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TMI Blog2021 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of the interest expenditure - Claim of expense of the assessee was disallowed by the A.O, for the reason, that the loan transactions in question had been held by him to be bogus - HELD THAT:- Now, as we have concluded that the assessee had raised genuine loans from the aforementioned parties, therefore, the consequential disallowance by the A.O of the interest paid to the said lenders by treating the loan transactions as bogus shall stand vacated - ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 - - - Dated:- 7-6-2021 - M. Balaganesh, Member (A) And Ravish Sood, Member (J) For the Appellant : Ritu Kamal Kishore, A.R. For the Respondents : G.N. Makwana and Sushil Kumar Mishra, Sr. D.Rs. ORDER Per Bench The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(Appeal)-47, Mumbai, dated 28.02.2018 which in turn arises from the assessment orders passed by the A.O as under: Assessment Year 2009-10 143(3) r.w.s 147, dated 29.02.2016 2010-11 143(3) r.w.s 147, dated 29.02.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 7. In any event, the Ld. AO erred in raising a demand of ₹ 2,35,75,510/- and the ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 8. The appellant craves leave to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal. 9. The appellant prays before the Hon'ble Tribunal to quash the assessment order and/or delete the additions made by the AO. 2. Briefly stated, the assessee which is a Joint Venture between M/s. Mumbai Shelter Housing Development Pvt. Ltd. AND M/s. Neminath Construction, a proprietary concern of Shri. Nemichand P. Jain is engaged in the business of redevelopment of buildings in Goregaon (W), Mumbai. As stated in the assessment order, as the shares of both the members were determined and known, therefore, the income of the AOP was taxable in their respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisted him in his nefarious activities were recorded u/s. 132(4) and u/s. 131 of the Act, wherein it was admitted by them that they were providing accommodation entries for bogus loans/bogus sales/purchases/import for others through various benami concerns. On a perusal of the incriminating material/documents seized during the course of the search proceedings, as claimed by the A.O, it transpired that the assessee was also one of the beneficiaries of accommodation entries of loans that were taken from the benami concerns managed and controlled by Shri. Bhanwarlal Jain. 4. On the basis of the information gathered in the course of the aforesaid search proceedings, a survey action was conducted on 16.10.2014 on M/s. Neminath group to which the assessee belongs. It was observed by the A.O that during the course of the survey proceedings, Shri. Neminath Jain, key person of the aforesaid group, in his statement had admitted that the various concerns belonging to his group (including the assessee) had obtained loans and advances from various name lending concerns managed and controlled by Shri. Bhanwarlal Jain. On analysis of the statement of Shri. Nemichand P. Jain it was observed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y after deduction and deposits of due TDS U/sec 194A. The said TDS were deposited before the due date and Form No. 16A was also is 3uecf to the said lenders. 1.2 Original assessment U/sec 143(3) was completed on 11/10/2011, accepting total income as per return of income. Copy of the said order U/sec 143(3) is at page 1 and 2. During the course of original scrutiny proceedings, we were asked to submit the loan confirmations of the above referred concerns vide questionnaire dated 20/07/2011 U/sec 142(1) (Question No. 9). In reply to the same, we had submitted loan confirmations of the above concerns vide our letter dated 19/07/2011. Copy of the same is at page 3 to 4. After verification of the same, the then A.O. has passed his order U/sec 143(3). 1.3 Further, we also filed before your good self, copy of Loan confirmations, Bank statements highlighting loans given and interest received by the above referred concerns from us along with copy of acknowledgement of their Income Tax returns filed and balance sheet vide our letter dated 19/02/2016 and 22/02/2016. It is submitted that the above concerns had given the said loans out of their bank balances which establishes their cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above facts no addition of loan taken of ₹ 3.75 Crores and interest paid by me can be made to our total income in view of the below mentioned reasons: i) The amount was received by A/C Payee Cheques/RTGS/NEFT from the lenders. ii) The Interest on loan was regularly paid by A/C Payee Cheque after deduction of due TDS U/sec. 194A. iii) We have established the creditworthiness of the said concerns and genuineness of the said loans taken by copy of Loan confirmations, Bank statements highlighting loans given and interest received by the above referred concerns along with copy of acknowledgement of their Income Tax returns and balance sheet have been filed vide our representatives letter dated 19.02.2016 and 22.02.2016. iv) The genuineness of the said loans taken has already been verified during the course of original scrutiny proceedings U/sec 143(3) and during survey U/sec 133A. v) Further to submit that we had never interacted with the alleged concerns nor knowing them directly as the said loans were arranged by a person to whom we know. Further, during the course of survey also no cash was found at our premises and therefore question of any additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. Without Prejudice, we had not claimed any commission paid on the said loans taken in Profit Loss A/c and therefore, question of any disallowance of any commission paid does not arise. Therefore, any addition of the same will amount to a notional addition of commission paid. 3. Further, CBDT has also clarified the same vide Instruction No. 286/2/2003/IT(Inv) dated 10/03/2003. K is instructed by the CBDT that: Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department Similarly, while recording statement during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee that it had raised genuine loans from the aforementioned parties. Rejecting the assessee's claim that it had entered into genuine loan transactions with the aforesaid concerns it was observed by the A.O as under: The concerns M/s. Mohit Enterprises, M/s. Jewel Diam, M/s. Meenakshi Exports, M/s. Rose Impex, M/s. Rose Gems Pvt. Ltd., M/s. Jewel Diam, M/s. Navkar Diamonds M/s. Sankhala Finvest Ltd. are the concern of the persons, who are actually associate cum employee of Bhanwarlal Jain as proved during the course of search on Bhanwarlal Jain group of cases. The parties in question have given contradictory statements during the search proceedings and subsequently in their affidavit filed. The Retraction via affidavit has already been refuted by the department holding the same as an afterthought having been filed after 6 months from the search. The assessee has made claim of loan from aforementioned concerns, which has been proved as bogus, since these concerns are controlled by Shri. Bhanwarlal Jain alongwith Shri Rajesh Jain to issue only accommodation entries. As such, the onus to prove otherwise was is on the assessee to substantiate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed accommodation entries from his dummy concerns. It was observed by the A.O that many of the ostensible beneficiaries of the accommodation entries had admitted that they had not raised any genuine loans from the aforesaid dummy concerns and had only obtained accommodation entries from them. It was further observed by the A.O that some of the beneficiaries of the accommodation entries after having been cornered had revised their returns of income and had surrendered the amount of the accommodation entries taken by them. On the basis of his aforesaid observations, it was concluded by the A.O that the assessee had not raised any genuine loans from the abovementioned benami concerns and had only obtained accommodation entries from them. 5. Further, referring to the incriminating material seized in the course of the search proceedings and also drawing support from the prevailing commission that would normally as a matter of practice be charged by an accommodation entry provider for the services rendered to a beneficiary, the A.O, was of the view that the assessee would had parted with a commission of 20 paisa (approx) per ₹ 100/- per month on the accommodation entries of loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents that were unearthed in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates/concerns. It was observed by the CIT(A) that the incriminating material seized in the course of the search proceedings read a/w the statements of Shri. Bhanwarlal Jain and his associates-cum-employees recorded during the course of the search proceedings revealed beyond doubt that they were not engaged in any genuine business activities but were carrying out their nefarious activities of providing accommodation entries through 68 dummy concerns. It was observed by the CIT(A) that the various persons who were projected as directors, partners and proprietors of the various concerns were actually dummies and the entire show was admittedly managed and controlled by Shri. Bhanwarlal Jain. It was further observed by the CIT(A) that the employees/directors/partners/proprietors of the various concerns had in their respective statements recorded u/s. 132(4) and u/s. 131 of the Act admitted that the entire affairs of the group concerns were managed and controlled by Shri. Bhanwarlal Jain with the support of his relatives/associates. In order to fortify his view that the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search operation, thus, the same was clearly an outcome of an afterthought and no cognizance of the same could validly be drawn. It was observed by the CIT(A) that the fact that Shri. Bhanwarlal Jain and his associates-cum-employees were carrying out their nefarious activities of providing accommodation entries was not solely based on his statement recorded u/s. 132(4), but on an analysis of the facts that were unearthed in the course of the search proceedings. It was, further, observed by the CIT(A) that contrary to what was alleged by Shri. Bhanwarlal Jain in his retraction letter there was nothing on record which would reveal that there was any threat or coercion at the time of recording of his statement u/s. 132(4) of the Act. Further, the CIT(A) in order to drive home his claim that retraction of the statement by Shri. Bhanwarlal Jain and his associates-cum-employees was merely backed by an afterthought and did not reveal the true state of affairs, took support of certain stereotype facts as were discernible from their respective affidavits on the basis of which they had retracted their statements. The CIT(A) further relied on certain judicial pronouncements to support his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) that the bank accounts did neither reflect the creditworthiness of the lenders nor the genuineness of the transactions. It was further observed by the CIT(A) that the onus cast upon an assessee does not get discharged merely by filing of the confirmatory letters of the lenders. Also, it was observed by him that the fact that the payments were made by account payee cheques and the same were reflected in the bank statements would not conclusively prove the genuineness of the loan transactions. The CIT(A) finally concluded that the assessee had not received any genuine loans from the aforementioned paper companies and had only received accommodation entries from them. The CIT(A) further supported his aforesaid view by relying on certain judicial pronouncements. Accordingly, the CIT(A) upheld the addition of ₹ 3.75 crores made by the A.O as an unexplained cash credit within the meaning of Sec. 68 of the Act. As regards the addition of commission of ₹ 3,72,328/- that was made by the A.O, on the ground, that amount to the said extent would have been parted with by the assessee for receiving the accommodation entries, the same too was sustained by the CIT(A). Insofa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad obtained accommodation entries of loans aggregating to ₹ 3.75 crores from certain benami concerns which were managed and controlled by an infamous accommodation entry provider, viz. Shri. Bhanwarlal Jain, the case of the assessee was reopened under Sec. 147 of the Act. During the course of the assessment proceedings it was observed by the A.O that the assessee had during the year in question claimed to have received unsecured loans amounting to ₹ 3.75 crores from certain concerns which as per the information shared with him by the DDIT(Inv.)-II, Mumbai were benami concerns managed and controlled by Shri. Bhanwarlal Jain (supra), as under: Sr. No. Particulars Amount 1. M/s Meenakshi Exports ₹ 25,00,000/- 2. M/s Navkar Diamonds ₹ 50,00,000/- 3. M/s Rose Impex ₹ 50,00,000/- 4. M/s Rose Gems Pvt. Ltd. ₹ 1,25,00,000/- 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) as observed by us hereinabove had concurred with the view taken by the A.O and dismissed the appeal. 12. As is discernible from the orders of the lower authorities, the loans in question have been held by them as bogus loans for multiple reasons that had ostensibly weighed in their mind, viz. (i). that Shri. Bhanwarlal Jain and his associates-cum-employees in their statements recorded u/s. 132(4) and u/s. 131 of the Act had admitted that they were providing accommodation entries through 70 benami concerns floated by them; (ii). that the incriminating material/documents unearthed in the course of search and seizure proceedings conducted on Shri. Bhanwarlal Jain and his associates/benami concerns revealed that the persons who were projected as directors/partners/proprietors of the various concerns were dummies who neither had any competence or credibility to operate any investment company/firm/proprietorship and the said benami concerns managed and controlled by Shri. Bhanwarlal Jain were not engaged in any genuine business but were carrying on an organised activity of providing accommodation entries; (iii). that a conjoint perusal of certain incriminating material seized dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. Apart from that, it was submitted by the assessee vide its letter dated 24.02.2016 filed with the A.O in the course of the reassessment proceedings that most of the loans in question had already been repaid by it. Also, the assessee in the course of the appellate proceedings had vide its written submissions stated that the loans in question were repaid in subsequent years by RTGS/Cheques only. Copy of the bank statement evidencing repayment of the loans alongwith the loan confirmations was filed by the assessee with the CIT(A). However, the CIT(A) held a conviction that as the lender concerns were not into any genuine busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his health at the relevant point of time. In the backdrop of the aforesaid facts, we shall deliberate on the evidentiary value of a statement of an assessee recorded during the course of a survey action conducted under Sec. 133A; and as to whether or not the same on a standalone basis can justify drawing of adverse inferences and a consequential addition in the hands of an assessee. Sec. 133A(3)(iii) of the Act which vests power with an Income Tax Authority to record the statement of any person in the course of survey proceedings, reads as under: (iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act. Accordingly, it is evident that an Income Tax Authority in the course of the survey proceedings conducted under Sec. 133A can record the statement of any person which could be useful or relevant to any proceeding under the Act. However, we find that the phraseology of Sec. 133A(3)(iii) is entirely different as in comparison to the provisions of Sec. 132(4) of the Act. Under Sec. 132(4) of the Act, the authorized officer can examine anybody on 'Oath', and such statement may be used as evidence in any proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorise taking any sworn statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Sons Vs. CIT (2003) 263 ITR 101 (Ker). In the aforesaid case, it was observed by the Hon'ble High Court that as the statement elicited during the course of the survey operations is not recorded on oath, therefore, the same has no evidentiary value. Further, the Hon'ble Supreme Court in its judgment in the case of CIT Vs. S. Khader Khan Son (2013) 352 ITR 480 (SC), while upholding the view of the Hon'ble High Court of Madras, had held, that as a statement recorded in the course of the survey proceeding does not carry any evidentiary value, therefore, no addition is sustainable on the strength of the said statement. A similar view had also been taken by the Hon'ble High Court of Delhi in the case of CIT Vs. Dhingra Metal Works (2010) 328 ITR 384 (Del). In the aforementioned case, it was observed by the Hon'ble High Court that a statement of an assessee to have evidentiary value should have been recorded on oath. It was observed by the High Court that though an admission was an extremely important piece of evidence, it could not be said to be conclusive and it was open to the person who made the admission to show that it was incorrect. In the backdrop of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orative evidence, therefore, the same on a standalone basis could not have justified drawing of adverse inferences as regards the authenticity of the loan transactions in question, specifically when the assessee had declined to act upon the same and had placed on record supporting documentary evidence to prove the authenticity of the said transactions. We find that the CBDT in its letter No. F. No. 286/2/2003, IT (Inv-II), dated 10.03.2003 had observed that instances have come to its notice that in certain cases the assessee's were forced to confess undisclosed income in the course of the search seizure and survey operations. It was noticed by the Board that as such baseless disclosures would be divorced from the actual facts and would not be backed by any credible evidence, therefore, the assesses at the time of filing their returns of income would retract from the same. Accordingly, the Board taking cognizance of the ground realities had in its aforesaid circular emphasised that the officials in the course of the search seizure proceedings and survey operations should focus and concentrate on collection of evidence of income which leads to information on what has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus on the basis of the statement of Shri. Bhanwarlal Jain that was recorded under Sec. 132(4) of the Act on 11.10.2013, wherein he had admitted before the Investigation wing that he was managing and controlling the various dummy concerns through which accommodation entries were being provided. As is discernible from the order of the CIT(A), Shri Bhanwarlal Jain had retracted from his aforesaid statement by filing an 'affidavit' dated 15.05.2014 (filed with the office of the Addl. Director of Income-tax (Inv.)-IX, Mumbai on 27.05.2014) on the ground that the same was made involuntarily and under coercion. Observing that as per the material available on record there was no evidence of any coercion, threat or duress by the department, the CIT(A) was of the view that the retraction of the statement recorded u/s. 132(4) by Shri. Bhanwarlal Jain and his associates-cum-employees was merely an afterthought and not corroborated by any material on record. Be that as it may, we find that it is not the case of the revenue that the aforesaid person or his associates-cum-employees had at any stage in their statements recorded during the course of the search proceedings ever alleged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of the loan transactions under consideration also drawn support from the fact that most of the loans had already been repaid by it. 15. We have given a thoughtful consideration to the facts of the case in the backdrop of the settled position of law. As observed by us hereinabove, the statement of Shri Bhanwarlal Jain, which thereafter had been retracted by him (though not accepted by the revenue) had heavily weighed with both the lower authorities for concluding that the assessee in the garb of unsecured loans had raised accommodation entries from the aforementioned seven parties. In sum and substance, we are confronted with a situation where a statement of a 'third party' which though had been retracted is being acted upon and pressed into service by the revenue for drawing of adverse inferences and treating the loan transactions under consideration as bogus/sham. On a perusal of sub-section (4) of Sec. 132 of the Act, an authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had thereafter been retracted. We cannot remain oblivious of the fact that now when a statement recorded under Sec. 132(4) of the Act which had thereafter been retracted (though not accepted by the department) would require some corroborative material for the A.O to make additions on the basis of such statement in the hands of the person whose statement it is, therefore, obviously a much higher burden would be cast upon the revenue at the time of using such statement for drawing of adverse inferences in the hands of a 'third party'. Admittedly, an admission recorded in a statement under Sec. 132(4) is a vital piece of evidence, but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Pullangode Rubber Product Company Ltd. Vs. State of Kerala 91 ITR 18 (SC). Also, a similar view had been taken by the Hon'ble High Court of Andhra Pradesh in the case of CIT Vs. Naresh K. Aggarwal (2014) 369 ITR 171 (AP). In the said case, it was observed by the Hon'ble High Court that a statement recorded under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue, even then, the addition/disallowance has to be based by the revenue on the basis of evidence collected during the course of the search proceedings. We, thus, on the basis of our aforesaid deliberations are of the considered view that merely on the basis of admission an assessee cannot be saddled with additions unless and until some corroborative evidence is found in support of such admission. 16. We shall in the backdrop of the aforesaid settled position of law advert to the adverse inferences drawn by the lower authorities as regards the genuineness of the loan transactions in question by drawing support from the statement of Shri. Bhanwarlal Jain that was recorded u/s. 132(4) of the Act. Admittedly, as observed by us hereinabove, the A.O had drawn adverse inferences in the hands of the assessee on the basis of the statement of Shri. Bhanwarlal Jain that was recorded under Sec. 132(4) of the Act, despite the fact that the said person had thereafter retracted from his aforesaid statement by filing an 'affidavit', dated 15.05.2014 with the Addl. DIT (Inv)-IX, Mumbai, on the ground that the same was recorded under threat and coercion. We are unable to pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had in the garb of the loans in question received accommodation entries. In sum and substance, though the lower authorities had in their respective orders referred at length to the incriminating material that was unearthed in the course of search proceedings which revealed that Shri. Bhanwarlal Jain was managing and controlling an organised activity of providing accommodation entries, but we are afraid that they had failed to lead any clinching evidence which would prove that the assessee in the garb of loans raised from the aforesaid concerns had only received accommodation entries. As is discernible from the orders of the lower authorities, neither in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates nor in the survey proceedings conducted on Shri. Neminath P. Jain, key person of Neminath group, any material was found which would prove that the assessee in the garb of the loans in question had only received accommodation entries and not genuine loans. Although the CIT(A) on the basis of his exhaustive observations had demonstrated the nefarious activities of providing of accommodation entries by Shri. Bhanwarlal Jain and his associates-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions in question and without dislodging the authenticity of the documentary evidence that was placed on record by the assessee in support thereof summarily stamped them as bogus. As observed by us hereinabove, the assessee in the course of its original assessment proceedings which had culminated into an order u/s. 143(3), dated 31.10.2011 had filed the aforesaid documentary evidence in order to substantiate the genuineness and veracity of the loans in question which were found to be in order by the A.O. In the course of the reassessment proceedings, the A.O was in receipt of information from the DGIT(Inv.), Mumbai that the assessee in the garb of the loans in question had raised accommodation entries from the aforesaid concerns which were the benami concerns of Shri. Bhanwarlal Jain, an infamous entry provider. Acting upon the information, the A.O after analysing the incriminating material/documents that were found in the course of the search proceedings and referring to the modus operandi that was adopted by the aforesaid person for carrying out his nefarious activities, had without pointing out any infirmity in the documentary evidence that was filed by the assessee to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey action conducted on Shri. Nemichand P. Jain (supra) which would evidence that the assessee had in the garb of the loans in question only raised accommodation entries, we are unable to subscribe to the reliance placed by the lower authorities on the statements of Shri. Bhanwarlal Jain and his associates-cum-employees that was recorded u/s. 132(4) and u/s. 131 of the Act, and thus, are unable to concur with the unsubstantiated view taken by them that as the aforesaid seven lender concerns in question were allegedly involved in providing accommodation entries, thus, the loans in question despite absence of any material proving to the contrary were to be held as bogus. In our considered view, though the incriminating material unearthed in the course of search proceedings conducted on Shri. Bhanwarlal Jain and his associates raises serious doubts as regards the genuineness of their activities, but then, doubts howsoever strong cannot be allowed to take the place of evidence. We, thus, in the backdrop of our aforesaid observations are unable to concur with the lower authorities who had drawn support from the statements of Shri. Bhanwarlal Jain and his associates-cum-employees rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions in question. In our considered view, the aforesaid failure on the part of the A.O to allow a cross-examination of the aforementioned parties, viz. Shri Bhanwarlal Jain and his associates-cum-employees is in flagrant violation of the basic tenets of the principle of natural justice. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC). In the said case it was observed by the Hon'ble Apex Court that not allowing the assessee to cross-examine the witnesses whose statements were made the basis for passing the impugned order by the Adjudicating Authority amounted to a serious flaw, which being in violation of the principles of natural justice rendered the said order as nullity. Further, we find that the Hon'ble High Court of Bombay in the case of The CIT-13 Vs. M/s. Ashish International, ITA No. 4299 of 2009; dated 22.02.2011 had held that the genuineness of the statements relied upon by revenue is not established when the assessee disputes the correctness of those statements and has not been afforded adequate opportunity to cross-examine those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person on whose statement reliance was placed by the department could not be produced for cross-examination, the said fact was sufficient to discard the said statement. Further, we find that the Hon'ble High Court of Gujarat in the case of Heirs Legal Representatives of Laxmanbhai S. Patel Vs. CIT (2010) 327 ITR 290 (Guj) deliberating on the legal sanctity of a statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving him an opportunity of cross-examination, had observed, that if relying on such statement an addition was made, then, the same was required to be deleted on the ground of violation of the principles of natural justice. Also, a coordinate bench of the Tribunal i.e. ITAT, Mumbai in the case of Mahesh Gulabrai Joshi Vs. CIT (2005) 95 ITD 300 (Mum), had observed, that in a case where the addition was made on the basis of statement of a person recorded during survey but no opportunity of cross-examining the said person was allowed to the assessee, then, the said statement could not have been made the basis of the addition. As regards the reliance placed by the lower authorities on the statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er concerns viz. M/s. Mohit Enterprises; M/s. Jewel Diam; M/s. Meenakshi Exports; M/s. Rose Impex; M/s. Rose Gems Pvt. Ltd.; M/s. Surya Diam; M/s. Jewel Diam; M/s. Navkar Diamonds M/s. Sankhala Finvest Ltd. figured in the list of the 68 concerns which were admitted by Shri. Bhanwarlal Jain as paper concerns which were being managed and controlled by him for providing accommodation entries for bogus loans/bogus sales/purchases/import for others. Rejecting the confirmations of the proprietor/partners/directors of the aforementioned concerns, it was observed by the A.O that the same had already been refuted by the department. Also, the A.O was not inspired by the assessee's claim of having raised genuine loans from the aforementioned parties for the reason that the said loans were not backed by loan agreements and collateral securities. Further, the A.O observed that a detailed analysis of the financials of all the benami concerns of Shri. Bhanwarlal Jain revealed certain common characteristics, viz. that despite high turnover no advance-tax or self assessment tax was paid by the said concerns; the major portion of assets in the balance sheets of the said concerns comprised of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents found during the course of survey conducted on the assessee revealed that it had collected unaccounted on-money on sale of flats in cash which was channelized into its books of accounts through accommodation entries received from the aforesaid benami concerns. Rejecting the confirmation letters of the lender concerns that were filed by the assessee in the course of the reassessment proceedings, it was observed by the CIT(A) that once it was proved that the lender concerns were benami concerns which were providing accommodation entries, the documents filed by the assessee in its attempt to substantiate the genuineness of the loan transactions lost its evidentiary value and were of no significance. Further, in order to drive home its conviction that the benami concerns in question were not carrying on any genuine business and were only providing accommodation entries, the CIT(A) referred to certain facts, viz. books of accounts of all the concerns were maintained at the same premises; blank signed cheques of the proprietors/partners/directors of the said concerns were found in the course of the search proceedings; books of account of all the concerns were being maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions in question as accommodation entries. Before proceeding any further, we may herein observe that the documentary evidence that was verified by the department for holding the loan transactions as genuine while framing the original assessment vide order passed u/s. 143(3), dated 31.10.2011, was however, discarded while framing the reassessment in its case, for the reason, that the names of the lender concerns in question had figured in the list of the 68 benami concerns which were admitted in his statement recorded u/s. 132(4) by Shri. Bhanwarlal Jain, an infamous accommodation entry provider, as benami concerns which were managed and controlled by him for providing accommodation entries. Primary basis for digressing from its earlier view and stamping the loan transactions as bogus while framing the reassessment was the reliance placed by the lower authorities on the statements of Shri. Bhanwarlal Jain and his associates-cum-employees recorded u/s. 132(4) and u/s. 131 in the course of the search proceedings AND that of Shri. Nemichand P. Jain that was recorded in the course of survey action. However, for the reasons culled out at length by us hereinabove, the statements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders in question were benami concerns of Shri. Bhanwarlal Jain, therefore, the aforesaid documents relied upon by the assessee in support of its claim of having raised genuine loans were of no significance and lost their evidentiary value. We are unable to concur either with the view and also the basis adopted by the A.O for so concluding. On a perusal of the orders of the lower authorities, it can safely be gathered from record that the lender concerns in question had not been conclusively proved to be benami concerns. Insofar the seven lender concerns in question are concerned, we find that except for the fact that the names of the said concerns had figured in the list of the 68 concerns which were stated by Shri. Bhanwarlal Jain in his statement recorded u/s. 132(4) as his benami concerns that were used for providing accommodation entries, there is nothing else discernible from the records which would evidence that the said concerns in question were bogus concerns and had provided accommodation entries to the assessee. Also, we cannot shut our eyes to the fact that the aforesaid statement of Shri. Bhanwarlal Jain recorded u/s. 132(4) had thereafter been retracted by him. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements of neither of the said persons had ever been made available to the assessee. In our considered view, the assessee by leading documentary evidence in support of the identity and creditworthiness of the lender concerns and genuineness of the loan transactions in question had discharged the primary onus that was cast upon it for proving the authenticity of the loan transactions. Thereafter, the onus to disprove the genuineness of the loan transactions in question was shifted on the A.O. However, the A.O we find had failed to discharge the onus that was cast upon him as regards disproving the genuineness of the loan transactions in question after taking cognizance of the documentary evidence that was filed by the assessee in support thereof. On a perusal of the orders of the lower authorities, we find that they had adopted a casual approach and without even putting up any effort to refer to the specific confirmations; income-tax credentials; bank accounts; and financials of the lender concerns/entities as were placed on the record of the A.O by the assessee vide its letter dated 19.02.2016 and 22.02.2016, had concluded, that as the lender concerns were benami concerns forming pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the lender concerns. Although, it is alleged by the lower authorities that the assessee's own unaccounted money was thereafter routed back as accommodation entries in the garb of loans, however, there is not a whisper of a word in their respective orders about any such material which would evidence that the source of the loan advanced by the lender concerns was the assessee's own money. In fact, no adverse observations backed by any supporting material as regards the credits/accumulated balances in the bank accounts of the lender concerns out of which loans had been advanced to the assessee is discernible from the orders of the lower authorities. Further, the assessee in order to substantiate its creditworthiness had also placed on record its financials with the A.O. However, both the lower authorities instead of disproving the authenticity of the loan transactions in the backdrop of the documents that were filed by the assessee in discharge of its onus of having raised genuine loans, had most arbitrarily discarded the same by stamping it as insignificant and devoid of any evidentiary value. As the view taken by the lower authorities that as the lender concerns wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as thereafter shifted on him by dislodging the assessee's claim on the basis of irrefutable material could not have drawn adverse inferences only on the basis of third party information. The Tribunal while concluding as hereinabove had observed as under: The solitary issue that needs to be resolved under given facts and circumstances of the case is whether unsecured loans taken from certain companies controlled and managed by Shri. Bhanwarlal Jain is unexplained cash credit which comes under the provisions of Sec. 68 of the Act or not. The A.O has made additions of ₹ 75,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri. Bhanwarlal Jain under Section 68 of the Act, on the ground that the assessee has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of parties. The A.O has extensively discussed the issue in his assessment order in light of facts gathered during the course of search in case of Bhanwarlal Jain group of cases and survey in the case of assessee's group concern. Accordingly, the A.O opined that although the assessee has furnished various documents i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nwarlal Jain by DGIT(Inv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal Jain and his associates were involved in providing accommodation entries. The A.O has taken note of statement recorded by the department from Shri. Bhanwarlal Jain and his associates. The A.O has taken note of survey proceedings conducted in group cases of assessee and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidence has been brought on record by the A.O to disprove the claim of the assessee that these are genuine transactions and unsecured loans taken under normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of account of the assessee are hit by the provisions of section 68 of the Act or not. The sole basis for the A.O to make additions is statement of Shri. Bhanwarlal Jain recorded under Section 132(4) of the Act, where he has admitted at he is involved in providing bogus unsecured loan entries to various beneficiaries. The statement given by Shri. Bhanwarlal Jain has been retracted by himself by filing affidavits before the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticularly when the person who gave the statement retracted his statement by filing affidavit. Further, the A.O failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that these transactions are non-genuine, but merely relied upon the statement of Shri. Bhanwarlal Jain under Sec. 68 of the Act to make addition u/s. 68 of the Act. No doubt, the A.O is having every right to suspect the transactions but, that by itself would not give rise an occasion for the A.O to make additions under Sec. 68 of the Act, when the evidences filed by the assessee clearly proves the fact that these transactions were genuine transactions which are undertaken under normal business circumstances. Therefore, we are of the considered view that the A.O has erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain under Section 68 of the Act. Apart from the aforesaid, a perusal of the orders of the lower authorities reveal that the A.O had not even sought to verify the authenticity of the loan transactions in question by issuing any notices under Sec. 133(6) of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of tax at source also fortifies its claim as regards the authenticity of the loan transactions. Also, the fact as regards part repayment of the loans by the assessee to the aforementioned lenders supports the genuineness of the loan transactions in question. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of PCIT Vs. M/s. Skylark Build (ITA No. 616 of 2016; dt. 24.10.2018). In the aforesaid case, the Hon'ble High court taking cognizance of the subsequent development of repayment of the loans by the assessee to the lenders, had observed, that the said fact proved the authenticity of the loan transactions. On a perusal of the order of the CIT(A), we find, that though he had focused more on demonstrating the facts which had emerged in the course of the search proceedings conducted on Shri Bhanwarlal Jain and the modus operandi that was adopted by the said person and his associates-cum-employees for providing accommodation entries, however, no facts specifically evidencing receiving of the accommodation entries by the assessee in the garb of loans from the aforesaid lender concerns in question are discernible from his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was observed by the Tribunal that the assessee had placed on record supporting documentary evidence to substantiate the authenticity of the loan transactions viz. confirmation letters, bank statements, financial statements of the lender parties, and thus, had discharged the onus that was cast upon it. It was further observed by the Tribunal that no adverse inferences could have been drawn by the A.O without making any inquiry by issuing notices under Sec. 133(6) or summons under Sec. 131 of the Act. As regards the admission of the undisclosed income by the director of the assessee company in his statement recorded in the course of the survey proceedings, it was observed by the Tribunal that a disclosure obtained in the course of survey de hors corroborative evidence cannot be a conclusive proof for making an addition in the hands of the assessee. Accordingly, the Tribunal on the basis of its aforesaid observations had in the abovementioned case wherein identical facts were involved concluded, that the A.O in the absence of corroborative evidence was not justified in treating the loans received by the assessee before them as unexplained cash credit under Sec. 68 of the Act. A sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged the 'onus' that was cast upon it under Sec. 68 of the Act, therefore, the A.O without rebutting the genuineness of the said loan transactions in question on the basis of supporting documents was in no way justified in treating the loans amounting to ₹ 3.75 crores received by the assessee from the aforementioned parties as unexplained cash credits under Sec. 68 of the Act. Accordingly, not finding favour with the view taken by the lower authorities, we herein set aside the order of the CIT(A) and vacate the addition of ₹ 3.75 crore made by the A.O. The Grounds of appeal No. 2 6 raised by the assessee are allowed in terms of our aforesaid observations. 23. We shall now advert to the disallowance of the interest expenditure of ₹ 3,72,328/- that was claimed by the assessee to have been paid to the aforementioned seven lender parties. We find that the aforesaid claim of expense of the assessee was disallowed by the A.O, for the reason, that the loan transactions in question had been held by him to be bogus. Now, as we have concluded that the assessee had raised genuine loans from the aforementioned parties, therefore, the consequential disallowance by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2010-11 and other loans taken from 7 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called led report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 5. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 6. Without prejudice to the above grounds of appeal, the Ld. CIT(A) erred in not applying the of peak credit. 7. In any event, the Ld. AO erred in raising a demand of ₹ 49,52,240/- and the Ld. CIT(A) erred confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would have parted with for availing the aforesaid accommodation entry with respect to bogus loans. Accordingly, the A.O assessed the income of the assessee company at ₹ 1,16,61,000/-. 31. On appeal, the CIT(A) not finding favour with the contentions which were advanced by the assessee to substantiate the genuineness and veracity of the loan transactions in question rejected the same and dismissed the appeal. 32. Aggrieved, the assessee has carried the matter in appeal before us. As the facts and issue involved in the present appeal remains the same as were there before us in the assessee's appeal for the immediately preceding year i.e. A.Y. 2009-10 in ITA No. 2554/Mum/2018, therefore, our order therein passed in context of the said issues in question shall apply mutatis mutandis for the purpose of disposal of the present appeal i.e. ITA No. 2885/Mum/2018. Accordingly, the order of the CIT(A) is set aside and the addition of ₹ 75 lac made by the A.O is vacated. On a similar footing the order of the CIT(A) sustaining the addition u/s. 69C towards commission expenses of ₹ 1,75,000/- and disallowance of interest expenditure of ₹ 39,91,000/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received by the A.O from DGIT(Inv.), Mumbai, that the name of the assessee figured in the list of the tainted parties which had raised accommodation entries for loans from benami concerns of Shri. Bhanwarlal Jain, an infamous accommodation entry provider, its case was reopened under Sec. 147 of the Act. Observing, that the assessee had claimed deduction for interest paid on loans pertaining to the earlier years which were held by him as bogus while framing the assessment for the said respective years, the A.O disallowed the assessee's claim for interest expenditure of ₹ 40,50,000/-. Accordingly, the income of the assessee was assessed by the A.O vide his order passed under Sec. 143(3) r.w.s 147, dated 29.02.2016 at an income of ₹ 40,50,000/-. 36. On appeal, the CIT(A) observed that as the impugned loans in question were held by him as bogus while disposing off the assessee's appeal in the preceding year i.e. A.Y. 2009-10 and A.Y. 2010-11, therefore, he upheld the disallowance of the interest expenditure claimed by the assessee and dismissed the appeal. 37. Aggrieved, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 6. Without prejudice to the above grounds of appeal, the Ld. CIT(A) erred in not applying the theory of peak credit. 7. In any event, the Ld. AO erred in raising a demand of ₹ 30,83,440/- and the Ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 8. The appellant craves leave to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal. 9. The appellant prays before the Hon'ble Tribunal to delete the additions made by the AO. 40. Briefly stated, the assessee company had filed its return of income for A.Y. 2013-14 on 25.09.2013, declaring a total income of Rs. nil. Subsequently, the case of the assessee was selected for scrutiny assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-15 44. We shall now deal with the appeal filed by the assessee for A.Y. 2014-15. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds before us: 1. On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of the disallowing interest amounting to ₹ 15,64,521/- on loans taken in FY. 2008-09, 2009-10 and 2012-13 under the provisions of Income Tax Act. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making notional addition of ₹ 4,27,340/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 3. On the facts and in the circumstances of the appellant's case and in law the ld. CIT(A) erred to hold that the loans taken by the appellant from 10 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/inform ..... X X X X Extracts X X X X X X X X Extracts X X X X
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