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TMI Blog2023 (10) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... d when income tax official visited at their address or on the basis of commission report alleging that the creditor parties were managed by entry provider? - HELD THAT:- The report of the commission cannot be taken as sacrosanct/gospel truth for taking any adverse view against the assessee without pointing out any specific defect in the documentary evidence furnished by the assessee during the assessment proceedings which have been elaborately discussed in the preceding paragraph. In our considered view the identity, creditworthiness of the parties and genuineness of the transaction were established by the assessee based on the documentary evidence but the revenue without pointing out any defect in such documents has decided the issue against the assessee based on the commission report. As such it is the onus upon the revenue to disprove the materials/documents submitted by the assessee in support of the transactions in dispute based on cogent reasons. But the same has not been done by the revenue in the objective manner. Likewise, it is also a fact on records that the revenue has taken some statements from the 3rd party which were not provided to the assessee for the rebuttal. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 5 Krystalklear Properties Pvt. Ltd. 25,00,000/- 6 Jaylalitha Commodities Pvt. Ltd. 55,00,000/- 7 Alsih Traders Pvt. Ltd. 50,00,000/- 8 Aristo Media Ent. Pvt. Ltd. 45,00,000/- 9 Aalyya Traders Pvt. Ltd. 4,00,000/- 10 Adamina Traders Pvt. Ltd. 10,00,000/- 11 Ethan Construction Pvt. Ltd. 1,27,00,000/- 12 M/s. Royal Trading Co. 55,00,000/- 13 Shreenathji Finstock Pvt. Ltd. 94,19,000/- 14 Jain Trading Co. 99,00,000/- 15 M/s. S.K. Enterprise 8,00,000/- Total 7,80,19,000/- 4.1 With respect to the first 13 parties, the assessee to prove the identity, genuineness and credit worthiness before the AO has furnished following documentary evidence: a. PAN of all the companies. b. Acknowledgements of returns filed for assessment year 2011-12. c. Computation of income for the assessment year 2011-12 and Audited Annual Accounts for the year under consideration. d. Copy of Bank Statements of all the parties evidencing to have advanced loan to the assessee. e. Confirmations stating that monies have been advanced to the assessee. f. Copies of Ledger Accounts of all the above parties. g. Copy of various ROC Documents showing the existence and identity of the parties and h. Affidavits of Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported that the parties appearing at serial No. 2 to 10 in the above table are identified by Shri Kumar Raichand Madan as the concerns belonging to entry provider Shri Shrish Chandrakant Shah (SCS). Shri Kumar Raichand Madan also admitted that he as well as the present assessee was working as associate for SCS. The parties at serial No. 2 to 10 were also subject to search proceedings carried out in the case of SCS group of companies. (f) The commission under section 131(1)(d) of the Act was appointed at the party namely Ethan Construction Pvt Ltd. The DDIT reported that at the given address, the dummy director namely Shri Kiran Soni is residing who along with another director stated that they were working as director on payroll of the present assessee. Shri Kiran J Soni has also given the address of the other party and when notice issued on the new address, the notice was received by Shri Kumar Raichand Madan. 4.5 In view of the above, thus, the AO made an addition of Rs. 7,80,19,000/- to the total income of the assessee under the provision of section 68 of the Act. 5. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itel Communications (P.) Ltd.(Supra) as well as by Hon'ble ITAT in the case of Sarjan Corporation (Supra). 3.3.7. In the light of the above principle, let us examine as to whether the genuineness of the transactions and the creditworthiness of their creditors has been sufficiently proved by the appellant before the Assessing Officer. The Ld. Authorized Representative has made detailed submissions in respect of all the creditors which are not reproduced here for the sake of brevity. However, from that discussion made in para 3.2.1 above, it transpires as under:- (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 business transactions with other parties. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax along with their PANS were also available with the Assessing Officer. The directors of the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors as held by Apex Court in the cases of Lovely Exports (P.) Ltd. [2008] 216 CTR 195(SC) and in the case of Divine Leasing Finance Ltd. [2008] 299 ITR 268 (Del.). I also agree with the Ld.AR that once the identity of the creditors has been proved as well as their creditworthiness and all payments are received by account payee cheques from the bank accounts whose statements have abo been furnished to demonstrate that sufficient balances were available in the account before issue of cheques addition of such loans cannot be made in the bands of the assessee in view of the settled legal position enunciated by the Apex Court in the case of CIT VS Orissa Corporation P. Ltd. [1986] 159 ITR 78(SC). Hon'ble Gujarat High Court is the cases of Apex Therm Packaging (P) Ltd (Supra), Sachitel Communications (P) Ltd. (Supra) and Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (G)) as well as by Hon'ble ITAT in the case of Sarjan Corporation (Supra). From the assessment order, it transpires that the AO has presumed adversely about the creditworthiness of the loan creditors on the basis of erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rish shah and actively involved in the scam. It is believed the assessee and his company was also searched at the time of search proceedings held in the month of April 2013. The Prabhav Industries is centralized with Central Crcle1(1), Ahmedabad. These comments of the Assessing Officer clearly demonstrate that there was no clinching evidence against the appellant that he has routed his money under the garb of unsecured loans from 15 creditors. The Assessing Officer is not sure that the appellant was searched or not. He has send the Remand Report as present Assessing Officer which means that the case is still with me and that he is not in possession of any incriminating material against the assessee even after the searches in Shiris Shah Group . Moreover, the assessee is an individual and his company has not accepted the unsecured loans. The present appeal is in respect of assessee and not his company. Even if there is material against the company, that cannot be legally used against the assessee unless it is proved that the said Prabhay Industries was a sham or paper company, which is not the case of the Assessing Officer. Thus, even after the searchs in the cases of creditors, Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has been able to generate huge. amount of undisclosed income as has been alleged by the Assessing Officer that appellant has routed his own unaccounted money under the garb of unsecured loans. 3.3.8 Considering the detailed facts of the case, written submissions of the AR and ratio of the judicial decisions cited above, it is held that the assessee bad proved beyond any doubt the identity, creditworthiness and genuineness of the loans amounting to Rs. 5,50,00,000/- in respect of first 13 creditors mentioned in the table in para 3.3.1. above and addition made by the Assessing Officer under section 68 is held to be not justified. Therefore, the same is directed to be deleted. In respect of M/s Jain Trading Co. and M/s. S.K. Enterprise from whom appellant received Rs. 99,00,000/- and Rs. 8,00,000/-, it is seen that even during Remand proceedings, appellant could not furnish requisite details as well as confirmations from those parties! I agree with the Assessing Officer that in absence of confirmation and documentary evidences to establish the genuineness of transaction as well as creditworthiness of the depositors, the assessee has failed to prove the genuineness of loans a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able explanation regarding nature and sources of such credit to the satisfaction of the AO. Thus, the primary onus lies with the assessee to explain the source of credit in the books. Over the period, the courts have laid down that the assessee to discharge its onus is required to furnish evidence with respect to identity of the creditor, genuineness of transaction and credit worthiness of the creditor. If the assessee failed to discharge the primary onus cast or the explanation and evidence submitted by the assessee, are not found satisfactory by the AO then the sum credited in the books shall be deemed as income of the assessee. The Hon ble Supreme Court in case of CIT vs. P. Mohanakala reported in 291 ITR 278 while dealing with scope of provision of section 68 of the Act held that the opinion of the AO that the explanation furnished by the assessee as not satisfactory is required to be based on proper appreciation of materials and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. In other w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thereafter, commission appointed under section 131(1)(d) of the Act at each creditor s parties. The DDIT(Inv) in its report under section 131(1)(d) submitted that the creditor parties were not found at their given address or on address available at MCA portal. 9.4 Now the question arises, whether the documentary evidence provided by the assessee should be brushed aside for the reason that they did not respond to notices issued under section 133(6) of the Act or not found when income tax official visited at their address or on the basis of commission report alleging that the creditor parties were managed by entry provider. At this juncture, we are inclined to refer to the order of the ITAT Mumbai in the case of Chemicon Engineering Consultant (P.) Ltd. vs. ACIT reported in 142 taxmann.com 297 who has taken, in somewhat similar facts and circumstances, the following view: 32. Further in our considered view, after the assessee had discharged its burden by furnishing the above documents in support of the source of source of funds, in compliance with proviso to Section 68 of the Act, then the onus of disproving or finding defects in these documents shifted to the Revenue. It was then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the source of source of funds qua Rs. 6,22,05,000/- were unexplained or represented unaccounted monies of the assessee cannot be sustained Hence, the impugned action of the Ld. CIT(A) confirming addition of Rs. 6,22,05,000/- cannot be countenanced. 9.5 Based on the above, we hold that the report of the commission cannot be taken as sacrosanct/gospel truth for taking any adverse view against the assessee without pointing out any specific defect in the documentary evidence furnished by the assessee during the assessment proceedings which have been elaborately discussed in the preceding paragraph. In our considered view the identity, creditworthiness of the parties and genuineness of the transaction were established by the assessee based on the documentary evidence but the revenue without pointing out any defect in such documents has decided the issue against the assessee based on the commission report. As such it is the onus upon the revenue to disprove the materials/documents submitted by the assessee in support of the transactions in dispute based on cogent reasons. But the same has not been done by the revenue in the objective manner. Likewise, it is also a fact on records that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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