.04.2016 but he deputed Inspector on 31.03.2016 to serve the notice on the assessee and this contention by itself is not believable. It is also submitted by the Ld. Counsel for the assessee that the Assessing Officer has not produced any report of the inspector nor any Panchanama for verification. 9. Ld. Counsel for the assessee submitted that it is clearly visible that the Ld. Assessing Officer has purposefully concealed the fact that he had not sent any such so called notice at our address at Bunglow No-N8, S.VP. Nagar, Near Versova Telephone Exchange, Mhada, Andheri West, Mumbai -400053 and if any such notice was issued at address at Atlantis B 403, Oshivara, Andheri (W), that itself proves that notice was issued deliberately on wrong address knowing the fact that actual address of the company is Bunglow No-N8, S. VP. Nagar, Near Telephone Exchange, Mhada, Andheri west. Ld. Counsel submits that it is relevant to note that while making assessment for A. Y. 2013-14, in fact the Ld. Assessing Officer had issued notices at correct address i.e. Bunglow No-N8, S.VP. Nagar, Near Telephone Telephone Exchange, Mhada, Andheri West, Mumbai -400053. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year ended 31.03.2010, bank statements of the shareholder and the corresponding bank statements of the assessee reflecting the transaction. Therefore, the Ld. Counsel for the assessee submits that since the assessee has furnished all these evidences before the Assessing Officer, it is not correct to say that assessee has not furnished sufficient details. It is submitted that by filing these evidences assessee has proved the identity, genuineness and creditworthiness of the creditor. It is also submitted that the report of the DDIT(Inv.) which was made in Kolkata to prove that the shareholder is not found in the address given is also not furnished to the assessee and no opportunity was given to the assessee to rebut the report said to have been received from the DDIT(Inv.). It is also further submitted that the Assessing Officer has not provided any copy of statements which are said to have been recorded from one Mr. Mantosh Kumara Yadav nor any cross examination was provided to the assessee which is in violation of principles of natural justice. Ld. Counsel for the assessee submits that the case laws relied on before the Ld. CIT(A) may be considered and the order of the Ld.CIT(A) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / loss / depreciation-allowance-under-section-................... for the said assessment year and I hereby require you to deliver to me before the expiry of 30 days from the date of service of this notice, a return in the prescribed form of your Income / the-income of:.................., in respect of which you are assessable for the said assessment year. (DHIRAJ KUMAR) Asstt. Commissioner of Income-tax, Circle-2, Thane 3.7 When objection of the Appellant was forwarded along with application under rule 46A to the Assessing Officer, the learned Assessing Officer has submitted counter comments stating that notice u/s 148 was issued on 30.03.2016 through speed post and further ward inspector was deputed on 31.03.2016 for service of notice through affixture. Since there was no one at the premises as mentioned by Assessing Officer it was served through affixture. However, it is very evident from the assessment record, submitted by the Assessing Officer that the alleged notice u/s 148 dated 30.03.2016 was issued on wrong address i.e. 403, Atlantis B, Inder Darshan, Cross Road, Oshiwara, Andheri (W), Mumbai-40005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The authenticity of service through affixture has been successfully challenged by the appellant. 3.9. It is further important to note that in order u/s 127 address of the assessee has been correctly mentioned. Further one important point is also noticed that same Assessing Officer namely, Shri Dhiraj Kumar ACIT Cir-2, Thane, has passed an assessment order of AY 2013-14 on 18.03.2016 mentioning the correct address as Bunglow No. A/8, SVP Nagar, Mr., Versova Tel. Exchange, Andheri (W), Mumbai 400 053. , then it is not understood as to how same Assessing Officer could issue notice u/s 148 on 30.03.2016 on different address i.e. 403, Atlanntis B, Inder Darshan, Cross Road, Oshiwara, Andheri (W), Mumbai-400053 . These facts and evidence groves beyond doubt that notice u/s 148 dated 30.03.2016 was not issued on proper address, nor was served properly on the appellant, when notice has not been issued on proper, correct and latest Known address, escapement assessment proceeding is bad in law, illegal. 3.10 The contention of the Appellant that no such affixture was made on 31.03.2016, nor was any report of inspector given to the appellant or no person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthiness of the creditor observing as under: 3.11. As regards merit and addition of share capital of ₹ 3,44,45,000/- made u/s 68 as unexplained cash credit, it is pertinent to mention that learned Assessing Officer has failed to demonstrate any contrary evidence accept general reply of DDIT that M/s Arena Textiles Industries Pvt.Ltd. was not found at given address and there was a general statement of Mr. Mantosh Kumar Yadav of giving accommodation entry. It can be seen from the evidence on record that by letter dated 23.12.2016 appellant has categorically mentioned as under:- Arena Textiles And Industries is a Non Banking Finance Company (Registration No. B 05.06555). The annual Accounts of the Company for the year ended 31.03.2009 along with copies of the Secretarial Compliance Report. Copy of Form 66 filed with the ROC, copies of Form 206, 23AC and 23 ACA filed with the ROC for the year ended 31.03.2009 and Annual Accounts of the Company for the year ended 31.03.2010 have been filed vide our letter dated 19th Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 143(3) vide; {Dhakeswari Cotton Mills Ltd. v. CIT,(1954)26 ITR 775,782(SC); Raj Mohan Saha v. CIT, (1964)52 ITR 231 (Assam). Also see, CIT V. Gokaldas Hukumchand, (1943)11 ITR 462,469(Bom) 3.16 Recently, in the case of CIT vs. Gagandeep Infrastructure Pvt.Ltd [ INCOME TAX APPEAL N0.1613 OF 2014] it was held by the Hon'ble Bombay High Court that, Bogus share capital/premium; The proviso to s.68(which creates and obligation on the issuing Co to explain the source of share capital premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior therto, as per Loverly Exports 317 ITR 218(SC), if the A 0 regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit. 3.17 In the similar case of M/s Easy Mercantile Pvt. Ltd. vs DCIT (ITA. No. 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the additions were deleted by the respective learned CIT(A) against which the department had filed Appeals before the Hon'ble ITAT, Mumbai. The Hon'ble ITAT Mumbai dismissed the Appeals filed by the department following the Ratio laid down by earlier decisions of the Hon'ble Tribunal, more particularly the case of ITAT E Bench in M/s. SDB Estate Pvt Ltd. vs. ITO - 5(3)(2) in ITA No. 584/Mum/2015; and deleted the addition. Thus in the light of above factual analysis, reference of evidences and judicial / propositions, it is held that escapement assessment of AY 2009-10 has been started without proper issue and service of notice u/s 148 and without refuting the factual objection of the appellant, hence such escapement assessment order under appeal deserves to be quashed, as held by Hon'ble High Court in the case of German Remedies Ltd. vs. DCIT (2006) 202 CTR Bom 369. Further, on merit also addition is not sustainable because Assessing Officer has not brought on record any contrary evidence against the claim of the appellant or evidences on record. Respectfully following the decision of Hon'ble Jurisdictional High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax act. The assessee has to prima facie prove (1) the identity of the creditor / subscriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels: (3) the creditworthiness or financial strength of the creditor/subscriber: (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit worthiness and the genuineness of the transactions. The party from whom the Assessee had received the share amount never responded to the summons issued by the Assessing Officer. The Assessing Officer has considered the said aspect and thereafter has added the amount under Section 68 of the Income Tax Act. According to the learned counsel, the Tribunal only on the basis that documents are available has accepted the case of the Assessee. The Tribunal has failed to consider the circumstances and the facts which are relevant. 3. The learned counsel for the Assessee supports the order and submits that the Assessee had discharged its onus. The Assessee had produced the PAN of all the creditors along with the confirmation, Bank Statement showing payment of share application money and relevant record is produced with regard to the allotment of shares to those parties. The share application form, allotment letter, share certificate are also produced. Even the balance-sheet, profit and loss account, the books of account of these creditors were produced on record showing that they had sufficient funds for investing in the shares of the Assessee. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance available with the creditors when cheques have been issued to the assessee company was established. (ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of ₹ 1 lac each received by two creditors from verifiable donors. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O. (iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts. (v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors. (vi) The identity and addresses of sub creditors was also available. 14. With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer towards unexplained unsecured loans and interest thereon amounting to ₹ 2,35,246/. Search and seizure action u/s. 132 of the Act has been conducted in the case of Shri Pravin Kumar Jain and statements were recorded from him and he is said to have been deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was one of the beneficiaries of accommodation entries given by Shri Pravin Kumar Jain. Assessee was required to explain the unsecured loans obtained in the name of M/s Mohit International and M/s.Natasha enterprises of ₹ 10 lakhs each and prove the genuineness of the transactions. Assessee furnished information in respect of the above transactions i.e. copy of Loan confirmation and Affidavit establishing identity of the lender, copy of ledger giving detail towards loan taken during the year and subsequent repayments and Copy of ITR V filed establishing Creditworthiness of the Lender. However, Assessing Officer did not accept the evidences furnished by the assessee and also the retraction statement of Shri Pravin Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for cross examination of Shri Pravin Kumar Jain. Going by the discussion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.4. It has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. He has submitted confirmation from the parties. filed Audit Reports of the parties alongwith copy of their ITR, and bank statements. In these circumstances, the onus had shifted to the assessing officer. If the assessing officer was still not satisfied, he had the option of making enquiries from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs. 6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of ₹ 20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of ₹ 20,00,000/- on account of unexplained unsecured loans and ₹ 2,35,246/- made on account interest on the same. The grounds of appeal are allowed. 10. On a plain reading of the Assessment Order, we find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the repayments for the same was also made through banking channels. The Assessing Officer ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. The Hon'ble ITAT on the analysis of the findings made in the assessment orders has reached to the conclusion that the re-opening itself is bad in law and quashed the orders accordingly. The ratio of these judgments is applicable to the facts of the instant case. This is confirmed by the Delhi Bench of the Income Tax Appellate Tribunal in the case of DCIT v. Nipun Builders Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigation wing which cannot conclusively prove that assessee's own money was invested in the form of share application money. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, the Mumbai Bench of the Income Tax Appellate Tribunal has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee specially when all other supporting evidences filed by the assessee were neither prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. Further, the appellant has stated that he had furnished all the relevant details during the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. Further, it may be pointed out that section 68 under which the addition has been made by the Assessing Officer reads as under-: 68. Where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... era House, Mumbai 400 002 AAACL4646G 20,00,000 9% When the Assessing Officer asked the assessee to prove the genuineness of these loans, the assessee submitted the following documents: a. Copy of acknowledgment of income tax return filed for A.Y. 2007-08. b. Copy of PAN of the parties c. Copy of bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the parties. The Assessing Officer treated these loans to be non-genuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions. 10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case. 11. We have also gone through the decisions relied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are supported by valid documents. The assessee further submitted that it has furnished confirmation letters alongwith copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent financial years. Therefore, we are of the view that there is no reason for the AO to doubt the genuineness of transactions despite furnishing necessary evidences including their financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of loan of ₹ 10.00 Lakhs taken from M/s. Falak Trading company P. Ltd, a company belonging to Praveen Kumar Jain who has confessed that he had provided only accommodation entries. A perusal of the record would show that the AO had issued notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by the AO U/s. 133(6) of the Act. 9. The assessee had taken loan from two of Praveen Kumar Jain s group companies viz., M/s. Josh Trading Co P Ltd and M/s Viraj Mercantile Ltd in the year relevant to AY 2012-13. The AO had assessed the loan amounts on identical reasoning. We notice that the Coordinate Bench of ITAT has deleted the additions vide its order dated 239.12.2017 passed in ITA.No. 5954/Mum/2016, with the following observations: - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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