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TMI Blog2019 (4) TMI 2060X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors We find that, the assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details as stated in earlier paragraphs and thus the assessee has discharged identity, genuineness and creditworthiness of the creditors. Assessing Officer has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer to disprove the evidences furnished by the assessee. As in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged his onus of proving the identity, genuineness and creditworthiness of the creditors and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act without any enquiry is liable to be deleted. Thus, we direct the Assessing Officer to delete the addition made u/s. 68 - Decided against revenue. - ITA No. 5638/MUM/2017 - - - Dated:- 5-4-2019 - Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him iii. Copy of ledger account of lender in my books iv. Copy of confirmation of the lender as per his books of account (iii) Namokar Impex P Ltd. i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him iii. Copy of ledger account of the lender in my books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender (iv) Viiav Kothari Prop. Kothari Impex i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of ledger account of the lender in assessee books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender vi. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet Profit Loss account which was filed by the lender to the department much earlier vii. Copy of audited schedule of loans advances in the books of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . i. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet Profit Loss account which was filed by the lender to the department earlier ii. Copy of audited schedule of loans advances in the books of the above lender (iv) Sanwala Kumhar Prop. Mangalam Gems i. Copy of confirmation of the lender as per his books of accounts ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet Profit Loss account which was filed by the lender to the department much earlier iii. Copy of audited schedule of loans advances in the books of the above lender (v) Kamlesh B Jain Prop. Ratan Gems i. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet Profit Loss account which was filed by the lender to the department much earlier ii. Copy of audited schedule of loans advances in the books of the above lender 6. The assessee explained before the Ld.CIT(A) that during the course of assessment proceedings since his mother was unwell and hospitalized, (ultimately passed away on the date of completion of assessment on 26.03.2013) the assessee could not furnish the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR Promotors Pvt. Ltd., [102 taxmann.com 182]. 10. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the details necessary in respect of these loans obtained from the creditors. It has been submitted that loans have been received through account payee cheques, confirmations from all the creditors containing name, address, PAN details, date of receipt of the loan, mode of payment by the loan creditors have been furnished, Tax Audit report of the creditors, ledger copy of the creditors, bank statements of the creditors, audited balance sheet of creditors reflecting the loans and advances in their books, computation of income, acknowledgement of return were furnished. Further, the Ld. Counsel for the assessee referring to Page Nos. 79 to 95 of the Paper Book submitted that three creditors have responded to the notices issued u/s. 133(6) of the Act by filing confirmation of accounts, acknowledgment computation of income in proof of filing return, copy of bank statements reflecting the transactions with the assessee, Ledger copy of the assessee firm M/s Dicen Industries in the books of the creditors. Therefore, Ld. Counsel for the assessee submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces furnished by assessee. 13. Ld. Counsel for the assessee submitted that the Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd., (159 ITR 78) held that the assessee is required to prove (i) identity of the lender/party, (ii) the genuineness of the transactions and (iii) the credit worthiness of the lender/party. Ld. Counsel for the assessee submitted that it is the case of the assessee that where the identity of the parties and their capacity is established, the initial burden which lies upon the assessee can be said to have been discharged by the assessee. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the A.O. to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, the A.O. has to be in possession of sufficient and adequate material. In this respect, the assessee relies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: - 5.4.1 From the submission I find that during the assessment proceedings AR of the appellant furnished various details before the AO vide his letter dated 18.03.2013, 20.03.2013 and 21.03.2013 regarding the loan creditors being copy of acknowledgement of return of income filed by them, extract of their bank statements, copies of their balance sheet, profit and loss account, and their confirmations. To verify the details A.O. asked to produce the loan creditors. The appellant remain failed to produce the parties before the A.O. Before me, the appellant submitted that whatever possible he could do, he had done the same. The appellant submitted that mother of the appellant was sick and she was hospitalized and she ultimately died on 26.03.2013 on which day the assessment order was passed. 5.4.2 The appellant came up with an application under rule 46A, submitting further information and submitted that he could not produce further evidence as his mother was sick and she was hospitalized for which necessary evidence has been filed by the appellant. I find that appellant was prevented by sufficient cause in not submitting some details for justifiable reason of his mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence . 20. Hon'ble Delhi High Court in the case of CIT v. Divine Leasing Finance Ltd. [299 ITR 268] in para nos. 13 16 has held as under: 13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue. the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances. 6.5 The Tribunal ought to have taken note of the fact that the assessee was not able to produce even a single party before the AO despite agreeing before the CIT(A) that it will produce all parties before the AO during remand proceedings. 2. Mr. Pinto, the learned counsel for the Assessee submits that the Assessing Officer upon considering all the facts had added Rs. 95 lakhs as income under Section 68 of the Income Tax Act. It needs to be considered that the Assessee had not discharged its onus to establish that the amount was received by the Assessee from the share holders as share application money. The Assessee could not prove the identity of the creditors, their credit worthiness and the genuineness of the transactions. The party from whom the Assessee had received the share amount never responded to the summons issued by the Assessing Officer. The Assessing Officer has considered the said aspect and thereafter has added the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case. 7. Considering the above, no substantial question of law arises. The appeal stands dismissed. However, there is no order as to costs. 22. The Hon'ble Delhi High Court in the case of MOD Creations Pvt. Ltd., v. ITO [354 ITR 282] held as under: - 13. In the light of the above principle, let us examine as to what the authorities below found vis- -vis the genuineness of the transactions and the creditworthiness of their creditors. (i) The fact that there was sufficient balance available with the creditors when cheques have been issued to the assessee company was established. (ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT Vs. Divine Leasing Finance Ltd., (2008) 299 ITR 268 (Delhi) and CIT Vs. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC)]. 23. In the case of ACIT v. Shri Ramesh Ramswarupdas Jindal in ITA.No. 3091 to 3096/Mum/2017 dated 15.11.2017 the Coordinate Bench held as under: - 9. We have heard the rival submissions, perused the orders of the authorities below, the case laws relied on and the material furnished before us. The only issue involved in this appeal relates to the deletion of addition of ₹.20 lakhs made by the Assessing Officer towards unexplained unsecured loans and interest thereon amounting to ₹.2,35,246/. Search and seizure action u/s. 132 of the Act has been conducted in the case of Shri Pravin Kumar Jain and statements were recorded from him and he is said to have been deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever been disclosed to the appellant opportunity for cross examination was also not given, hence such statement could not be utilized against the appellant without giving full and proper opportunity of cross examination as has been held vide Mahesh Gulabral Joshi Vs. CIT(A) (2005) 95 lTD 300 Mumbai ITAT and Hon ble Supreme Court decision in the case of KishanchandChellaram Vs. CIT (125 ITR 713 (SC)). 6.3. Further during the course of assessment proceedings, the appellant has produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.2014 retracting, the statements made before the Investigation Wing. Assessing officer has not given opportunity to the appellant for cross examination of Shri Pravin Kumar Jain. Going by the discussion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere has to be some concrete evidence whether direct or circumstantial. In this case, no such evidence is present. On the contrary, the appellant is showing from the record that he has received loan through account payee cheques from above TWO PARTIES. He has shown that the loans have been repaid through account payee cheque and as long as he was holding the loan, he has paid the interest after deducting TDS. With regard to the disallowance of interest on loans taken from afore-mentioned parties, the appellant submitted that the AO has also ignored the fact that the said interest expenses were incurred wholly, exclusively necessarily for business of the Appellant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs. 6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of ₹.20,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.10.2018, the Coordinate Bench held as under:- 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 corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/Mum/2012. Both the cases relate to re-opening of assessment on the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. The Hon'ble ITAT on the analysis of the findings made in the assessment orders has reached to the conclusion that the re-opening itself is bad in law and quashed the orders accordingly. The ratio of these judgments is applicable to the facts of the instant case. This is confirmed by the Delhi Bench of the Income Tax Appellate Tribunal in the case of DCIT v. Nipun Builders Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed 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 by the appellant and casually brushed aside the details filed by the appellant. Further, the appellant has stated that he had furnished all the relevant details during the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. Further, it may be pointed out that section 68 under which the addition has been made by the Assessing Officer reads as under-: 68. Where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nklet, Yari Road, Versova, Mumbal 400 061 AAACA7065L 20,00,000 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee failed to discharge the burden to prove the credit worthiness as well 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are supported by valid documents. The assessee further submitted that it has furnished confirmation letters alongwith copies of their bank statement and acknowledgement of IT returns showing the above transactions. The assessee further contended that in response to notices u/s 133(6) issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. 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 todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by the AO U/s. 133(6) of the Act. 9. The assessee had taken loan from two of Praveen Kumar Jain s group companies viz., M/s. Josh Trading Co P Ltd and M/s Viraj Mercantile Ltd in the year relevant to AY 2012-13. The AO had assessed the loan amounts on identical reasoning. We notice that the Coordinate Bench of ITAT has deleted the additions vide its order dated 239.12.2017 passed in ITA.No. 5954/Mum/2016, with the following observations: - Since the facts surrounding the present issue being identical with that examined by the Coordinate Bench in A.Y. 2012-13, consistent with the view taken therein, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to delete the addition of ₹.10.00 lakhs. 28. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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