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TMI Blog2021 (6) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness of the creditors by providing all necessary details as stated in earlier paragraphs and thus the assessee has proved identity, genuineness and creditworthiness of the creditors. The Assessing Officer has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer to disprove the evidences furnished by the assessee. What is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged his onus of proving the identity, genuineness and creditworthiness of the creditors and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act without any enquiry is liable to be deleted. Thus, we direct the Assessing Officer to delete the addition made u/s. 68 - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) sustained the addition made by the Assessing Officer. 4. Before us Learned Counsel for the assessee submitted that as per provisions of section 68 of the Act any sum received or credited in the books of the assessee during the year under consideration and the assessee offers no explanation it can be added to the total income of the assessee. It is submitted that in assessee's case the sum has been credited in the earlier year and not in the year of reopening and therefore section 68 of the Act does not apply in its case for the year under consideration. Ld. Counsel for the assessee further submits that the entire loan has been received through banking channels by account payee cheques/RTGS and in support copies of assessee's bank statements were filed during assessment proceedings. It is submitted that the said loans have been duly repaid in the subsequent year through banking channels. Copy of ledger account along with bank statements of lenders for payment made was also furnished in the assessment proceedings. Learned Counsel for the assessee submitted that the lenders have also confirmed that the loans have been given to the assessee and have been made paid from their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taken the share premium in calculating net-worth while considering the Creditworthiness of the lender. Therefore, it is submitted that the assessee had satisfied all the three conditions i.e., Identity of lender, Creditworthiness of lender and genuineness of transaction. Hence there is no justification in making addition u/s. 68 of the Act. 9. Ld. Counsel for the assessee further relied on the following decisions in support of his contentions: - (i). CIT v. Orissa Corpn. (p.) Ltd [25 Taxman 80F (SC)] (ii). Orient Trading Co. Ltd. v. CIT [49 ITR 723 ((Bombay)] (iii). H.R. Mehta v. ACIT [72 taxmann.com 110 (Bombay)] (iv). CIT v. Ayachi Chandrashekhar Narsangji [43 taxmann.com 251 (Guj.)] (v). Gujarat Television (P.) Ltd. v. ACIT [94 taxmann.com 400 (Guj.)] (vi). ACIT v. Vikrant Puri [82 taxmann.com 48 (Delhi - Trib.) (vii). DCIT v. Bairagra Builders P Ltd., (ITAT 'B' Bench, Mumbai) (viii). Yamuna Synthetics (P.) Ltd. v. DCIT [SOT 35 (ITAT Delhi Bench 'A')] (ix). Sarjan Corporation v. ACIT [25 taxmann.com 426 (ITAT Ahmedabad -Bench 'D'.) (x). Pr.CIT v. Hi-Tech Residency (P.) Ltd. [96 taxmann.com 402 (Delhi)] (xi). Pr.CIT v. Bhanuprasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmation letters from the lenders stating that they have lent money to the assessee. All these evidences goes to show that the assessee has discharged its primary onus by furnishing all the details in respect of the loan creditors. 12. On a perusal of the Assessment Order we observed that except stating the creditworthiness of the creditors cannot be relied on merely because they have shown loss return, no conclusive evidences were brought on record to show that the loan amount credited in the Books of Accounts of the assessee is nothing but unaccounted money of the assessee. 13. The Hon'ble Supreme Court in the case of CIT v. Orissa Corporation reported in 159 ITR 78 has held as under: - "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 15. In the case of CIT v. Orchid Industries Pvt. Ltd. (ITA No.1433 of 2014) (Bom.), Hon'ble jurisdictional High Court held as under: "The Revenue has filed the appeal on following questions: "6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of ₹ 95,00,000/- made u/s. 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for investing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) and the order of the Apex Court in case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195. 4. We have considered the submissions. 5. The Assessing Officer added ₹ 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT 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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded the unsecured loans as unexplained income of the assessee. Correspondingly he has also disallowed the interest thereon. Before the Ld.CIT(A) assessee furnished all the information regarding the unsecured loans as mentioned above. The Ld.CIT(A) considering the submissions and the findings furnished by the assessee deleted the additions observing as under: - "6.2 HELD: - I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit International amount to ₹.10,00,000/- and (2) Natsha Enterprises amounting to ₹ 10,00,000/- aggregating at ₹ 20,00,000/-. I find force in the argument of the Ld. AR. It 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 state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The assessing officer never asked for any further material. This leads to the inescapable conclusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant's claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied. 6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued only bogus bills/accommodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has not made any efforts to make independent enquiries with the lender companies. We also observe from the Assessment Order that the Assessing Officer has not provided the statements of Shri Pravin Kumar Jain to the assessee for its rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and repayment in subsequent years to establish the genuineness of the transactions copy of ITR -V filed establishing creditworthiness of the lender are non-genuine. It was also noted by the Ld.CIT(A) that the assessee has provided the identity creditworthiness as well as the genuineness of the transactions. The Ld.CIT(A) also elaborately 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 Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otally ignored the documentary evidences submitted by the appellant. The AO in the assessment order has admitted existence of these details. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.10. As far as the question of validity of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.16. After considering the totality of facts, the rival submissions, the applicable law and on the basis of discussions mentioned above, I have come to the conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s. 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of ₹ 1,27,50,000/-. This ground of appeal is allowed." 8. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue." 19. We also find that identical issue came up in the case of DCIT v. Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA.No. 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 loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts: Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 (Gau) Vijay Kumar Talwar vs. CIT [2011]330 ITR 1 (SC) 8. The learned DR, on the other hand, relied on the decisions of the Hon'ble Delhi High Court in the case of Principal CIT vs. Bikram Singh ITA.No. 55/2017 & CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014. 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmi Developers v. ITO in ITA.No. 2562/Mum/2017 dated 29.12.2017, the Bench held that once the assessee has discharged its initial burden the burden shifts to the Assessing Officer to prove otherwise. The Coordinate Bench considered the submissions as well as the material placed before the lower authorities and concluded that when once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the Assessing Officer. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. While holding so, it has been observed as under: - "4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received 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 accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that 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 financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. ….. ….. 11. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there is no reason for the AO to make addition towards loan u/s 68 of the Act. Hence, we direct the AO to delete addition made towards loans alongwith interest u/s 68 of the Act." 21. Similar view has been taken by the Coordinate Bench in the case of M/s. Shree Laxmi Developers v. JCIT in ITA.No. 6090/Mum/2017 dated 07.03.2018, wherein it has been held as under: - "8. The next issue relates to the addition 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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