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TMI Blog2021 (6) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Briefly stated the facts are that, the Assessing Officer reopened the assessments u/s. 147 of the Act based on information received from DGIT(Inv.), Mumbai that the assessee has taken accommodation entries in the form of loans from various parties as mentioned in the Assessment Order. Assessing Officer was of the view that these parties are managed and controlled by Bhanwarlal Jain Group and assessee is one of the beneficiary of accommodation entries for loans. Based on the statement of Bhanwarlal Jain obtained in the course of the search in Bhanwarlal Jain Group the Assessing Officer concluded that the transactions of loans are nothing but accommodation entries obtained by the assessee from various concerns of Bhanwarlal Jain Group and they were treated as bogus accommodation entries and brought to tax u/s. 68 of the Act as unexplained cash credits. The Assessing Officer also disallowed interest on such loans. 4. On appeal the Ld.CIT(A) following the order of the Tribunal in assessee's own case for the A.Y.2013-14 and A.Y.2014-15 in ITA.Nos. 2436 and 2591/Mum/2018 dated 08.07.2019 deleted the addition made u/s. 68 of the Act and consequential disallowance of interest thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies controlled and managed by Shri Bhanwarlal Jain is unexplained cash credit, which comes under the provisions of section 68 of the Act or not. The AO has made additions of Rs..15,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain under Section 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation entries. The AO has taken note of statement recorded by the department from Shri Bhanwarlal Jain and his associates. The AO has taken note to survey proceedings 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 under Section 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions 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. 10 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Steller Investment Ltd (2001) 251 ITR 263 (SC) (civil appeal) "That the increase in subscribed capital of the respondent company 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.com 289 (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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no 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 necessary information from the sources to which the information was attributable......If it had any doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the company's own income from undisclosed sources. It was nobody's case that the nonresident 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.com 177 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The Tribunal after considering the relevant 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. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cash deposit nor any withdrawal in any bank 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 expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Shanti Developers in ITA No. 2690/Mum/2018 13. Order dated 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Mega Developers in ITA Nos. 2691/Mum/ 2018 14. We have also considered the following judgements relied upon by the learned D.R.: - 1. Principal Commission of Income Tax vs. NRA Iron & Steel (P.) Ltd. (2019) 103 taxmann.com 48 (SC) 2. Principal Commission of Income Tax vs. NDR Promoters (P.) Ltd. (2019) 102 taxmann.com 282 (Del.) 3. Pee Aar Securities Ltd. vs. DCIT (2018) 96 taxmann.com 602 (Delhi-Trib) 4. Pavankumar M. Sanghvi vs. Income Tax Officer (2018) 97 taxmann.com 398 (SC) After considering the case law relied upon by the learned D.R. i.e. the case of NRA Iron & Steel (P.) Ltd. we note certain distinguishing features vis-a-vis factual matrix of the present case. Upon perusal of paras 3.7 & 3.8 of the said judgement, it is noted that the Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. Submissions were received through DAK only which created a doubt about the identity of the investor company. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urden by filing various documents to prove identity, genuineness of transactions and creditworthiness of the parties. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan under Section 68 of the Act. The Ld. CIT(A) without appreciating these facts simply confirmed the addition made by the AO. Hence, we reverse the findings of the Ld. CIT(A) and direct the AO to delete the additions made towards unsecured loans under Section 68 of the Act. 16. Ground Nos. 2 to 5 are in relation to confirming the action of the AO in making notional addition on account of alleged commission by invoking section 69C of the Act. The AO has disallowed interest paid on unsecured loans on the ground that once loans have been treated as bogus accommodation entries, then any interest paid on such unsecured loans also needs to be treated as bogus and accordingly disallowed total interest paid on unsecured loans. Similarly, the AO has estimated 0.2% commission on total unsecured loans taken from companies on the basis of statement of Shri Bhanwarlal Jain where he had admitted that he charged 0.2% commission on all accommodation entries. We noted that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not find any infirmity in the order passed by the Ld.CIT(A). Grounds raised by the revenue are dismissed. ITA NO. 8043/MUM/2019 (A.Y: 2013-14) 9. This appeal is filed by the revenue against deletion of penalty u/s. 271(1)(c) of the Act for the A.Y. 2013-14 by the Ld.CIT(A). The Ld. Counsel for the assessee submitted that the addition made u/s. 68 of the Act in assessment proceedings has been deleted by the Tribunal in ITA. No. 2436/Mum/2018 by order dated 08.07.2019. Therefore, it is submitted that since the quantum addition has been deleted by the Tribunal the penalty levied on such addition will not survive. 10. On hearing both sides and perusing order of the Tribunal, we observe that the Tribunal has deleted the quantum addition made by the Assessing Officer u/s. 68 of the Act. Since the quantum addition has been deleted by the Tribunal the Ld. Commissioner of Income-tax (Appeals) has rightly deleted the penalty as no penalty will survive. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue. 11. In the result, appeals of the revenue are dismissed. Order pronounced on 14.06.2021 as per Rule 34(4) of ITAT Rules by placing the pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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