9911796707
TMI Blog2020 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the case of CIT vs Lovely Exports Pvt.Ltd. [ 2008 (1) TMI 575 - SC ORDER ] held that if, the share application money is received by the assessee company from alleged bogus shareholders, the names are given to the Ld. AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but the sum found credited in its books cannot be regarded as undisclosed income of the assessee. - Decided in favour of assessee. - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : Shri Haridas Bhat, AR For the Revenue : Shri V.Vinod Kumar, JCIT -DR ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals) 24, Mumbai, dated 23/08/2019 and it pertains to Assessment Year 2016-17. 2. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the case, and in law, the Income Tax Officer, Circle 15(1)(2), Mumbai ( The AO. ) erred in adding unsecured loans of ₹ 1,23,00,000/- as unexplained cash credits u/s 68 of the IT Act. 2. On the facts and circumstances of the case, the Income Tax Officer, Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n total a sum of ₹ 1.38 crores cannot be treated as unexplained cash credit within the meaning of section 68 of the I.T.Act. In response, the assessee has filed confirmation letter from all the parties, but could not file any other details, including financial statements and their ITR copies. The Ld. AO was not convinced with the explanation furnished by the assessee, insofar as, loans taken from three parties amounting to ₹ 1.23 crores, on the ground that the assessee has failed to file necessary details in order to prove the identity, genuineness of transactions and creditworthiness of the parties. Insofar as, loan taken from the M/s Garware Finance Corporation Pvt. Ltd, the Ld. AO has observed that although, the assessee has filed necessary details, but as per the confirmation filed by the party, there is a difference of ₹ 15 Lacs in the loans shown to have taken from the party and accordingly, made additions towards difference of ₹ 15 Lacs u/s 68 of the I.T.Act, 1961. The AO, while, doing so has taken support from the report of Investigation wing, Mumbai, as per which M/s. Arya Global Shares Securities Pvt.Ltd. is a shell company, which is engaged in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, wherein it was found that during the year the M/s. Garware Finance Corporation Ltd., has given loan to the assessee company to tune of ₹ 1,20,00,000/-. However, as per assessee records, the loan received during the year is show as ₹ 1,35,00,000/-. The difference of ₹ 15,00,000/- is unexplained. 5.6 Since there is no response from the assesee nor any details to prove the genuineness and credit worthiness of the creditor has been filed, the assesee was once gain an opportunity vide this office letter dated 09-12-2018, by bringing the above facts to the notice and since the matter is getting barred by limitation of time on 31-12-2018, the assessee was asked to show cause in the absence of any details, the genuineness and credit worthiness of the above said parties cannot be proved, therefore, was asked to produce the parties by12-12- 2018, failing which assessment will be completed based on the material available on record without any further opportunity. However, the assessee has not filed any reply to the said show cause. 5.7 Since, these entries of loans are appearing in the books of accounts of the assessee and it is assesee, who is claiming them to Be unsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities Pvt. Ltd. Is a bogus company that has been used by the entry operators to provide accommodation entries to various beneficiaries . Shri Deepak Rathod, Director of M/s Arya Global Shares Securities Pvt. Ltd has stated in his statement recorded on oath on 21-06-2018 before the DDIT (Inv.) Unit VIII(2), Mumbai that he is working as a tempo driver and has no idea of the operations of the company. He also stated that he does not even know about the directorship fo the company. He has just even his credentials (PAN, Ration card, Photo etc.) and signs certain documents for which he gets some amount as income. In effect , he is a dummy director and the company has been created to provide accommodation entries. 5.11 In view of the facts and circumstances of the case as discussed above, it is established that the credits in the form of alleged unsecured loans appearing in the books of account of the assessee amounting to ₹ 1,23,00,000/- from the above mentioned three parties and the difference found in the books of M/s Garware Finance Corporation Ltd. Of ₹ 15,00,000/- totaling to ₹ 1,38,00,000/- remained unexplained cash credits and therefore, brought to tax u/s 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be charged to income tax as the income of the assessee of that previous year. Provided that where the assesee is a company (not being accompany in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a)The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory. As per section 68 of the Ac, onus is upon the appellant to discharge the burden so cast upon. First burden is upon the appellant to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material. This has been observed in Oceanic Products Exporting Company v CIT 241 ITR 497 (Kerala). The legislature had laid down that in the absence of satisfactory explanation the unexplained cash credit may be charged u/s 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount can be treated as income of the assessee. 5.2.6 The Delhi High Court in the case of Principle CIT v. Bikra Singh ITA No.55/2017 has held that where the transactions herein do not inspire confidence as being genuine and are shrouded n mystery, as to why so-called creditors would lend such huge unsecured, interest free loans-that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness. In this case, the assessee has been able to submit only its own documents like bank account, ledger, etc and has not preliminary discharged the obligation of establishing the genuineness of the transaction and the creditworthiness of the lender parties. The Hon.Calcutta High court in CIT vs Precision Finance Pvt.Ltd. (1994) 208 ITR 465 (Cal.) laid down that the assessee is expected to establish:- 1. Identity of his creditor; 2. Capacity of creditors to advance money; and 3. Genuineness of transaction As to the issue of genuineness of transaction, it was further held in the above decision that the transaction is not genuine, simply because some, out of many, of the transactions are by cheque. Where cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash credited u/s 68 of the Act. 5.3.2 I have perused the facts of the case and submissions filed by the appellant. There appears to be discrepancy in the opening and the closing balance of the loan confirmations filed by the Garware Finance and the appellant. It is worthy to note here that both these are part of the same group entities and hence, the discrepancy, if any, in the loan balance ought to have been reconciled or explained for during the course of the assessment as well as appellate proceedings. The appellant has failed to discharge its duty of providing the correctness of the loan amount and the veracity in the ledger confirmation filed vis-a-vis the amounts appearing in the books of the appellant. In these circumstances, I agree with the addition made by the AO and uphold the same. This ground of appeal is dismissed. 5 .4 Ground 3-Disallowance of interest expenditure of ₹ 1,3,83,200 5.4.1 Having held in Ground 2 above that the loan taken by the appellant is an accommodation entry and disallowable u/s 68 it is consequently implied that the interest thereon also takes the colour of the accommodation entry and hence, the same is rightly disallowed by the Ld. AO. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 51 CCH 0107 Mum Trib. 9. Commissioner of Income tax vs Sahibgnj Electric Cables P. Ltd. (1978) 46 CCH 0212 KolHC (1978) 115 ITR 0408 7. The Ld. DR, on the other hand strongly supporting order of the Ld.CIT(A) submitted that it is a clear case of taking accommodation entries from entry providers, which is proved from the fact that the investigation wing of Income tax department has brought out modus operandi of entry providers as per which, M/s Arya Global Shares Securities Pvt.Ltd. is a shell company which is engaged in providing accommodation entries. The Ld. DR, further submitted that the Ld. AO, as well as, the Ld.CIT(A) have appraised facts in right prospective, in light of provisions of section 68 of the Act, and came to the conclusion that purported unsecured loans taken from above parties are non genuine transactions within ambit of section 68 of the I.T.Act, 1961. 8. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We have also carefully considered case laws relied upon by both the parties. The Ld. AO has made additions towards unsecured loans taken from four parties amounting to ₹ 1.38 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt.Ltd. amounting to ₹ 15 Lacs, the Ld. AO has drawn adverse inference, only on the basis of bank statement filed by the assessee for the relevant financial year to come to the conclusion that the assessee has taken loan to the tune of ₹ 1.20 crores, whereas as per the letter of confirmation, the loan has been shown at ₹ 1.35 crores. But, fact remains that on perusal of confirmation letter filed by the assessee, we find that the assessee having a running account with Garware Finance Corporation Pvt.Ltd., which includes opening balance and transactions during the year. Further, all the transactions have been made through proper banking channels. Therefore, we are of the considered view that the Ld. AO has arrived at wrong conclusions, on the basis of bank statement, ignoring other evidences filed by the assessee, including confirmation letter from the parties. As regards, loans taken from M/s Arya Global Shares Securities Pvt.Ltd., we find that as per confirmation letter of the creditor, the loan has been paid by cheque on 23/10/2015. Similarly, the assesee has obtained confirmation letter from M/s Kyra Landscapes Ltd., as per which the loan has been taken through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. This legal proposition is further strengthen by the decision of Hon ble Bombay High Court, in the case of CIT vs Goa sponge Power Ltd.(supra), where the Hon ble High court by following the decision of Hon ble Supreme court, in the case of CIT vs Lovely Exports Pvt.Ltd (supra) held that once, the authorities have got all the details, including name and address of the shareholders, their PAN / GIR number, so also, the name of the bank from which the alleged investors received money as share application money, then it cannot be turned as bogus. The ITAT, Mumbai, in the case of Sangvi Realtors Pvt.Ltd. vs DCIT(2017) (60 ITR (Trib.) 150 held that when, the assessee has furnished all relevant details in order to discharge burden of proof placed upon it u/s 68 of the Act, then additions made u/s 68 is not justified. In yet another decision of ITAT, Mumbai ACIT vs Sreedham Builders (2018) 53 CCH 2012 it was held that additions on account of unsecured loans cannot be made, where the assessee has discharged its primary onus of providing complete details, in respect of loan transactions. The ITAT, Mumbai in the case of DCIT vs Bairagra Builders Pvt.Ltd.(2017) 51 CCH 107 has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
