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TMI Blog2022 (6) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... rjit Singh, Hon'ble Judicial Member For the Assessee : Shri Jain Dixit For the Department : Shri Mehul Jain ORDER PER S. RIFAUR RAHMAN (AM) 1. All these appeals are filed by the assessee against common order of the Learned Commissioner of Income Tax (Appeals)-42, Mumbai [hereinafter in short Ld.CIT(A) ] dated 29.08.2019 for the A.Ys.2009-10, 2010-11, 2011-12 and 2012-13. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 267/MUM/2020 for Assessment Year 2009-10 as a lead case. 3. Brief facts of the case are, assessee filed return of income on 29.09.2009 declaring total income of ₹.73,16,401/-. The assessment was completed u/s. 143(3) of the Act on 29.11.2011. Further, re-assessment u/s. 143 r.w.s. 147 of the Act was completed on 13.03.2014 determining the total income of ₹.1,01,15,791/- which was then rectified by order u/s.154 of the Act dated 27.03.2014 determining revised total income at ₹.2,02,49,317/-. Subsequently, information received from the DGIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/10/2015 and reply was received. The followings facts emerged from the verification of replies submitted u/s 133(6) in cases of M/s Navkar Daimonds: i) The entity had carried out business of trading Polishing of diamonds. ii) On verification of financial statements of M/s Navkar Diamonds certain characteristic features were observed in their businesses which are not possible in normal business. The same are as below: a) High Turn Over. - b) Major Portion of assets in the balance sheet comprise of Loan advances, debtors and investments. These assets almost match the figures of their business creditors. c) The advance tax payment is very nominal despite their turn over running in to several crores. d) The entire TDS deducted on the Interest payable against their Loans advances (including the loans given to the assessee) are claimed as Refund. e) There is hardly any own capital in the balance sheet. f) A perusal of balance sheet shows that the source of loans and advances is from the funds due to sundry creditors. Advancing loans worth crores of Rupees for years together and that too, without any security, from the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act was taken on 20/03/2015 / 25/03/2015 i.e. before the expiry of 4 years from the relevant AY, hence only first condition needs to be satisfied for these AYs. For AY 2009-10, the assessment was completed u/s. 13(3) of the Act vide order dated 29/11/2011 and thereafter, u/s 143(3) r.w.s 147 vide order dt. 13/03/2013, hence, for AY 2009-10, both the conditions must be fulfilled. 6.3.4 The Hon'ble Apex Court in the case of Asst. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (Supra) has also held that The word reason in the phrase reason to believe' would mean cause or, justification. If the AC has cause or, justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot he read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion, 6.3.5 Hence, it is well settled that at the stage when reasons are recorded for reopening the assessment. .AO is not required to build a fool proof or a fort-like case for making addition to the assessee's income; all that he is required at that stage is to form a prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. 6.3.7 Further, every disclosure is not and cannot be treated as true and full disclosure where transaction itself, on the basis of subsequent information, is found out to be a bogus transaction. Under similar circumstances, the Hon'ble jurisdictional High Court of Bombay in the judgement dated 18' June 2014 in the case of Nickunj Eximp Enterprises Pvt. Ltd. vs. CIT in Writ Petition No. 2860 of 2012 has held that in case there is a prima facie doubt about the truthfulness and/or completeness of the disclosure at the time of original assessment in view of information obtained later the provisions cannot aid the petitioner at the stage of notice ti/s148 of the Act and the same is necessarily to be the subject matter of enquiry during the reassessment proceedings. The relevant part of the decision (Para 8) is as under: In case there is a prima facie doubt about the truthfulness and/or completeness of the disclosure at the time of original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 25,00,000/- from M/s Navkar Diamonds, a concern controlled and managed by Sh. Bhanwarlal Jain and group, actively engaged in providing accommodation entries of bogus loans through the concerns managed by the group. Information was received from DGIT (Inv), Mumbai that a search Seizure action u/s 132 of the Act was carried out in the case of Sh. Bhanwarlal Jain and group concerns on 03/10/2013, where it was found that Sh. Bhanwarlal Jain his son viz. Sh. Rajesh Jain have floated various entities (Approx. 70 Benami concerns), which are engaged in the business of providing accommodation entries in the form of bogus unsecured loans, bogus purchases, bogus capital gains, etc., and the assessee is one of the beneficiaries of the bogus concerns operated and controlled by Sh, Bhanwarlal Jain Sh. Rajesh Jain. On going through the statement of Sh. Bhanwarlal Jain recorded u/s 132(4) in connection with the search action u/s 132 of the Act, the AO found that Sh. Bhanwarlal Jain has admitted that through various dummy director/directors on papers, he had controlled, operated and managed large number of concerns which are not carrying out any genuine business activities but are engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation was received by the AO to initiate the reopening of the assessment. Therefore, AO on the basis of subsequent information which was specific, relevant and reliable, after recording the reasons, has rightly invoked the provisions of ss. 147 and 148. 6.3.14 Under similar circumstances, the Hon`ble Supreme Court of India in the case of Yogendrakumar Gupta v. Income-tax Officer [2014] 51 taxmann.com 383 (SC) has dismissed SLP against the order of the Hon'ble High Court of Gujarat in Yogendrakumar Gupta v. ITO[20141 46 taxmann.com 56 (Guj.) wherein it is held that where subsequent to completion of original assessment, Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee. 6.3.15 Further, the Hon'ble Gujarat High Court in the case of Boghara Polyfab Pvt Ltd Vs DCIT: (Dated: February 26, 2018) [2018-TIOL-905-HC-AHM-IT ] wherein the AO referred to the materials available with him which prima f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld AO by issuing notice u/s. 148 of the IT Act 1961 and the reasons assigned for doing so are wrong and contrary to the provision of the Income Tax Act and rules made there under. 2. On the facts and in the circumstances of the case and in law the Hon ble CIT(A) erred in upholding the addition of Rs. 25,00,000/- made by the Ld AO on account of unsecured loan as unexplained cash credit u/s. 68 and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under. 3. On the facts and in the ! circumstances of the case and in law the Hon ble CIT(A) erred in upholding the addition of Rs. 64,932/-made by the Ld AO on account of interest paid on unsecured loan as non-genuine and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under. 4. On the facts and in the circumstances of the case and in law the Hon ble CIT(A) erred in upholding the penalty u/s. 271(1)(c) levied by the Ld AO and the reasons assigned for doing so are wrong and contrary to the provision of the Income Tax Act and rules made there under. 5. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that assessee has taken unsecured loan from M/s. Navkar Diamonds and paid relevant interest to them. The Assessing Officer based on the information from investigation wing, reopened the assessment and based on the statement given by Shri Bhanwarlal Jain he made certain enquiries before the assessee as well as unsecured loan creditor by issuing relevant notices and came to the conclusion that this transaction is accommodation entry and assessee has not proved the genuineness and creditworthiness of the transactions. We observed that in the case of M/s. Indravadan Hanjarimal Jain v. ACIT (supra) the Coordinate Bench has considered the similar issue and it has held as under: - 7. After hearing the rival contentions of both the parties and perusing the material on record, we find that in this case the assessee has taken unsecured loans from four parties related to Bhanwarlal Jain group. The AO made the addition by doubting the genuineness of the loan transactions by citing the reason that a search on Bhanwarlal Jain and related parties has revealed that the entire group was engaged in advancing tax accommodation entries without doing any real business which has affirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. The AO has made additions of Rs.10,45,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act, on the ground that the assessee has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of the parties. The AO has extensively discussed the issue in his assessment order in light of facts gather during the course of search in case of Bhanwarlal Jain group of cases and survey in the case of assessee s group concern. Accordingly, the AO, opined that although the assessee has furnished various documents including confirmations from the loan creditors and their ITR acknowledgment, but failed to prove the genuineness of transactions and creditworthiness of the parties in order to come out the provisions of section 68 of the Act. The AO further was of the opinion that mere furnishing certain paper documents is not sufficient enough in light of various facts gathered by the department during the course of search. The AO further was of the opinion that payment through proper banking channel and interest payment to those unsecured loans is not sacrosanct because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings conducted in the group cases of assessee and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidences has been brought on record by the AO to disprove the claim of the assessee that these are genuine transactions and unsecured loan taken under normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of accounts of the assessee are hit by the provisions of section 68 of the Act or not. The sole basis for the AO to make additions is statement of Shri Bhanwarlal Jain recorded u/s 132(4) of the Act, where he was admitted that he is involved in providing bogus unsecured loans entries to various beneficiaries. The statement given by Shri Bhanwarla Jain has been retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the AO to go only on the basis of statement of Shri Bhanwarlal Jain so as to treat unsecured loan taken by the assessee from the firm and companies controlled and managed by Shri Bhanwarlal Jain and his associates. 13. Having said so, let us examine what is the basis for the AO to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 68 of the Act. No doubt, the AO is having every right to suspect the transactions but, that by itself would not give rise an occasion for the AO to make additions u/s 68 of the Act, when the evidences filed by the assessee clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act. 14. Coming to the cases relied upon by the assessee, the assessee has relied upon various judicial precedence including the decision of the Hon ble Supreme Court in the case of CIT vs Lovely Export Pvt. Ltd. (2008) 216 CTR 195. The case laws relied upon by the assessee has been dealt as under:- CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay) 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 application, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany 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, tinder no circumstances could the amount of share capital be regarded as un disclosed 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. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com289 (All-High Court) We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to Rs. 25,00.000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme Court in the cases of CIT v. Steller Investments Ltd. [2001] 251 ITR 263 and Lovely Exports case (supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted by the assessee to plough back its own undisclosed income into its accounts, could be of n o avail. The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the nece sary information from the sources to which the information was attributable......If it had any doubts with regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription an d that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com177 (Guj-HC) It is noted that Commissioner (Appeals) as well as the Tribunal have duly considered issue and having found complete details of the receipts of share application money, alongwith the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd to the case of the assessee. Therefore, no reason was found in absence of any illegality much less any perversity too to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant facts and also considering the retracted statements filed by Shri Bhanwarlal Jain came to the conclusion that one documents filed by the assessee to prove the identity, genuineness of transactions and creditworthiness of the parties are clearly established the fact that the transactions between the parties are genuine which are undertaken under normal commercial business, no reason for the AO to make additions u/s 68 of the Act. 16. We further noted that in most of the cases, the Tribunal has considered the companies controlled and operated by Shri Bhanwarlal Jain in light of observations made by the AO to make addition u/s 68 of the Act. We further noted that the Coordinate Bench of ITAT, Mumbai, in the case of Shri Sumit J. Jain vs ACIT in ITA No.145/Mum/2017 had an occasion to consider identical issue in light of unsecured loans taken from companies controlled and managed by Shri Bhanwarlal Jain. The Coordinate Bench, after considering the relevant facts, has held that when assessee has filed various documents to prove three ingredients provided u/s 68 of the Act, there is no reason for the AO to make additions towards u/s 68 of the Act only on the basis of statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account castigating the same as accommodation entries. It is further noted that the assessee duly paid the interest on the loan amount and deducted. Copy of Form no.16A was also filed and the learned Assessing Officer has not brought on record any evidence / reason to disbelieve the evidence filed by the assessee. I am satisfied with the reasoning of the learned CIT(A) that the addition was merely made on the basis of presumption that all the five concerns from whom loan was taken were managed and controlled by Shri Bhawarlal Jain. The statement was also recorded wherein there is no mention that any accommodation entry was obtained. Rather, the case of the assessee is fortified by the reply to question no.40 and 41 wherein it has been tendered that the loan was advanced and interest @ 9% p.a. was charged. The name of the assessee is nowhere mentioned in the list of suspicious dealer / person. Thus, I find no infirmity in the conclusion of the learned CIT(A), resulting into dismissal of the impugned ground raised by the Revenue. 5. The next ground pertained to deletion of addition of Rs. 5,78,278, made on account of interest expenditure on alleged bogus loans. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision of section 68 of the Act. Hence, not carried any enquiry qua these three conditions rather he mainly relied on the search conducted in the case of Bhawarlal Jain Group of cases. It is also not clear from the assessment order whether these loan parties are genuine or non-genuine and the amount received are unexplained but how. It is a fact that the assessee has discharged its primary onus by filing all these documents which the Assessing Officer should have verified and examined these parties. Even now before us, the learned Sr. DR could not controvert the basic facts of the case except relying on the case law of Pawankumer M Sanghvi vs. ITdo in ITA No. 2447/Ahd/2016 and Pr. CIT vs. NRA Iron Steel (P) Ltd. (2019) 110 taxmann.com 491 (SC). Without pointing out the factual aspect of this case, we cannot take it as legal proposition laid down in the given facts. Hence, we are of the view that there is no infirmity in the order of the CIT(A) and hence, we confirm the same. The appeal of Revenue on this issue is dismissed. (c) In the case of DCIT vs. 4. DCIT vs.M/s. Jainam Investments (ITA No.6099/M/2016)the Tribunal has held as under: 17. There should not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... More (supra) to contend that the surrounding circumstances and human probabilities should also be taken into consideration by the tax authorities. He contended that these loan transactions are deceptive transactions. There should not be any doubt with this proposition of law. In the instant case, the Ld CIT(A), as well as the Tribunal in the case of Vama International (supra) has observed that the sworn statements given by Shri Bhanwarlal Jain and others have been retracted. The question whether the revenue is entitled to place reliance on the retracted statements remains unanswered. Further, the assessing officer has placed reliance on the various observations made by the search officials like, sharing of common address by various concerns, inducting employees as directors etc., to come to the conclusion that these transactions are bogus in nature. We notice that the search officials have only drawn adverse inferences on the basis of information gathered by them and it is the duty of the assessing officer to substantiate those inferences by bringing corroborative materials. The Ld CIT-DR has reiterated these inferences as surrounding circumstances. However the moot point that rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has specifically requested the AO twice to give the materials that were relied upon by the assessing officer to take adverse view. Despite the request so made, the AO has not furnished copies of materials to the assessee. Hence, as per the decision rendered by Hon ble Supreme Court in the above said case, the AO could not have placed his reliance on those materials, which were not confronted with the assessee. 22. The assessee has also asked for copies of sworn statements given by Shri Bhanwarlal Jain and others. The assessee also asked for an opportunity to cross examine them. However, the AO has failed to furnish copies of sworn statements and also did not afford opportunity to cross examine the deponents. Hence the decision rendered by Hon ble Supreme Court in the case of Andaman Timer Industries (supra) goes in favour of the assessee and accordingly the Ld CIT(A) was justified in placing reliance on the same and holding that the impugned additions are not justified. 23. We notice that the assessee has specifically asked the AO to issue summons to the loan creditors, but the assessing officer has failed to do the same. It is pertinent to note that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er case laws also. In effect, the Ld CIT(A) has examined the documents furnished by the assessee and has held that the assessee has discharged the initial burden of proof placed upon it u/s 68 of the Act. He has also held that the non-furnishing of documents relied upon by the AO and non-providing of opportunity to cross examine the Shri Bhanwarlal Jain and others would make the addition to fail. Even in respect of documents relied upon by the AO, the Ld CIT(A) has found the same to be inadequate to warrant the additions made u/s 68 of the Act. Hence, we are of the view that the Ld CIT(A) has passed a reasoned order by considering the facts of the case, applicable case laws and has taken a justifiable view in this matter. Hence we do not find any infirmity in the order passed by Ld CIT(A). Accordingly we confirm the order passed by Ld CIT(A) in deleting the addition of Rs.24.75 crores made u/s 68 of the Act. 8. In view of these facts, we are not in concurrence with the finding of the Ld. CIT(A) and accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Ground no. 2 is allowed. 9. The issue raised in ground No.3 is against the confirmation ..... 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