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TMI Blog2019 (7) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be taken in view of the decision of the hon'ble Supreme Court in Kishinchand Chellaram v. CIT [ 1980 (9) TMI 3 - SUPREME COURT] . Addition u/s 68 - all documentary evidences furnished by the assessee, remand reports including the first, second and supplementary remand report of the Assessing Officer and passed detailed order. The learned Commissioner of Income-tax (Appeals) given his clear finding that, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the assessee the addition of ₹ 3,60,00,000 is unjustified; firstly, on the ground that no notice was issued/no inquiries made to rebut the evidences filed by the appellant and secondly on the ground that the assessee duly discharged its burden casted upon under section 68 to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. No contrary facts or law is brought to our notice to take a different. Therefore, we affirm the order of learned CIT(A). Appeal of the Revenue is dismissed. - I. T. A. Nos. 325, 326, 327, 328 and 312 /Jodh/ 2018 - - - Dated:- 18-1-2019 - R. C. Sharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement recorded under section 132(4) of the Act admitted of taking accommodation entries in the form of long-term capital gain (LTCG). Consequent of search, a notice under section 153A was issued to the assessee on June 30, 2016. In response to the notice, the assessee filed its return of income declaring income of ₹ 31,89,380 on April 13, 2016, declaring the same income as declared while filing the original return of income under section 139. The assessment was completed under section 153A read with section 143(3) on December 29, 2017. The Assessing Officer while passing the assessment order made the addition on account of unsecured loan received by the assessee from the following three parties aggregating to ₹ 76,65,206 : Sl. No. Name of parties Amount of loan (Rs.) 1. Manglam Vinyog Pvt. Ltd. 25,57,329 2. RisehighTracom Pvt. Ltd. 25,55,480 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record. Though the Revenue has raised as many as three grounds of appeal however, in our considered view the only substantial ground of appeal relates to deleting the addition under section 68. The learned Departmental representative for the Revenue supported the order of the Assessing Officer. The learned Departmental representative further submits that during the assessment, the assessee failed to discharge his onus to prove the identity, creditworthy of creditor and genuineness of transaction. The additions were deleted on technical reasons. The learned Departmental representative prayed for restoring the finding of the Assessing Officer. 6. On the other hand, the learned authorised representative of the assessee supported the order of the learned Commissioner of Income-tax (Appeals). The learned authorised representative further submits that the learned authorised representative of the assessee submits that reassessment was made by the Assessing Officer pursuant to search action carried out on August 26, 2015 under section 132 of the Act at the entire assessee's group. During the search action, no incriminating material was found by the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oteshwara Rao v. Dy. CIT [2015] 64 taxmann.com 159, Jaipur Tribunal in Navrattan Kothari v. Asst. CIT in I. T. A. No. 425/JP/2017 dated December 13, 2017, Jodhpur Tribunal in Adarsh Co-operative Bank v. Asst. CIT in I. T. A. Nos. 452 and 453/Jodh/2015 dated June 19, 2017, the hon'ble Bombay High Court in CIT v. Gurinder Singh Bawa in I. T. A. No. 1839 of 2013 dated October 5, 2015- [2016] 386 ITR 483 (Bom), All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 18 ITR (Trib) 106 (Mumbai) [SB] ; 23 taxmann.com 103 (Mum) [SB], which was affirmed by the hon'ble Bombay High Court in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom). 8. In alternative and without prejudice to the contention, the learned authorised representative submits that they have produced all requisite details documents, like ; PAN, balance-sheet, confirmation of account to substantiate the identity, creditworthiness and genuineness of lender company. All the transactions were done through banking channel and there is no cash deposit. The statement recorded at the back of the assessee, which were never share with the assessee by the Assessing Officer and no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire assessment order that Shri J. P. Agarwal ever admitted about the receipt of unsecured loan. The impugned assessment year under consideration is 2010-11 and the period for completion of assessment has already expired when the search was conducted. The Assessing Officer made the addition of alleged share application money in the assessment year 2010-11, which is beyond his jurisdiction in the absence of incriminating material found during the search. 11. We are conscious of the fact that the present appeal is filed by the Revenue and no cross-objection is filed by the assessee. However, in our considered view as per rule 27 of the Income-tax (Appellate Tribunal) Rules, the assessee-respondent is empower to support the order appealed against on any of the grounds decided against him. The assessee before the Assessing Officer raised objection that no incriminating material was found during the search related with the unsecured loan. The assessee before the learned Commissioner of Income-tax (Appeals) raised specific ground that the addition is made in the absence of incriminating material unearthed during the search. Therefore, in view of the decision of the hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such report could be taken in view of the decision of the hon'ble Supreme Court in Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC). No contrary facts or evidence is brought to our notice to take a contrary view, therefore, we affirm the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition. 15. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 326/Jodh/2018 assessment year 2014-15 by the Revenue 16. The Revenue has raised the following grounds of appeal : 1. Whether on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in delet ing the addition of ₹ 2,15,00,000 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the additions when the creditworthiness of the alleged creditor was not established before the Assessing Officer. 4. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the addition of ₹ 29,46,934 made by the Assessing Officer by disallowing the claim of interest expenses on unsecured loans treated as bogus by the Assessing Officer. I. T. A. No. 312/Jodh/2018 for the assessment year 2015-16 cross-appeal by the assessee 20. The assessee has raised following grounds of appeal : 1. Under the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in not holding the assessment order dated December 29, 2017 as bad in law, perverse, arbitrary, without jurisdiction and illegal and passed without allowing adequate opportunity of being heard. 2. Under the facts and in the circumstances of the case sand in law, the learned Commissioner of Income-tax (Appeals) has erred in upholding the addition of ₹ 25,00,000 under section 68 of the Act by relying upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while passing the assessment order made the addition on account of unsecured loan received by the assessee from the following six parties aggregating to ₹ 2,30,00,000 (actual figure is ₹ 2.55 crores) ; Sl. No. Name of parties Amount of loan (Rs.) 1. Emrald Commercial Pvt. Ltd. 25,00,000 2. Vignharta Infra Developers Pvt. Ltd. 15,00,000 3. Venketeshwara Industries Promotion Pvt. Ltd. 10,00,000 4. S. K. Growth Funds Ltd. 1,10,00,000 5. Tavish Industries 75,00,000 6. Aplaya Creation Ltd. 20,00,000 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive submissions on similar lines as made in other connected appeals. 25. We have considered the rival submissions of the parties and perused the orders of the lower authorities and also deliberated on the case law relied on by the lower authorities. As we have noted earlier in the connected appeal that the Assessing Officer made additions on the basis of under section 68 on taking view that in order to verify the genuineness of creditors issued a commission under section 131(1)(d) was issued to the Deputy Director of Income-tax, Kolkata with the request to issue summons to the principal officer of the creditors company and to furnish spot verification through inspector. The Assessing Officer received the enquiry report from the Deputy Director of Income-tax, Kolkata wherein it was disclosed that some of the entry operator are controlling and managing all affairs of the business activities of the lender companies which are engaged in providing accommodation entries. The Assessing Officer on the basis of report of the Deputy Director of Income-tax, Kolkata made addition of ₹ 2.55 crores and also the disallowed the interest expenses of ₹ 29,46,934. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal issues and also contended that the assessment order was passed on making inquires at the back of the assessee. The copies of the investigation got conducted by the Assessing Officer through the Deputy Director of Income-tax (Investigation) were not shared to the assessee. The statement recorded by the alleged investigator was also not shared to the assessee. The assessee specifically urged that they have discharged their onus by furnishing complete details and documentary evidences to prove identity, creditworthy and the genuineness of the transaction. On the submissions of the assessee the learned Commissioner of Income-tax (Appeals) called remand report of the Assessing Officer not only once, but thrice and also sought the comment of the assessee. After considering the remand reports and the submissions of the learned Commissioner of Income-tax (Appeals) passed the following order : 6. Now I deal with the unsecured loans/share application from M/s. Vishnaharta Infra Developers Pvt. Ltd. (₹ 15,00,000), M/s. Venketeshara Industries Promotion Pvt. Ltd. (10,00,000) and M/s. SJC. Growth Funds Pvt. Ltd. (₹ 1,10,00,000), M/s. Tavish Industries (ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Glaze Constructions Pvt Ltd. 8. Grove Suppliers Pvt. Ltd. 9. Rub Infratech Pvt. Ltd. 10. Rise High Treacom Pvt. Ltd. 11. Faithful Infra Projects Pvt. Ltd. 6.3 I have gone through the material placed on record and I find that the Assessing Officer has not issued any summon/notice under section 131/133(6) of the Act to S. K. Growth Funds Pvt. Ltd., Tavish Industries and Aplaya Creation Ltd. Also, on-spot verification by the inspector was not done in the case of S. K. Growth Funds Pvt. Ltd., Tavish Industries and Aplaya Creation Ltd. as evident from page Nos. 22-23 of the assessment order whereas the appellant in discharge of its onus under section 68 of the Act has filed confirmation of accounts as well as bank statements reflecting the transactions with other substantiating documents, which are available at page Nos. 130-356 of the paper book. From these documentary evidences placed on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd., Vighnaharta Infra Developers Pvt. Ltd. and Venketeshara Indus tries Promotion Pvt. Ltd. who has duly filed a reply along with the documentary evidences to substantiate the transactions with the Assessing Officer. In the case of the rest of the companies no inde pendent inquiries carried out by the Assessing Officer. 6.5 The Assessing Officer during assessment proceedings took negative inference from the statement of Shri J. P. Agarwal recorded during search under section 132(4) wherein he made disclosure in respect of long-term capital gain in his individual hands. I have gone through the statement of Shri J. P. Agarwal and his disclosure made in his statement. Notably, the disclosure made was in his personal capacity only and with respect to long-term capital gain only and not in respect of any other transactions be it be receipt of unsecured loans. Therefore, I find that in the absence of any nexus of the State ment of Shri J. P. Agarwal with the appellant or its total income, this basis of the addition adopted by the Assessing Officer is farfetched and cannot be concurred. 6.6 Further, the Assessing Officer has treated the various com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t various observations of the Assessing Officer on balance-sheet/ITR of the lender companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations/observations of the Assessing Officer are misconceived and premature only and in view the submission made by the appellant in para No. 2.27, the same does not lead any where to draw any adverse inference against the appellant. Further, the various case laws relied upon by the Assessing Officer are distinguishable from the facts of the present case as categorically countered by the appel lant in his written submissions in para Nos. 2.28 to 2.35 above. 6.9 It is a settled judicial position that under the Income-tax law the primary burden under section 68 of the Act is on the appellant and once this burden is discharged under section 68 of the Act, no addition under section 68 of the Act is justifiable in the hands of the assessee in view of the judgments in the case of Shree Barkha Synthetics Ltd. v. Asst. CIT [2006] 283 ITR 377 (Raj) ; [2006] 155 Taxman 289 (Raj), CIT v. Morani Automotives (P.) Ltd. [2014] 264 CTR 86 (Raj), CIT v. Orissa Corporation P. Ltd. [1986] 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, accordingly the Assessing Officer has not followed the principles laid down under section 68 of the Act. The hon'ble Gujarat High Court in the case of CIT v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj) has held that : 'Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income-tax assessees whose PAN have been disclosed the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. (para 15) Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assess ing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transac tion, the Assessing Officer does not follow the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,10,00,000), M/s. Tavish Industries (₹ 75,00,000) and M/s. Aplaya Creation Ltd. (₹ 20,00,000) totalling to ₹ 2,30,00,000 is not sustainable and hence the same stand deleted. Thus, ground Nos. 2, 5 and 8 of this appeal stand partly allowed as discussed in paras 5 and 6 above. 30. Considering the clear finding of the learned Commissioner of Income-tax (Appeals) that the Assessing Officer initially made the addition on incomplete enquiry report of the Deputy Director of Income-tax, (lnvestigation), Kolkata. All the details of creditors are verifiable. The learned Commissioner of Income-tax (Appeals) also clearly concluded (in para 6.13) that no incriminating material (clinching evidence) on record that any unaccounted income has been routed through unsecured loan by the assessee-company. Mere suspicious cannot substitute the documentary evidences. The learned Commissioner of Income-tax (Appeals) also concluded that there was no incriminating material found during the search to rebut the documentary evidences furnished by assessee. No contrary fact is brought to our notice during the hearing to take a contrary view. Thus, we affirmed the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of creditor. The assessee furnished the confirmation of the creditor. The Assessing Officer asked the assessee to produce the competent person of the creditor along with relevant documents and information. The Assessing Officer recorded that the assessee furnished only confirmation of the party and the bank statement reflecting the transaction. No evidence to prove the creditworthy and genuineness of transaction was filed. The Assessing Officer further concluded that the bank accounts entry shows that on getting credit entry of unsecured loan the same was transferred to other accounts of the group on the same day. The amount was credited in a round figure and simultaneously transferred to other bank and the same was treated to be suspicious by the Assessing Officer. The Assessing Officer treated the entire amount as unexplained cash credit under section 68 of the Act. 35. On appeal before the learned Commissioner of Income-tax (Appeals), the entire addition was deleted by the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) deleted the entire addition after seeking three remand report from the Assessing Officer. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 are not based on any incriminating material found during the search. We have noted that the assessment order for the year under consideration was passed under section 143(3), thus, the submissions of the learned authorised representative for the assessee that the additions in the assessment order is not based on incriminating evidence, has no force. The Assessing Officer made additions on his observation that the bank accounts entry of the assessee shows that on getting credit entry of unsecured loan the same was transferred to other accounts of the group on the same day. The amount was credited in a round figure and simultaneously transferred to other bank and prima facie the entry seems to be not genuine and treated the same as unexplained cash credit under section 68 of the Act. 38. The learned Commissioner of Income-tax (Appeals) after seeking reports of the Assessing Officer and the reply of assessee and after considering the contents of remand reports and the reply of the assessee deleted the addition with the following observation : 4.3.3 I have gone through the material placed on record and I find that the Assessing Officer has not is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een done through banking channels and on the date of making of loans, there is balance available in the account of the borrower, which proves its creditworthiness and genuineness of the transactions. There is no case of any cash depo sition in the account of the creditor at the time of issuing cheques/ RTGS in favour of the assessee. Therefore, in view of the settled judi cial precedent in the case of CIT v. Varinder Rawlley [2014] 366 ITR 232 (P H), CIT v. Vijay Kumar Jain [2014] 221 Taxman 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271 (Delhi), Addl. CIT v. Bahri Bros P. Ltd. [1985] 154 ITR 244 (Patna) and others as referred by the appellant, I am of the considered view that the appellant duly discharged its burden casted upon it under section 68 of the Act. It is further seen that no summon/notice was issued to the principal officer of the named above 11 companies in para No. 4.3.2 who has duly filed reply along with documentary evidences to substantiate the transaction with the Assessing Officer. In case of the rest of the companies no independent inquires carried out by the Assessing Officer. 4.3.5 The Assessing Officer during assessment proceedings too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, while making loans to party, funds are required to be arranged by the lender, therefore reflection of such entries in bank statement doesn't lead to draw any adverse inference against the appellant needless to say that appellant is not required to prove source of the source under section 68 of the Act in view of the settled judicial precedents. 4.3.7 In my considered view of the undersigned, mere not believing an explanation cannot lead to a conclusion that the borrowed amount is the income of the assessee (borrower) from some undisclosed sources while in the present case, no evidences of any generation of undisclosed income or their utilization in the form of unsecured loans has been found and brought on record. 4.3.8 Similarly, I find that various observations of the Assessing Officer on balance-sheet/ITR of the lender companies are miscon strued, misconceived and are factually incorrect. I further find that the various other allegations/observations of the Assessing Officer are misconceived and premature only and in view the submission made by the appellant in his written submissions in para Nos. 3.26 to 3.33 above, the same does not lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instance case, appellant has co-operated in assessment by showing his willing to produce the directors of lender companies and some directors/officer were also produced before the Assessing Officer. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the present case it is untenable to make an addition for alleged non-appearance by the concerned person before the authorities though they complied with the notices/summon issued to them. 4.3.11 In the present case in hand, I find that Assessing Officer asked the assessee to produce lender companies without verifying the facts of lending money from respective jurisdiction Assessing Officer and without verifying their returns of in income and balance-sheet wherein the e-transactions are reported, accordingly the Assessing Officer has not followed the principles laid down under section 68 of the Act. The hon'ble Gujarat High Court in the case of CIT v. Ranch hod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj) has held that : Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant-company. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of an incriminating material found during search to rebut the evidences filed by the appellant, the impugned addition made in respect of unsecured loan under section 68 of the Act is legally unten able and unjustified. 4.3.14 In view of the above discussion of relevant facts and following the several ratios on the subject from the hon'ble apex court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition of ₹ 3,60,00,000 is not sustainable and hence the same stand deleted. Thus, ground Nos. 2, 5 and 6 of the appeal stand allowed. 39. We have seen that the learned Commissioner of Income-tax (Appeals) considered the all documentary evidences furnished by the assessee, remand reports including the first, second and supplementary remand report of the Assessing Officer and passed detailed order. The learned Commissioner of Income-tax (Appeals) given his clear finding that, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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