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TMI Blog2019 (9) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... vided to the assessee for rebuttal, it is in violation of principles of natural justice and further we observe that no sort of enquiries were made by the AO to disprove the evidences furnished by the assessee. Addition made u/s. 68 cannot be sustained. We direct the AO to delete the addition made u/s. 68 of the Act. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182]. 5. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the details necessary in respect of these loans obtained from the creditors. It has been submitted that loans have been received through account payee cheques, confirmations from the concern creditors were also furnished, PAN details of the creditors, ledger copy of the creditors, bank statements of the creditors, audited balance sheet computation of income, acknowledgement of return were furnished, details of interest payments and TDS deducted thereon were furnished. Further, the creditors have responded to the notices issued u/s. 133(6) of the Act by filing confirmation of accounts, acknowledgment computation of income in proof of filing return, PAN details, annual report, extracted bank statements reflecting the transactions with the assessee. Therefore, Ld. Counsel for the assessee submits that all these evidence prove that the loan transactions are genuine. 6. It has been argued that the assessee has established the identity, genuineness and creditworthiness of the creditors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le wherein credit in the name of the appellant is outstanding in their books. e. Payment of interest to creditors after subjecting the amount to TDS. f. Confirmation from the loan creditors. g. Affidavit confirming the loan transaction. 10. In response to notices issued u/s. 133(6) of the Act to the creditors, the creditors have filed the following information to substantiate the transactions entered into by them with the assessee. a. Confirmation of accounts for A.Y. 2012-13. b. ITR acknowledgement for A.Y. 2012-13. c. Copy of PAN Card of the Creditor company. d. Annual report for A.Y. 2012-13. e. Extract of bank statements for A.Y. 2012-13 reflecting the transactions with the assessee. 11. The Assessing Officer completely ignoring all the above evidences treated the loan transactions as non-genuine solely based on the statement said to have been recorded from PKJ before DGIT(Inv.) in the course of search proceedings. We also notice that the Assessing Officer never provided to the assessee the statements on which he is placing reliance for treating these loan transactions as non-genuine. We also find that no cross examination has been provided by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money to various parties seeking such accommodation by following unethical practices to defraud the revenue. Also, the appellant is one of such companies who have taken such accommodation entries since some of the concerns floated by entry operators (about 79 such concerns) are very much appearing in the books of the appellant company. 2.4.1.8 In the instant case, however, as seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. Thus, taking into consideration the entire factum of the case, it would be indispensable on the part of the AO to produce compelling evidences to distort the picture shown by the appellant company. 2.4.1.9. Keeping the above background in mind, now it would be pertinent to analyse the evidences relied upon by the AO. The AO has primarily relied upon the statement of Mr. Pravin kumar Jain and his accomplices which were taken during the search proceedings u/s 132 carried on at his premises. Such statements are definitely a good starting point and can also be used to initiate a proceeding, however, such statement cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68. In the present case, from the records, it can be seen that the Appellant has established the identity of the parties by giving its name, address, PAN and copy of Return of income for A.Y.2012- 13. "Further, the appellant has established the creditworthiness of the parties by filing the Financials of all the parties as on 31.3.2012 and the Bank statement of the parties reflecting payment made to the appellant. From the said Financials of the parties, it can be seen that the parties had sufficient creditworthiness to lend ₹ 85,00,000/- to the appellant company. Next, genuineness of the transaction was demonstrated by the appellant by explaining the business of the appellant, requirement of the loans in the business of the appellant, details of deduction of TDS on interest payment, loan confirmation from the parties and the ledger account of the parties wherefrom it was substantiated that the loans had been squared off during the year under consideration. To top it, the parties have confirmed the transaction to the AO, in reply to summons issued. The AO has not answered several valid points raised by the appellant nor proved how the details like PAN, the IT returns, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not required to bring positive evidence on record to treat amount in question as income of the assessee. While considering the explanation of the assessee, the AO has to act reasonably-application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits -should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a causal manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt -such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under Section 68. (v) Confirmatory letters or A/c payee cheques do not prove that the amount in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted in the books of the appellant as well as the creditors as seen from the audited accounts filed. The transactions were also confirmed by all the creditors who are assessed to tax. Further, the appellant has paid interest through banks to the creditors by duly subjecting the interest amount to TDS. Nowhere the AO has challenged the identity, creditworthiness of the lenders and the genuineness of the transactions with any tangible material. I find that the AO was in possession of good information in the form of investigation report, to begin with, but he could neither succeed to repudiate the evidences filed by the appellant nor he could gather independent evidence even to establish the surrounding circumstances not to speak of leading evidence to prove his hypothesis. In view of the above discussion I hold that the loan taken by '-" the appellant from the above three parties cannot be doubted and the addition made by the AO u/s 68 of the Act cannot survive the test of appeal. I therefore, direct the AO to withdraw the addition. This ground is allowed. None of the above findings have been controverted with evidences by the Revenue. 13. The Hon'ble Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT Vs. Divine Leasing & Finance Ltd., (2008) 299 ITR 268 (Delhi) and CIT Vs. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC)]." 14. In the case of ACIT v. Shri Ramesh Ramswarupdas Jindal (supra) the Coordinate Bench held as under: - "9. We have heard the rival submissions, perused the orders of the authorities below, the case laws relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has merely described the statement of Shri. Pravin Kumar Jain and as communicated by the investigation wing. Thus, it is very evident that the Ld. Assessing officer has not made any independent enquiry in order to establish the in-genuineness of loans if any, with contrary evidence. The statements referred to and relied upon by the assessing officer have never been disclosed to the appellant opportunity for cross examination was also not given, hence such statement could not be utilized against the appellant without giving full and proper opportunity of cross examination as has been held vide Mahesh Gulabral Joshi Vs. CIT(A) (2005) 95 lTD 300 Mumbai ITAT and Hon'ble Supreme Court decision in the case of KishanchandChellaram Vs. CIT (125 ITR 713 (SC)). 6.3. Further during the course of assessment proceedings, the appellant has produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating that the party did not exist, he should have summoned the party and recorded the statement. As the AO, has not brought anything in record to show that the evidences filed by the appellant are false, the loan received and repaid by the appellant cannot be treated as bogus. The addition cannot be made merely on the basis of suspicion, surmises and conjectures. There has to be some concrete evidence whether direct or circumstantial. In this case, no such evidence is present. On the contrary, the appellant is showing from the record that he has received loan through account payee cheques from above TWO PARTIES. He has shown that the loans have been repaid through account payee cheque and as long as he was holding the loan, he has paid the interest after deducting TDS. With regard to the disallowance of interest on loans taken from afore-mentioned parties, the appellant submitted that the AO has also ignored the fact that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orately considered the submissions and the averments made by the Assessing Officer in the Assessment Order and the evidence furnished by the assessee and concluded that the assessee has discharged its primary onus on providing complete details in respect of the loan transactions and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loans, this finding in our view is completely justified in view of the facts and circumstances of the assessee's case." 15. In the case ACIT v. M/s. H.K. Pujara Builders (supra), the Coordinate Bench held as under: - 6. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are found to be not genuine, it does not lead to the conclusion that all the transactions were non-genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusions drawn therein cannot be applied ipso facto to all other cases. Simply relying on the report of the DGIT(Inv), Mumbai and statement the AO cannot conclude that all transactions are accommodation entries. 5.11. The case of the appellant is covered by the decision of ITAT, T Bench, Mumbai, in the case of Satish N. Doshi HUF Vs. ITO, Ward 21(2)(4), Mumbai in ITA No-2329/Mum/2009 and the decision of ITAT, 'E' Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/Mum/2012. Both the cases relate to re-opening of assessment on the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances. 5.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss the merit of submission made by the appellant and casually brushed aside the details filed by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: - "6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned assessment year, the assessee had taken unsecured loans from the following two parties: Sr. No Name of the Party and Address PAN Loan taken(Rs.) Rate of Interest 1. Javda India Impex Limited CS-1, Silver Anklet, Yari Road, Versova, Mumbal 400 061 AAACA7065L 20,00,000 9% 2. Lexus Infotech Ltd. 626, Panchratna, Opera 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said unsecured loans have been repaid in the subsequent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377;.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: - … … Since the facts surrounding the present issue being identical with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from them." 20. In so far as the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., (supra) relied on by the Ld.DR, we are of the view that this decision is not applicable to the facts of the case on hand. Further, we find that in the case of ITO v. M/s. Vulvan Traders in ITA.No. 4137/Mum/2015 and 4144/Mum/2015 dated 30.01.2019 the Coordinate Bench considered this decision of Hon'ble Delhi High Court and observed as under: - "4.4. …….. In the case before Hon'ble Delhi High Court, NDR Promoter Pvt. Ltd.((supra)), cited by Ld. DR, it was found that the cash was deposited in the bank account of one such company and thereafter transferred/ circulated within the group companies before the cheque is issued to the beneficiaries. It is also noted (page-14, para-12) that the share holder companies (five in numbers) were all located at the common address i.e. 13/34 WEA, Fourth Floor, Arya Samaj Road, New Delhi. In that situation, Hon'ble Delhi High Court reached to a particular conclusion. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are different and distinguishable. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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