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TMI Blog2021 (7) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... . As in the case Shri Kapurchand Shrimal vs.CIT [ 1981 (8) TMI 2 - SUPREME COURT ] where with reference to first appellate authority s order it was observed that it is the duty of the appellate authority to correct the errors in the orders of the authority below. In this view of the matter, in our considered opinion order of learned CIT(A) is not at all sustainable. - Revenue s appeal is allowed for statistical purposes. - I.T.A. No. 5606/Mum/2018 - - - Dated:- 22-6-2021 - Shri Shamim Yahya (AM) And Shri C.N. Prasad (JM) For the Assessee : Shri R.B. Popat For the Department : Ms. Shreekala Pardeshi ORDER PER SHAMIM YAHYA (AM) :- This appeal by the Revenue is directed against the order of learned CIT(A) dated 12.7.2018 and pertains to assessment year 2010-11. 2. Grounds of appeal read as under : (1) On the facts and in the circumstances of the case and in law, the Ld.CIT (A) erred in deleting the addition of ₹ 1,50,00,000/-made u/s 68 of the Income Tax Act, 1961 on account of unsecured loan, without appreciating the fact that mere furnishing of documents of M/s Prabhav Industries Ltd will not suffice in law to accept it; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai that the assessee is beneficiary of bogus purchases/hawala transactions with various hawala parties, Accordingly, the case was reopened u/s 147 with the issuance of notice u/s 148 dated 23.03.2015 after recording the reasons for reopening the assessment. In response to notice u/s. 148, the assessee vide letter dated 10.04.2014 requested to treat the return of income filed on 15.10.2010 may be treated as filed in response to notice u/s. 148 of the Act. [Upon request of the assessee, the reasons were communicated to the assessee vide letter dated 24.06.2015. Notices u/s. 143(2) and 142(1) were issued to the assessee. During the course of assessment proceedings, the assessee did not raise any objections. As per the information, the assessee has entered into transactions with five hawala parties amounting to ₹ 66,86,153/-. Further, on examination of the books of accounts, the A.O. further found four more hawala parties as per the list of Sales-tax Department and accordingly the total purchase transactions worked out to ₹ 1,05,55,097/-. The A.O. relied on various judicial pronouncements held that the assessee has inflated its purchases to reduce its profitability and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g their unaccounted funds to the books of account. Accordingly, in view of the above facts, during the course of hearing on 02.03.2016, the AR of the assessee company asked to produce the loan providing entity physically to prove the identity, genuineness and creditworthiness. The AR was also asked to show cause as to why the unsecured loan shall not be added back to the total income of the assessee company. 7. Assessee s reply was reproduced by the Assessing Officer as under in his order :- Kindly refer to the ongoing assessment proceedings u/s. 148 of the Income Tax Act, 1961 for the income tax Assessment year 2010-11 wherein you asked us to show cause on 1.03.2016 as why loan from M/s. Prabhav Industries Ltd. should not be treated as non genuine and you have asked us to prove its genuineness, creditworthiness and its identity and show cause as to why it should not be added as taxable income on account of bogus loan as accommodation entry; In that connection we submit as under :- Details of the loan taken from M/s. Prabhav Industries Ltd. during the FY 2009-10 is as below: Date of Loan Borrowed Cheque Number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id party as well as interest was also paid on the loan thereby deducting tax and the entire transaction of borrowing and repayment was through proper Banking Channel only. TDS returns were also duly filed. We have enclosed form 16 A in support of the same. Confirmation of accounts from M/s. Prabhav Industries was also submitted you vide our submissions dated 1s' March, 2016 which farther indicates that loan was actually borrowed and it was not at all accommodation entry adjusted in hooks. Enclosing herewith again a copy of account confirmed by M/s. Prabhav Industries Ltd. for your records and references. We request your goodself to provide us with information which you have received from Income Tax Office Central Circle, Ahmedabad which you propose to use against us so as to enable us to give any further information, if any that you may desire. We request you to provide us an opportunity to confront the party or its statements, if any by way of cross examination, in case if it is proposed to be used against us. In this regards, it may also be noted we have requested the company to furnish details such as their income tax return and other relevant documents so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah, including M/s. Prabhav Industries Ltd., are merely layering transactions wherein payment has been finally reached into the bank accounts of the beneficiaries as share capital/share premium/unsecured loans. 6.6 The assessee, in the instant case, has emphasized that the unsecured loan of ₹ 1,50,00,000/- was raised through banking channel only and that the interest was also paid through banking channel only and that nothing as such is done in cash in the transaction in question. The contention of the assessee is not acceptable in the light of above elaborated facts. Further, in the most recent judgement delivered on 07.01.2015 by the Hon'ble Bombay High Court in the case of Shri Naresh Pahuja 54 taxmann.com 258, it has been held that merely routing of a gift through a banking channel would not by itself establish that gift was genuine. The Head note of the above cited judgement is reproduced hereunder; Section 63, read with section 254 of the Income-tax Act, 1961 Cash credits (gift) - Assessment year 1995-96 - Assessing Officer made addition in income of assessee as income from undisclosed sources holding that gifts received by assessee from one 'K' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and source thereof is, in the opinion of the assessing officer, not satisfactory. 6.10 The Hon'ble Supreme Court in the case of CIT v. P. Mohanakala 12007] 161 Taxman 169/291 ITR 278, while considering the scope of Section 68, observed as follows:- 15. ... When and in what circumstances Section 68 of the Act would come into play? That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression the assessees offer no explanation means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be established by the assessee company nor the source of these funds. Therefore, the purported unsecured loan of Rs. l,50,00,000/- is hereby treated as a 'cash credit' in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee's income as envisaged in Section 68 of the Income Tax Act, 1961 and accordingly the same is added to income of the assessee company under the head Income from other sources and the same is hereby held to be not eligible for any deduction there against. Penalty proceedings u/s. 271(l)(c) of the Act are hereby initiated for furnishing inaccurate particulars of income/concealment of income. 9. Upon assessee s appeal learned CIT(A) reproduced the assessee s submission. Thereafter in a very short order without dealing with the case laws of Hon'ble Bombay High Court and Hon'ble Supreme Court referred by the Assessing Officer, he deleted the addition of unsecured loan by referring to case law on addition of share capital and share premium. He held as under :- I have carefully considered the submission of the AR of the appellant and relied upon cases. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 is ₹ 147.92 crore. Further, genuineness of transaction is also established by virtue of payment of interest on loan, deduction of IDS, TDS returns of the appellant, loan borrowed is repaid during the beginning of the next year all the facts as noted by the learned AO in his order and also confirmed by the bankers certificate which was filed during assessment proceedings. Respectfully following, the Hon. Supreme Court judgement in the case of CIT V. Lovely exports Pvt. Ltd. reported in [2009] 319 ITR (St.) 5. (SC) and relied upon by The Hon. Jurisdictional High court in the case of CIT v. Creative World Telefilms Ltd. [2011] 333 ITR 100 (Bom.HC), Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272 (Bom HC), PCIT Vs. Paradise Inland Shipping P. Ltd. (2017) 84 taxmann.com 58 (Bom HC) wherein Hon. Courts have consistently held that when the details about identity of loan creditor namely Prabhav Industries Ltd having CIN No. L45200GJ1995PLC28373 and ISIN No. INE 538J01012 which a Public Limited Company (in our case) and is also BSE listed company is proved, then the department is free to proceed to reopen loan creditor's individual assessment in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief only on the basis of decisions rendered in the context of share application and share premium. That those decisions are not at all applicable. That in the present case the issue is bogus unsecured loan and issue is not bogus share capital and share premium. 12. Per contra, learned Counsel of the assessee relied upon several case laws and supported the findings of learned CIT(A). He submitted that all the necessary details have been submitted by the assessee. Hence, addition is not at all sustainable. Several decisions were referred by learned Counsel of the assessee in the submission. City gold Education Research Ltd. ITA No. 4742/Mum/2015 (A.Y. 2010-11) PCIT v. Himachal Fibers Ltd. [2018] 98 taxmann.com l72 (Delhi) SLP Dismissed by SC PCIT v. Himachal Fibers Ltd [2018] 98 taxmann.com 173 (SC) CIT v. Gangeshwari Metal (P.) Ltd [2013] 30taxmann.com 328 (Delhi-HC) Rukmini Ag.P.Lld Vi.DCIT, CC- 5(1) ITA No. 2562/Mum/2018(AY:2010-11) Bini Builders (P.) Ltd. v. DCIT, Central range-7(3) [2020] 118 taxmann.com 447 (Mumbai-T) Satyam Smertex (P.) Ltd. v. DCIT [2020] 117taxmann.com 93 (Kol.-Trib.) Prime Comfort Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has referred to the decision of Hi-Tech Residency (P) Ltd. (supra) claiming that the issue of absence of wrong agreement was dealt with by Hon'ble Delhi High Court. In this regard we may gainfully refer the aforesaid decision of Hon'ble Delhi High Court as under :- 1. This is an appeal by the Revenue against an order dated 18th December, 2015 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No.4707/Del/2012 for the Assessment Year ('AY') 2009-10. 2. While admitting the appeal on 18th December, 2016, the following questions were framed: (1) Whether on facts and circumstances of the case, ITAT erred in deleting the addition of ₹ 1,30,00,000 under Section 68 where assessee was not able to produce any of the Director, Shareholders or Principal Officer of the companies to which shares were allotted? (2) Whether on facts and circumstances of the case, ITAT was justified in upholding the order of CIT (A) by reducing the addition under Section 68 to ₹ 5,01,000 on account of receipt of Unsecured loans of ₹ 1,00,01,000? (3) Whether on facts and circumstances of the case and in law ITAT was justified in deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case Shri Kapurchand Shrimal vs. CIT [1981] 131 ITR 451 (SC), where with reference to first appellate authority s order it was observed that it is the duty of the appellate authority to correct the errors in the orders of the authority below. In this view of the matter, in our considered opinion order of learned CIT(A) is not at all sustainable. We also note that various decisions of Hon'ble Bombay High Court and Hon'ble Supreme Court as referred by Assessing Officer s order above have not been dealt with by learned CIT(A) as well assessee in its submission. These case laws may be gainfully referred as under as they are germane :- Hon'ble Bombay High Court in the case of Shri Naresh Pahuja 54 taxmann.com 258, it has been held that merely routing of a gift through a banking channel would not by itself establish that gift was genuine. The Head note of the above cited judgement is reproduced hereunder; Section 63, read with section 254 of the Income-tax Act, 1961 Cash credits (gift) - Assessment year 1995-96 - Assessing Officer made addition in income of assessee as income from undisclosed sources holding that gifts received by assessee from one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation Pvt. Ltd. (159 ITR 78) held as under : 25. ...The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. No case has been made out that these decisions are duly explained in the case laws referred by learned CIT(A) or the assessee. 15. In this view of the matter in our considered opinion interest of justice the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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