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TMI Blog2018 (11) TMI 1893X X X X Extracts X X X X X X X X Extracts X X X X ..... those creditors because under law the assessee can be asked to prove the source of the credits in its books of accounts but not the source of the source. After considering the various judicial pronouncements with reference to the factual matrix of the case the CIT(A) concluded that assessee has discharged the primary onus with respect to the identity, genuineness and creditworthiness of the loan creditors. As brought to our notice that the loan so taken by the assessee has been repaid in the next assessment year 2010-11 by the account payee cheque. The confirmations filed by all the loan creditors are also placed on record acknowledging the repayment of loans. AO had passed scrutiny assessment order in assessee s case for the A.Y.2010-11 dated 25/03/2013, wherein there is no adverse observation with regard to the repayment of loan already taken by the assessee to the respective loan creditors. CIT(A) has recorded categorical findings to the effect that the assessee has discharged the burden cast on him with regard to the identity of the loan creditors, genuineness of the transaction and creditworthiness of loan creditors. The detailed finding so recorded by CIT(A) are as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,75,00,000/- treated as unexplained and added to the total income of the assessee. 6. By the impugned order CIT(A) deleted the addition after observing as under:- 5. I have carefully gone through the assessment order passed by the A.O, written submissions filed by the appellant and relevant case laws cited by the appellant during the appellate proceedings. 5.1 All the grounds of appeal are related with addition of ₹ 1,75,00,000/- u/s.68 of IT.Act on account of accommodation entries. Therefore for the sake of convenience, all the grounds are disposed together. 5.2 The AO has received the information from the Investigation Wing, that the appellant had obtained accommodation entries. Based on the said information the then Assessing Officer had reasons to believe that the income had escaped assessment and reopened the assessment by way of issue of notice u/s.148 dt.14.11.2014 after duly recording the reasons. Shri.Praveen Kumar Jain along with his associates were engaged in fraudulent billing activities and in giving accommodation entries in order to enable the clients to declare Speculation Profit/loss, Short term capita! gain, Long term capital gain, Profit/loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are / produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to prove the matter further. 5.5 Element of credit worthiness and satisfaction of AO thereafter is subjective and requires more efforts/inquiry on the part of the AO to give a finding in the order that lender is not credit worthy. The AO must make proper enquiry before making any addition. In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.), it has been held that empowers the Assessing officer to make enquiry. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee's explanation, A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. 5.6 It is clear from the above discussion that all the transactions were through account payee cheques and appellant has submitted sufficient details before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rawley (2014) 366 ITR 232 (P H) the court held that where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he discharges the onus. In that case, the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to assessee , particularly in a case where no summons u/s 131 is issued against the third party. 5.8 Further, in the case of Namichand Kothari vs CIT - [264 ITR 254] [Gau], the Hon'ble High Court had held that: A harmonious construction of section 106 of the Evidence Act and section 68 of the Income-tax Act will be that though apart from establishing the identity of the creditor, the assessment establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account used for business transactions. Interest is also paid on these loans and at the time of payment of interest, tax was deducted at source and TD5 returns were filed. It was contended by the department that they have received information from DGIT (InvJ that assessee had taken unsecured loans from the above parties by way of unaccounted cash / accommodation entries. High Court observed that there is a bald statement on the part of the department there is no tangible material to re-open the assessment. The High Court held that we do not find anything in the said affidavit that establishes there is a reason to believe that income has escaped assessment. The Court also held that they are unable to agree with the department since petitioner has clearly seated that all the payments were made Dy account payee cheques which were encashed in the bank account of the petitioner in regular course of business. We find that the petitioner has also paid interest on these loans after deduction of tax at source and TDS returns are also accordingly filed. There is no dispute in regard to the above. We find nothing to support the said contention of revenue. The revenue's contention i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e doubted. Once evidences related to a transaction is submitted before the A.O., tne onus shifts on him to prove these as non-genuine or bogus. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.13 As far as the question of validity of the transaction done through M/s.Duke Business P.Ltd. (JPK Trading I Pvt.Ltd., Casper Enterprises P.Ltd. (Ostwal Trading P.Ltd. and Sumukh Commercial Pvt.Ltd. (Capstown Mer.P.Ltd. are .concerned, even if some of the transactions entered into by Shri.Pravinkumar Jain Group are found to be not genuine, it does not lead to the conclusion that all the transactions entered into by these brokers were bogus or 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 Shri.Pravinkumar Jain, the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required . to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by A/c payee cheque. Creditworthiness of the lender can be established by attending circumstances. 5.16 During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these parties. If the above referred principles are applied to the facts of the case under consideration, it can De seen that the identity of the creditors has been established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of ₹ 1,75,00,000/-. This ground of appeal is allowed. 5.18 The other ground is related with addition of ₹ 3,50,000/- on account of alleged commission paid in cash@ 2% of ₹ 1,75,00,000/-. These additions were made on the basis of cost of the accommodation entries. However, the above mentioned addition has clearly been explained that the transactions are genuine and not as an accommodation entries. Therefore, addition made on account of cost of accommodation entry cannot be sustained and the same is deleted. 6. In the result, appeal is allowed. 7. Against the above order of CIT(A), revenue is in further appeal before us. 8. We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that to substantiate genuineness of its claim of ₹ 1,75,00,000/- received from four different parties, the assessee has furnished following documents before the lower authorities. S.no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Kunal Gems ₹ 10,00,000/- iv) Natasha Enterprises ₹ 36,00,000/- e) Copy of PAN Card f) Copy of Income Tax Return. g) Copy of Annual Repon and Balance Sheet for the Y. 31-03-2008. h) The identity, creditworthiness of the M/S. Casper Enterprises P. Lid. is proved and the genutnity of the loan transaction in also proved as required u/s 68. B. DUKE BUSINESS P. L TD. (formerly known as J P K TRADI.\G (INDIA) P. L TD,) a) Copy of Ledger Account of Duke Business P. Led. as it appears in the books of M/S. Shree Ganesh Developers for the period 03-04-2007 to 31-03-2010. b) Loan Confirmation for 'Me Period 2007-08, 2008-09 2009-10. c) Certificate of Incorporation from Registrar of Company. d) Copy of Bank Statement of Duke Business P. Ltd. highlighting the payment made to M.'S. Shree Ganesh Developers. The Sources of Fund is (he loan received back by Duke Business P. Lid. from : i) New Plane! Trading Co. P. Ltd. ₹ 17,00,000/ ii) Natasha Enterprises Rs. I3.80,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such additions made deserves to be deleted. 15. Our attention was invited to the fact that Pravin Kumar Jain has retracted from the statement given by him before the DDIT (Inv). Attention was invited to the copy of retraction by Pravin Kumar Jain. AR referred to the point no 7 and onwards of the retraction Affidavit, to show that the statement given to the DDIT (Inv) was under coercion, pressure and threat from the DDIT (Inv). The statement was recorded under the extenuating circumstances and Pravin Kumar Jain was not even aware of the content that was recorded by the DDIT(inv). The Search operation continued for 9 days and Pravin Kumar Jain in his Retraction affidavit has said that he signed the statement to ensure that the 9 days long search action ends. 16. Ld. AR relied on following judicial pronouncements in support of contention that the conditions of section 68 are proved with documentary evidences, where the AO has not investigated the loans receipts on his own and has just relied on the statement of an unknown person, where a statement of a person unknown to the assessee is used against the assessee and no opportunity is given to the assessee to cross examine suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of accounts but not the source of the source. 19. After considering the various judicial pronouncements with reference to the factual matrix of the case the CIT(A) concluded that assessee has discharged the primary onus with respect to the identity, genuineness and creditworthiness of the loan creditors. It was also brought to our notice that the loan so taken by the assessee has been repaid in the next assessment year 2010-11 by the account payee cheque. The confirmations filed by all the loan creditors are also placed on record acknowledging the repayment of loans. The AO had passed scrutiny assessment order in assessee s case for the A.Y.2010-11 dated 25/03/2013, wherein there is no adverse observation with regard to the repayment of loan already taken by the assessee to the respective loan creditors. Considering the documentary evidence filed before the lower authorities, the CIT(A) has recorded categorical findings to the effect that the assessee has discharged the burden cast on him with regard to the identity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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