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TMI Blog2022 (7) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under section 147 of the Act. Addition u/s 68 - Appellant has duly proved the genuineness of the transactions by submitting various details as also mentioned at Page 12 and 13 of Ld. CIT (Appeals) order. Taking it into consideration entire facts and circumstances of the case and the ratio of the decision relied upon by the Ld. AR, we set aside the order passed by the Ld. CIT (Appeals) and direct the AO to delete the additions so made under section 68 of the Act in both the assessment years in the impugned appeals. Both the appeals of the assessee are allowed. - ITA Nos. 178 & 179/NAG/2017 - - - Dated:- 28-6-2022 - SHRI SANDEEP GOSAIN , JM And SHRI ARUN KHODPIA , AM Assessee by: Shri Kapil Hirani , Adv Revenue by :Shri Vitthal M. Bhosale ( JCIT - DR ) ORDER Per Sandeep Gosain , JM The impugned appeals are filed challenging the order of the first Appellate Authority (CIT-Appeals) dated 09-02-2017 for the assessment years 2009-10 and 2011-12 respectively confirming the orders of the Assessing Officer ( AO ) (Deputy Commissioner of Income Tax, Circle 1, Nagpur) who has made the additions treating unsecured loans as unexplained cash credits under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12 on 29.09.2011 declaring income at Rs. 1,18,73,560/-. c. The Appellant has taken unsecured loans which forms the subject matter of impugned appeals as under: i. AY 2009-10 - Rs. 1,00,00,000/- from M/s. Duke Business Pvt. Ltd. (Formerly known as JPK Trading India Pvt. Ltd.) ii. AY 2011-12 - Rs. 50,00,000/- from Nakshatra Business Pvt. Ltd. (Formerly known as M/s. Hema Trading Co. Pvt. Ltd.) d. The assessments of the Appellant were reopened under section 147 of the Act primarily for the reason that income chargeable to tax had escaped assessment on the ground that the Appellant is a beneficiary of accommodation entries provided by one Shri Praveen Kumar Jain. The basis for reopening of assessment is statement of Shri Praveen Kumar Jain recorded under section 132(4) of the Act at the time of search where he allegedly stated that he, along with bunch of companies were involved in providing accommodation entries in the form of share capital and unsecured loans to various persons. e. This statement as informed has however been retracted by filing affidavit on 15.05.2014. f. The Appellant filed its return in response to notice issued under section 148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sufficient to form a basis for escapement of income. Therefore, we are of the considered view that reopening as done by the AO is legally tenable and accordingly dismiss the ground taken by the Appellant challenging the reopening of the assessment as well as proceedings as completed under section 147 of the Act. 4. Coming to the merits of issue on hand, the Ld. AR of the Appellant at the outset invited our attention to the order in ITA No. 154/Nag/2007 dated 14.10.2018 passed in the case of Axykno Enterprises Pvt. Ltd. which is a sister concern of the Appellant and in which one of us was a party to the order wherein additions made on identical grounds were deleted on merits. 5. The Ld. AR further drew our attention to the fact that the applicable assessment year in the said appeal was AY 2011-12 where the dispute was relating to receipt of funds from M/s. Nakshatra Business Pvt. Ltd. which is the same company from where funds have been received in impugned appeal for AY 2011-12. 6. The Ld. AR then drew our attention to the judgment in the case of ACIT vs. Calvin Properties ITA Nos. 6561, 6562 6564/Mum/2017 in which again one of us is a party to the order which also cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to prove that the impugned credit comes within the ambit of provisions of section 68 of the Act. In this case, the assessee has filed complete details of identity of the creditors including their PAN details, financial statement, bank statement and confirmation from the parties. The assessee also proved the genuineness of the transaction by filing the bank statement to prove that the money has been transacted through proper banking channel. The assessee also filed the financial statement of the creditors to prove their creditworthiness as per which the companies are having capacity to explain source of investment in share application money. Once the assessee has filled complete details of identity and their creditworthiness, then it is for the Assessing Officer to carry out necessary independent enquiries to disbelieve the documents filed by the assessee in order to make additions under section 68 of the Act towards share application money. In this case, on a perusal of the facts, we find that the Assessing Officer did not carryout any independent enquiry in order to ascertain the genuineness of transaction and creditworthiness of the parties. The Assessing Officer made addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO, an addition cannot be sustained merely based on inferences drawn by circumstance. 10.5. The Appellant further places reliance on DCIT Vs. Alcon Biosciences Pvt. Ltd. (TAT Mumbai) (ITA No. 1946/Mum/2016) wherein the Hon'ble Tribunal has held that the fact that a private limited company issued shares at an exorbitant premium is irrelevant if the assessee has roved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee u/s. 68. 10.6. Reliance further placed on Umbrella Projects Put. Ltd. Vs. ITO (TTA No. 5955/Del/2014) wherein it has been held that if the assessee has discharged the initial onus regarding the identity, creditworthiness and genuineness, the onus shifts to the AD to bring material or evidence to discredit the same. Further there must be material to implicate the assessee in a collusive arrangement with person who are Accommodation entry providers. 10.7. Reliance further placed on PCIT Vs. Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) and direct the Assessing Officer to delete the additions made on account of share capital under section 68 of the Act. 1. Similarly in ACIT vs. Calvin Properties (ITA Nos. 6561, 6562 and 6564/Mum/2017) it has been held as under: Ground No. 1 is raised against the addition made of Rs. 1,50,00,000 as unexplained cash credit under section 68 of Income Tax Act, 1961. The learned assessing officer has noticed that the appellant has during the year under consideration received unsecured loans of aggregated amount of Rs. 1,50,00,000 as under- S. No. Name PAN Amount of sales to assessee in F.Y. 2010-11 (in Rs.) 1. Casper Enterprises (Oswal Trading P Ltd.) AAACO7955M 20,00,000 2. Duke Business P. Ltd. (JPK Trading I Pvt. Ltd.) AABCJ6245N 30,00,000 3. Nakshatra Business P. Ltd. (Hema Trading P. Ltd.). AABCH4279G 1,00,00,000 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll his associates. It is alleged that the assessing officer failed to collect further information and not made any efforts to disprove the genuineness of the transactions of unsecured loans received, it is also the contention of the learned AR that the assessing officer has failed to discuss the merits of the cases cited by the appellant firm during the course of assessment proceedings. 2.4.7 In the present case before me, as seen from the details filed before the assessing officer, as evident from the paper book. I do not find any inconsistency or incoherence in respect of the receipt of the unsecured loan received from the said three companies. Primarily, as regards the transaction, the same has routed through the banking channel and the source cannot be doubted. It was held in several cases that, whatever may be the strength of presumption it cannot substitute the evidence. Even though the transaction is from a tainted group, the assessing officer has not made any efforts to show that the transaction with the appellant firm was sham, fictitious or artificial except believing the statements given by the accommodation entry providers. He has failed to gather any evidence to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e produced by the assessee cannot be brushed aside in a casual manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt - such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under section 68. (v) Though confirmatory letters or account payee cheques do not prove that the amount in questions properly explained for the purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction, it is also true that money received through foreign remittance with RBI approval is a strong indicator of bona fide of the cash credit that has to be disapproved by the positive evidence. (vi) In matters regarding cash credits, the onus of proof is not a static one. As per the provisions of the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68 of the Act cannot survive the test of appeal. I therefore direct the assessing officer to withdraw the addition. This grounds allowed. 9. After having gone through the facts of the present case and hearing the parties at length, we find that learned DR relied upon the orders passed by assessing officer and submitted that learned Commissioner (Appeals) had wrongly deleted the addition made under section 68 of the Act without appreciating that as per the enquiry investigation made by the assessing officer as well as Investigation Wing of the department, the parties from whom the assessee had received unsecured loan were mere accommodation entry providers, who provide accommodation entries as per the requirements of the beneficiary. It was also submitted that the said parties had no real worth/capability/credit from where they could lend such huge loan to the assessee. It was submitted that the assessee failed to discharge his onus to prove identity, creditworthiness and genuineness of the transactions, therefore in such circumstances, learned Commissioner (Appeals) ought to have upheld the additions. 10. On the other hand, learned AR relied upon the orders passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,00,000. The details of which are as under- S. No. Name PAN Amount of sales to assessee in F.Y. 2010-11 (in Rs.) 1. Casper Enterprises (Oswal Trading (P) Ltd.) AAACO7955M 20,00,000 2. Duke Business (P) Ltd. (JPK Trading (I) Pvt. Ltd.) AABCJ6245N 30,00,000 3. Nakshatra Business (P) Ltd. (Hema Trading (P) Ltd.). AABCH4279G 1,00,00,000 TOTAL 1,50,00,000 12. The assessee had filed all the required details to prove the identity and creditworthiness of the investing companies and the genuineness of the transactions in the form of PAN, incorporation certificate, memorandum of associate, IT return copies, confirmations, bank statements, audited accounts etc. We have also noticed that the transaction had taken place through banking channels, therefore the genuineness of the investment can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation offered by the assesses, in the opinion of the assessing officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers, no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the assessing officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of maternal and other attending circumstances available on the record. The opinion of the assessing officer is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is unbelievable or false the assessing officer is not required to bring positive evidence on record to treat amount in question as income of the assesses 'Mule-considering the explanation of the assessee, the assessing officer has to act reasonably - application of mind is the sine qua non-for forming the opinion. (iii) Phrase appearing in the section - nature and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. 14. In this case, there is an important undisputed fact that the unsecured loan had already been repaid and in this respect, documents were placed on record by the assessing officer. We are also relying upon the judgment of Hon'ble Apex Court in the case of Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC), wherein it was held that the assessing officer is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. 15. In this case, the creditworthiness of the investors even if is not proved, even then it will not automatically give license to the assessing authority to make additions in the hands of the recipient under section 68, unless that is proved that it is the unexplained and unaccounted money of the assessee which has been introduced in its books of account in the name of bogus/non-existent entities. In the instant case, the assessing officer had not made any dent on these lines. On the other hand the appellant has filed all the details and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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