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TMI Blog2021 (10) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent years to establish the genuineness of the transactions copy of ITR V filed establishing creditworthiness of the lender are non-genuine. The assessee has discharged his primary onus on providing complete details in respect of the loan transaction and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loan. In the case on hand assessee provided various evidences to establish the transactions are genuine, creditors identity and creditworthiness is proved by providing all the information to the Assessing Officer the assessee has discharged the initial onus of providing genuineness of the transactions under u/s 68 - once the initial burden is discharged by the assessee the burden shifts to the revenue to disprove the claim of the assessee. It is noticed that AO did not make any sort of enquiries to disprove the genuineness of the transaction on the evidences furnished by the assessee. He has completely ignored even the statement retracted by the PKJ. The addition is made merely on surmises and conjectures without probing further by the Assessing Officer. - Decided in favour of assessee. - IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition holding that appellant has not proved identity, creditworthiness and also the genuineness of the transactions. 3. Before us, Ld. Counsel for the assessee strongly placed reliance on the written submissions furnished. The written submissions furnished by the Ld. Counsel for the assessee are as under: - As regards the Identity of the party; a. The Appellant has filed the following information / documents during the assessment proceedings to the AO vide it's various letters: i. Name, Address, PANetc. of the party ii. Copy of duly signed Loan Confirmation; iii. Copy of Bank statements of both Lender as well as Lendee, highlighting the said transactions; iv. Copy of ITR, P L, Balance Sheet with schedules of the lender was also submitted by the party. v. The lncome-tax Jurisdiction details financials of the party proved the identity as well as financial capacity i.e. creditworthiness of the party. Hence, the aforesaid documents have proved the identity of the party. II. As regards the Genuineness of the transactions: a. The Appellant has received the unsecured loan through proper banking channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credit under section 68 of the Act on the alleged ground that the appellant hasw not brought on record to prove the identity, genuineness of the transactions and creditworthiness of the lender without appreciating that the Appellant/Lender have submitted the copies of ITR, balance sheet, bank statement, loan confirmation, etc., clearly brought out the nature of the transactions, amount involved and scope of the transaction. iii) The Appellant had also repaid the entire amount back to the Lender company during the subsequent assessment year of which the details are on record. Copy of Ledger account along with bank statement till the date of entire loan amount repayment is enclosed as per paper book No iv) Moreover, the Lender company from whom money was borrowed by the appellant company had the financial strength capacity to lend and the relevant financials bank statement confirm it's identity, genuineness of the transactions and creditworthiness as lender are on record. v) The Appellant submit that the Appellant has discharged its onus of proving the identity of the party, genuineness of the transactions and creditworthiness of the lender. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax, Circle 1(2) (a) [2018] 94 taxmann.com 29 (Bombay) Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credits (Shell entity) - Assessment year 2010-2011 - Whether information received has to be examined in context of facts on record before coming to a view that income chargeable to tax has escaped assessment on account of failure to disclose fully and truly all relevant facts and in absence of above, it amounts to outsourcing of reasons to believe - Held, yes - Whether where there had been no independent application of mind on part of Assessing Officer to information received from Deputy Director of Investigation, that assessee had issued zero coupon rate debentures to a company which prima facie was a shell entity and creditworthiness of lender and genuineness as well as nature of transaction was not explained, reopening of assessment on basis of such information was without jurisdiction - Held, yes [Paras 6 and 7] [In favour of assessee] 4. Hubtown Ltd. v. Deputy Commissioner of Income-tax, Central Circle-5(l)[2016] 74 taxmann.com 18 (Bombay) Where c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions were genuine such as confirmations of lender companies, copies of financial statements of lender companies, copies of bank statements evidencing advancing of loan by lender companies to assessee through proper banking channels, etc., additions under section 68 on account of bogus loan was unjustified 8. Income-tax Officer, Ward 15(2)(1), v. Iraisaa Hotels (P.) Ltd[2018] 97 taxmann.com 623 (Mumbai -Trib.) Where assessee had furnished several documentary evidences to prove genuineness of unsecured loans and share capital investment and creditworthiness of parties, no additions under section 68 was to be made in respect of such loan and share capital relying upon order of SEBI that some of shareholders of assessee were part of several entities who were linked to money laundering 9. Elder IT Solutions (P.) Ltd. vs. Commissioner of Income-tax[2015] 59 taxmann.com 232 (Mumbai - Trib.) Section 68, read with section 263, of the Income-tax Act, 1961 - Cash credit (Unsecured loan) - Assessment year 2009-10 -On verification of assessment records, Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - a. It is also settled law that where the assessee provides identity and details pertaining to the lenders/ creditors/ investor of share application money and is unable to produce them and requests the AO to issue summons u/s 131 for their attendance, it is the duty of the AO to issue such summons, failing which the addition would get deleted. Reference in this regard can be made from the decisions made in the following judiciary ruling:- N.P. Garodia (order dated 13.01.2009 of Hon'ble P fit H High Court in ITA no. 808 of 2008) Brij Pal Sharma (order dated 17.02.2009 in ITA no. 685 of 2008 of Hon'ble P H High Court) b. Similarly as held in the case of CIT v. Metachem Industries (2000) 245 ITR 160 (MP) where a credit is shown to have come from a person other than the assessee, there is no further responsibility of the assessee to show that it has come from accounted source of the lender, as long as the fact that the had made the advance and was capable of making the advance are established. c. It was held by the Hon'ble Madras High Court in Hastimal (S) v. CIT (1963) 49 ITR 273 that after a lapse of decade, the assessee should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical case i.e. Arceli Realty Limited Vs. The Income Tax Officer 15(1) (1), Mumbai pronounced on 21.04.2017 ITA-6492/Mum/2016-17, the summary of the case is outlined as under:- ........A.O. merely relied upon the information provided by the office of DGIT (Investigation), Mumbai and did not made any independent enquiry. The papers filed by the assesse do demonstrate the identity, credit worthiness, genuineness, Source of Source of the transaction. AO did not provide Opportunity to Cross Examine the concerned person and also the department has not provided authenticity of the information to the person against whom such information is used. The addition is made merely on surmises and conjectures. The statement recorded at the back of the Respondent cannot be utilized ignoring other verifiable evidences. The Id. Assessing officer has made the addition of ₹ 20,00,000/- disregarding the evidences on record and without discharging her onus and without establishing anything contrary to the agreement of the Respondent and without verifying the Bank Account, existence of Investor and without making fruitful investigation, thus the demand was directed to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan transaction from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd. On the other hand, the assessee has furnished 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 ............It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden to disprove the said claim shifts upon the AO Coming to the case laws relied upon the assessee, the assessee has relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt. Ltd (2017) 394 ITR680 (Bom). We have gone through the case laws relied upon by the assessee in the light of facts of the present case and find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions filed by her which are as under: - With reference to the above, I am submitting the case laws relied by me in the above-mentioned appeal filed by the assessee. In this case, loan from one Josh Trading Pvt. Ltd. was added u/s 68 by the assessing officer, on the ground that this company is a shell company and not involved in any genuine business activity but engaged in providing accommodation entry in form of loans, share capital and bogus purchases. This company was floated by Praveen Kumar Jain, who in the sworn statement u/s 132(4) has admitted before the department that all the 70 concerns are shell entities and are not doing any business. All the directors of these companies were found to be the the dummy directors and also admitted before the department that they use to sign the documents for nominal consideration given by Shri Praveen Kumar Jain. Books of accounts of all such shell companies are under the control of Shri Praveen Kumar Jain. The assessee has submitted that the loan has been raised through banking channels and interest was also paid. Also, it was contended that all the documentary evidence to prove the identity, genuineness and creditworth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it colour of a normal business entity, used as a vehicle for various financial manoeuvres. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial manoeuvring to legitimise illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/ 2015] 228 Taxman I would also like to rely on the decision of Delhi High Court in the case of Jan Sampark Advertising Marketing Pvt. Ltd. (2015) 231 Taxman 384 (Delhi) wherein Hon'ble High Court has held that though it is the obligation of the Assessing officer to conduct proper scrutiny of material in the event of AO failing to discharge his function properly , obligation to conduct proper enquiry shifts to CIT(A) and on Tribunal and cannot delete the addition made by AO on the ground of lack of inquiry. On the issue of retraction statement filed by the PKJ group of companies. The DDIT (Inv.) has promptly acted on the retraction statemnt filed by the directors of PKJ group of companies. The point wise reply of the assertion made by PKJ and the common reading of all the affidavits filed, clearly go to establish that it is an afterthought given by PKJ, when the information pertaining to A.Y 2007-08 was disseminated to the field , such affidavits have been filed. The findings of the search have already established that all such associates who have now filed affidavits along with PKJ are his dummy dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 29.12.2017 the Coordinate Bench considered the transaction with M/s. Josh Trading Private Limited and held 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 accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank 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 financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt categorically observed that the Proviso to section 68 has been inserted by the Finance Act, 2012 wef 01-04- 2013 is applicable from AY 2013-14 onwards. The Court further observed that the Parliament did not introduce the proviso to section 68 with retrospective effect nor does the Proviso introduced states that it was introduced for removal of doubts. Therefore, it is not open to give retrospective effect. The relevant portion of the order of High Court is extracted below:- The proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1-4-2013. Thus, it would be effective only from the assessment year 2013-14 onwards and not for the subject assessment year. In fact, before the Tribunal, it was not even the case of the Revenue that section 68 as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1-42013 was its normal meaning. The Parliament did not introduced to proviso of section 68, with retrospective effect nor does the proviso to introduced states that it was introduced 'for removal of doubts' or that it is 'declaratory'. Therefore, it is not open to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gandeep Infrastructure (P) Ltd (supra) would be applicable in the facts and circumstances of the present case. 9. The assessee has also relied upon the decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). The Hon ble Apex Court while deleting the addition made u/s 68 observed that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but this amount of share application money cannot be regarded as undisclosed income u/s 68 of the Income-tax Act, 1961. 7. The Coordinate Bench of the Tribunal in the case of ITO v. M/s.Viswa Vyapar Trading Pvt. Ltd., in ITA No. 2888/Mum/2017 dated 05.04.2019 also considered the transaction by the assessee with the lender M/s. Josh Trading Pvt. Ltd., and held as under: - 29. In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged its onus of proving the identity, genuineness and creditworthiness of the creditors/shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a sum of ₹ 45 lakhs, but according to the assessee it has received ₹ 40 lakhs only from the companies belonging to Shri Praveen Kumar Jain group as detailed below:- 1. Java India Impex Ltd - ₹ 15.00 lakhs 2. Kush Hindustan Entertainment - ₹ 10.00 lakhs 3. Lexus Infotech Ltd - ₹ 5.00 lakhs 4. Vanguard Jewels Ltd - ₹ 5.00 lakhs 5. Yash V Jewels Ltd - ₹ 5.00 lakhs ₹ 40.00 lakhs 4. Learned Departmental Representative submitted that the impugned addition has been made by the Assessing Officer on the basis of admission made by Shri Praveen Kumar Jain in his sworn statement. Though the assessee has furnished details of annual accounts of share applicants, perusal of the income tax return would show that they are declaring only mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters were filed before the learned CIT(A). Learned AR further submitted that the learned CIT(A) has followed decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd. (2017) 394 ITR 680 in deciding the issue in favour of the assessee. Hon'ble Bombay High Court has also held in the case of Principal CIT Vs. Paradise Inland Shipping (P) Ltd. (84 taxamnn.com 58) that once the assessee had produced documentary evidence to establish the existence of share applicant companies, burden would shift on the Revenue to establish their cases. He further submitted that the identical addition made in the case of M/s. SDB Estate Private Limited (ITA No. 584/Mum/2015) has been deleted by the Mumbai Tribunal vide its order dated 15.4.2015 6. I have heard the rival contentions and perused the record. I noticed that the learned CIT(A) ahs deleted the addition by making following observations :- 6.3.1. I have considered the entire facts and circumstances of the case and have carefully considered the finding of AO, rival submission of the appellant and evidence on record. During the year the appellant in the process of expansio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on record by the AO. No nexus is established as to circulating of funds or that cash was paid by the appellant company to obtain the cheques for share application. 6.3.5. The appellant has provided the identification of the parties. The same is supported by the income tax returns filed by the respective parties. The allegation of the AO that PAN is issued without verification of the applicant is not correct. The AO could have verified the jurisdiction of the respective parties and could have made enquiries with the respective AO's about the said five parties from the PAN available with him. 6.3.6. The appellant has submitted balance sheet and details of the said five parties to prove credentials and genuineness of the transactions. The three ingredients viz. identity, credentials and genuineness cannot be doubted. 6.3.7. The AO has heavily relied on information received from DDIT (Inv), Mumbai and that of the statement of Mr. Pravin Kumar Jain. The AO has not carried out independent enquiries to prove the case. On reading from the assessment order there is nothing corroborative brought on record to prove that the share application money receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Pvt. Ltd vs. ITO-(5)(3.(2) in ITA No. 584/Mum/2015 on similar ground it has been decided that:- In view of the above stated legal position and in the light of reliable evidences brought on record by assessee to substantiate identity, genuineness and creditworthiness of shareholders, which have not been controverted by the Revenue, the additions made solely on the basis of general statement of Shri Mukesh Chokshi cannot be held to be justified and the same are accordingly ordered to be deleted 6.3.8. As regards issue involving addition of share premium amount alongwith share application money/share capital money, the jurisdictional ITAT, Mumbai has decided in many cases that it cannot be added. Further, the Honble High court has also decided the issue that the addition of share premium amount cannot be made in earlier years prior to amendment in the relevant provisions in the I.T.Act, 1961. In this regard, reference is made and reliance is placed 'to the various Judicial Pronouncements on the issue related to additions for share premium amount included in the share application money/share capital money. These are as under: (i) In the case of M/s. Vodafo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing ITA No. 5784/Mum/20 11 dated 23/4/2014, Hon'ble Mumbai ITAT decided that We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense....... The entire dispute revolves around the fact that the assessee has charged a premium of ₹ 190/- per share. No doubt a non-est company or a zero balance sheet company asking for Rs. I90/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56(1) as income from other sources - Held, yes - Whether since entire transaction relating to allotment of shares had been done through banking channel and assessee had invested share premium in its three subsidiary companies, provisions of section 68 as suggested by revenue had also not applicable to instant case - field, yes.... No doubt a non est company or a zero balance company asking for a share premium of ₹ 490 per share defies all commercial prudence, but at the same time one cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a very premium. The revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. (v) In the case of CIT vs. Goa Sponge and Power Ltd reported in Appeal No. 16 of 2012, Hon'ble Bombay High Court decided that :- Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td reported in 251 ITR 263, Hon'ble Apex court decided that That the increase in subscribed capital of the respondentcompany could not be a device of converting black money into white with the help of formation of an investment company, on the round that, even if it be assumed that the subscribers to the increased capital were not genuine, under no circumstances could the amount of share capital be regarded as undisclosed income, an appeal was taken by the Department to the Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusion on facts and no interference was called for. (ix) In the case of CIT vs. Expo Globe India Ltd reported in 361 ITR 147, Hon'ble Delhi High Court decided that It has been held by Hon'ble Supreme Court and various High Courts that no addition can be made on account of share application money once the names of the share applicants are given. In the instant case, identity of these persons are not or doubt and assessment particulars of all the persons are on record and there is no material to hold that creditworthiness of these persons are not established. The judgment of Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application money. The appellant has established the genuineness of the transaction and that the same cannot be treated as unexplained credits. Therefore, the addition made by the AO of ₹ 45,00,000/- is deleted. 7. The assessing officer has made the impugned addition u/s 68 of the Act. Under the provisions of sec. 68 of the Act, the assessee is required to discharge initial burden of proof placed upon his shoulders, i.e., the assessee has to prove the identity of the creditor, the credit worthiness of the creditor and the genuineness of transactions. A perusal of documents filed before the tax authorities and also the observations made by Ld CIT(A) would show that the assessee has discharged the burden placed upon its shoulders. Once the assessee discharges its primary burden, then the burden to disprove the assessee s version would shift to the shoulders of the assessing officer. In the instant case, the assessing officer has simply relied upon the general statement given by Shri Praveen Kumar Jain. As contended by Ld A.R, it was not shown that the transactions of the assessee with the above said companies have been declared as accommodation entries. On the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer required the assessee to prove the genuineness of the transactions and the assessee furnished copy of bank statements, Income Tax Returns of the lenders, copy of acknowledgments of the Income Tax Returns; copy of ledger accounts of the creditors, loan confirmations along with bank statements reflecting the receipts and payments of loans from the said parties. It was stated by the assessee that the loan was taken only for eight days and this will not serve any purpose of accommodation entries and therefore the transactions shall not be treated as accommodation entries at all. Assessee also requested the Assessing Officer to issue notice u/s. 133(6) of the Act to the above said parties for the further information. However, the Assessing Officer relying on the statements of Shri Praveen Kumar Jain and Shri Bhanwarlal Jain concluded that the companies have provided only accommodation bills to the assessee and therefore the assessee has not proved the nature and source of the transactions. Accordingly, he made addition u/s. 68 of the Act treating them as unexplained credits. On appeal Ld.CIT(A) deleted the addition based on the submissions and information/evidences fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthiness of the creditors have been proved and therefore no addition is warranted u/s. 68 of the Act. Ld. Counsel for the assessee referring to the Page No. 194 of the Paper Book which is the order of the Tribunal in the case of A.C.I.T v. M/s. Shreedham Builders in ITA.No. 5589/MUM/2017 dated 22.06.2018 considered M/s. J.P.K. Trading (I) (P.) Ltd. as genuine. Similarly, referring to the Page No. 122 of the Paper Book it is submitted that M/s. New Plant Trading Co. (P.) Ltd. was considered as genuine by the Tribunal in ITA.No. 2979 2980/Mum/2017 dated 31.08.2017. Therefore, it was submitted that since both these companies were considered by the Hon'ble Tribunal as genuine in the above said cases, it was submitted that the transaction cannot be treated as non-genuine and therefore the addition is liable to be deleted. 6. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions, 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 were non-genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusions drawn therein cannot be applied ipso facto to all other cases. Simply relying on the report of the DGIT(Inv), Mumbai and statement the AO cannot conclude that all transactions are accommodation entries. 5.11. The case of the appellant is covered by the decision of ITAT, T Bench, Mumbai, in the case of Satish N. Doshi HUF Vs. ITO, Ward 21(2)(4), Mumbai in ITA No-2329/Mum/2009 and the decision of ITAT, 'E' Bench, Mumbai in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof 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 appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss the merit of submission made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue. 10. In the case of DCIT v. M/s. Manish Flour Mills Pvt. Ltd., in ITA.No. 6729/Mum/2016 dated 24.10.2018 the Coordinate Bench held as under: 3. Briefly stated the facts are that, the Assessing Officer noticed that assessee during the year under consideration received unsecured loan of ₹.40 lakhs from M/s. Meenaxi Diamonds Pvt. Ltd., ₹.25 lakhs from M/s. Roshan Gems Pvt. Ltd., and ₹.75 lakhs from M/s. Abhiman Gems Pvt. Ltd. A.O observed that there is a search and seizure operation in the case of Shri Bhanwarlal Jain Group by the Investigation wing of the Department and in the course of proceedings it was established that these persons are in the business of providing accommodation entries to various beneficiary companies. He observed that M/s. Meenaxi Diamonds Pvt. Ltd., M/s. Roshan Gems Pvt. Ltd, and M/s. Abhiman Gems Pvt. Ltd., have provided accommodation entries as these companies were managed by the Shri Bhanwarlal Jain Group. In order to verify the genuineness of the transactions Assessing Officer issued notices u/s.133(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up addition cannot be made treating them as mere accommodation entries. It was also further submitted that the statements given by Shri Bhanwarlal Jain Group have subsequently retracted by themselves. It was further submitted before us that the Assessing Officer has not provided the cross examination of the persons who gave statements. It was also submitted that in the statements given by Shri Bhanwarlal Jain Group they have never mentioned assessee s name as the beneficiary of the accommodation bills. Therefore, the Learned Counsel for the assessee submitted that the transactions are genuine, the identity and credit worthiness of the creditors have been proved and therefore no addition is warranted u/s. 68 of the Act. 6. Ld. Counsel for the assessee placed reliance on the following decisions in support of his submissions: - a. ACIT vs. Sumit J. Jain (ITA No. 145/M/17) b. ACIT vs. Shri Vashu Bhagnani (ITA.No.5648/M/16) c. ITO vs. Gujarat Construction (ITA No. 7040/M/16) d. DCIT vs. M/s YRV International (ITA No. 1414/M/17) e. ACIT vs Shri Dilip Chimanlal Gandhi (ITA No. 7079/M/16) f. ACIT vs Rajesh M. Shah HUF (ITA No. 7079/M/16) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. Firstly, as regards the transaction, the same has rooted through the banking channels and the source cannot be doubted. Secondly, as was held in several cases that whatever maybe the strength of presumption it cannot replace evidence. Even though, the transaction is from a tainted group, the AO has not gathered any additional/independent evidence to show that the transaction with the appellant company was sham, fictitious or artificial except believing the statements given by the entry operators. He has failed to gather evidence to show that the unaccounted cash of the appellant had changed hands subsequently replacing the cheque payments. Thirdly, he has also not answered several valid points raised by the appellant nor proved how the details like PAN, the IT returns, confirmation letters, bank statements of the creditors, audited balance sheet of the creditors cannot be taken note of. Fourthly, the ITAT Mumbai in the case of Anant Shelters P Ltd. (2012) 20 taxmann.com 153 has laid down certain principles with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmatory letters or A/c payee cheques do not prove that the amount in question is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. Of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts to the Revenue. Fifthly, the Honorable Supreme Court in the case of Lovely Exports Private Limited, (2008) 216 CTR 195 (SC), has stated that the AO is at liberty to bring to tax the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant from the above three parties cannot be doubted and the addition made by the AO u/s 68 of the Act cannot survive the test of appeal. I therefore, direct the AO to withdraw the addition. The ground is allowed. 5. The second issue is with regard to addition of ₹ 8,32,607/- on account of interest expenses u/s 69C of the Act. The AO has noticed payment of interest to the creditors from whom loan was taken. As the credits were disbelieved by the AO since the credits were given by the bogus concerns floated by Banwarlal Group who are the only entry operators, the AO has also disallowed interest claimed to have been paid to these creditors u/s 69C of the Act. 5.1 The appellant has objected for the disallowance of interest truly been paid to the creditors from whom loans were taken. He has further submitted that the payments were made through banking channel after making TDS applicable. 5.2 I have carefully considered the facts and submissions of the Id.AR. As seen from the details the appellant has borrowed money from four parties and paid interest after making TDS as under: - Name of the lenders. Capital b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9% 2. Lexus Infotech Ltd. 626, Panchratna, Opera House, Mumbai 400 002 AAACL4646G 20,00,000 9% When the Assessing Officer asked the assessee to prove the genuineness of these loans, the assessee submitted the following documents: a. Copy of acknowledgment of income tax return filed for A.Y. 2007-08. b. Copy of PAN of the parties c. Copy of bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the parties. The Assessing Officer treated these loans to be non-genuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the genuineness of the transactions. 10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case. 11. We have also gone through the decisions relied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the assessee s case. In the case on hand assessee provided various evidences to establish the transactions are genuine, creditors identity and creditworthiness is proved by providing all the information to the Assessing Officer the assessee has discharged the initial onus of providing genuineness of the transactions under u/s 68 of the Act. Therefore, once the initial burden is discharged by the assessee the burden shifts to the revenue to disprove the claim of the assessee. It is noticed that Assessing Officer did not make any sort of enquiries to disprove the genuineness of the transaction on the evidences furnished by the assessee. He has completely ignored even the statement retracted by the PKJ. The addition is made merely on surmises and conjectures without probing further by the Assessing Officer. The result of the investigation in the case of PKJ is not known especially when the PKJ has retracted his earlier statement. The sole basis for the addition in this case is the statement of PKJ and nothing else. In view of the above, I hold that the addition made u/s. 68 of the Act is bad in law. 14. In the result, appeal of the assessee is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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