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TMI Blog2019 (12) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of assessment proceedings, the AO called upon the assessee to explain the acceptance of loans/deposits in respect of 10 parties the details whereof is as under: Name of the party whose account is credited Amount Shankeshwar Exports 50,00,000/- Dezire Exports 55,00,000/- Kartik Diamond Pvt. Ltd. 35,00,000/- Kushal Exports Surat 70,00,000/- Manmohan Exports Pvt. 55,00,000/- Madhav Gems India 27,00,000/- Yashika Jewels Pvt. Ltd. 30,00,000/- Rashmi Diamond Pvt. Ltd. 50,00,000/- Dev Diamonds Surat 55,00,000/- TOTAL 4,27,00,000/- Smt. Bharti N. Patel Date Receipt Amount 19.05.2011 25,00,000/- 20.06.2011 40,00,000/- 20.06.2011 11,00,000/- 23.08.2011 7,00,000/- 25.08.2011 10,00,000/- Total 93,00,000/- Grand Total 5,20,00,000/- 4. It is pertinent to note that the said loans were duly reported in the tax audit report by the assessee. The assessee filed the confirmations of these loans during the assessment proceedings. The AO, finding various defects in the loan confirmations as filed by the assessee, came to the conclusion that despite various opportunities given , the assessee has failed to prove the creditworthines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness. Appellant failed to file complete details and also failed to produce the parties. AO took the onus on himself and collected the details, issued 133(6) notices to loan creditors. AO analyzed and proved that the loan creditors of the appellant have no capacity to extend such huge amounts based on the businesses and also gave a finding based on observations from the documents that these companies are paper companies rotating the entries. The loan creditor companies generally have no place of business for which they pay rent, no electricity expenses are claimed, no salary, no opening stock, no other administrative expenses are seen in the accounts. Reliance is placed on the following case laws in this regard. CIT v Navodaya Castles (P) Ltd. 56 taxmann.com 18(50), which has confirmed the order of the Hon'ble High Court of Delhi in Navodaya Castles (P) Ltd. 367ITR306 (Delhi) CIT v. Nova Promoters and Finkase (P) Ltd. [2012] 342 ITR 169/206 Taxman 207/18 taxmann.com 217, CIT v. N.R. Portfolio (P.) Ltd. [2014] 222 Taxman 157/42 taxmann.com 339 (Delhi) and CIT v. MAF Academy (P.) Ltd. [2014] 361 ITR 258/42 taxmann.com 377 (Delhi) The above decisions refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 5.6 Hon'ble Apex Court in the case of Navodaya Castles (P) Ltd 56 taxmann.com 18(SC), has dismissed the appeal of the assessee company against the order of Delhi High Court in the case 367 ITR 306 (Delhi). Hon'ble High Court held that certificate of incorporation, PAN, etc., are relevant for purpose of identification, but have their limitation when there is evidence and material to show that subscriber was a paper company and not a genuine investor. Also held that assessee cannot simply furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by these parties by filing necessary evidences in support of the advancing of loans to the assessee. The Ld. A.R. submitted that the loan creditors in response to notice under section 133(6) filed the following information: "Assesses ledger account in his books for the A.Y 2012-13 and subsequent year till the loan repaid. j. Loan confirmation. k. Bank statement reflecting loan given and received back. I. Mode of receipt and payment of loan. m. Whether any interest charged by you? If yes, than the rate of interest charged. Also state whether TD5 was made from the interest received on loan given to Naresh Patel. n. Explain the nature, of loan that is whether it is business loan or otherwise. If it is business loan, than explain the nature of business loan with Naresh Patel with appropriate documentary evidences. o. Copy of your ROI filed for A.Y. 2012-13 alongwith Balance sheet, Audit Report and its enclosures p. Your PAN NO. with details of AO and proof of filing of ROI for A.Y.2012-13." The ld AO has candidly admitted in the remand report on page No.9 these evidens having been filed. The Ld. A.R. contended that despite having all the facts/evidences on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions. The Ld. D.R. submitted that though the assessee has filed the evidences in the form of copies of confirmations of the lenders, bank statements, ITRs, PAN cards, copies of balance sheet etc. However, the documents furnished by the assessee were incomplete and therefore could not be relied upon. The Ld. D.R. submitted that even the notices issued to the lenders under section 133(6) of the Act to verify the genuineness of the transactions and creditworthiness of the lenders did not yield any result as the information were provided incomplete and therefore , the order of Ld. CIT(A) may kindly be affirmed. 8. After hearing both the parties and perusing the material on record, we observe that the assessee has taken loans from 10 parties aggregating to Rs. 5,20,00,000/-. The particulars of the said loans were duly reported in the tax audit report form 3CD under the heads "Acceptance of loans/deposits". The AO treated the said loans as non genuine in which the identities and creditworthiness of the lenders were not proved and accordingly added the entire amount of Rs. 5,20,00,000/- under section 68 of the Act to the income of the assessee. The Ld. CIT(A) partly allowed the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led all the evidences before the AO which has been admitted by the AO in the remand report. Under these circumstances, it is nothing but an addition made by the AO and also confirmed by the Ld. CIT(A) on presumption basis. Further, we find that assessee has not been confronted with any information that the said companies were non genuine and paper companies. The case of the assessee is supported by the Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT (supra) wherein the Hon'ble Bombay High Court has held that AO should have provided the assessee the material used against him apart from providing him an opportunity to cross examine the deponents whose statements were relied upon. In the case of Pr. CIT vs. Veedhata Tower Pvt. Ltd. (supra) wherein the Hon'ble Bombay High Court has held that assessee has discharged his onus which has cast upon him in terms of preamended section 68 of the Act by filing the necessary confirmation letters from the creditors, their affidavits, their full addresses and their PANs and it was not necessary to prove the source of source prior to 01.04.2013 as has been held in the case of CIT vs. Gagan Deep Infrastructure Pvt. Ltd. 294 ITR 680 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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