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TMI Blog2024 (11) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... cial statements and unilaterally made addition u/sec 68 of the Act only on the basis of statement provided by third party without any iota of evidences discrediting the evidence furnished by the assessee and the statement of Shri Vipul Vidur Bhatt has been retreated which cannot use as reliable evidence. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 - loan transactions are not believed and alleged as non genuine and treated as unexplained cash credit u/sec 68 of the Act and these unsecured loans were repaid through account payee / banking channels in the subsequent years which is not disputed. AR submitted that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden. We considering the facts, circumstances and ratio of judicial decisions referred above, set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loans and disallowance of interest - Decided in favour of assessee. - Shri Pavan Kumar Gadale, Judicial Member And Shri Girish Agrawal, Accountant Member' For the Assessee : Shri. Karan Jain. AR For the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,05,12,704/- from two parties 1. M/s. P. Saji Textile Limited Rs. 52,55,983/- 2. M/s. Shipra Fabrics Pvt. Ltd. Rs. 52,56,721. The AO has called for the details information to explain transactions and produce the unsecured loan creditors with supporting sources of funds and bank statement of the lenders. Further notice u/sec. 133(6) of the Act was issued on unsecured loans creditors and the AO has observed that these parties have not responded. Therefore, the AO considering the facts has provided opportunity to the assessee to establish the identity credit worthiness and genuineness of the loans unsecured loan creditors and a show caused notice was issued on 29/11/2017. In response to the show cause notice, the assessee has filed the details vide letter dated 05/12/2017 that the supporting confirmation of accounts, the affidavit confirming the transactions, bank statement of unsecured loan creditors income tax return acknowledgment and the assessee has repaid the unsecured loans obtained from two unsecured loan creditors in subsequent years and was confirmed by the parties. Whereas the AO was not satisfied with the explanations and the information and observed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed the requisite details before the assessing officer and first appellate authority. Further the Ld. AR mentioned that the assessing officer has made the addition of interest component which is already included on the accrual basis in the outstanding loans of the creditors and the A.O has made simultaneously made addition of interest, which is contrary to the provisions of the act. We find that before the Assessing Officer, the assessee has submitted information in respect of unsecured loan creditors and the A.O. has issued notice u/sec 133(6) of the Act and it was responded with the requisite details. On perusal of the assessment order, the assessee has submitted the documentary evidences but the A.O has over looked the vital documents in respect of the sources filed by the assessee. The assessee has submitted the written submissions before the CIT(A) and the confirmation of loan creditors, PAN, Bank account details and the Income Tax returns. We find that the assessee has to satisfy the 3 ingredients with respect to identity, creditworthiness and genuineness of the transaction. The CIT(A) has discussed on the provisions of the Act but has confirmed the action of the A.O. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. no substantial question of law arises for our consideration. 9. The appeal is dismissed. No order as to costs . 7. The Hon ble Tribunal Vakharia Mumubai Vs ITO in ITA No. 1540 1539/Mum/2023 dated 28.07.2023 for A.Y.2012-13 2013- 14 has considered the provisions, facts and the submissions of the assessee on the unsecured loans and granted relief observing at Page 9 Para 9 of the order read as under : 9. Heard the parties and perused the material available on record. As per balance sheet, as on 31st March, 2012 the Assessee has shown the amount of Rs. 20,00,000/- and Rs. 50,000/- as liability towards M/s. Santoshima and M/s. Vasudev respectively and also shown to have paid the interest amount of Rs. 2,40,000/- and Rs. 60,000/- respectively to M/s. Santoshima and M/s. Vasudev. It is not in controversy that the Assessee had taken the said loans in the financial year 2010-11 (AY: 2011-12) which continued in the assessment year under consideration as well. During the course of assessment proceedings, the Assessee also submitted the following documents in order to substantiate its claim. (i) The confirmation of loans. (ii) Acknowledgment of returns of income of loan parties. (iii) Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantly the instant appeal is allowed. 8. The coordinate bench of Hon ble Tribunal in the case of ITO Vs. M/s MJD Financial Services Pvt Ltd in ITA No. 6051/Mum/2018 dated 10-09-2020 for A.Y.2012-13 has considered the provisions and facts on the submissions of the assessee and has upheld the order of the CIT(A) dismissing the revenue appeal observing at Page 5 Para 9 10 of the order read as under: 8. We have material the rival submissions of the parties and perused these. The Lon record incluasions of the pallied upon by the partiesiding L. CIT (A) has ding the he addition made by the AO the Ao as deleted the ad any fact on record to established that cash wast introduced prior te advancing the dout to the assessee was introdus no evidence on record to shu of that the assessee and the cash to the loan creditors in lieu of loan received from them. fact that the unsecured loans under consideration have been It is an admitted repaid over a period of time under conslappellant has paid interest and deducted TDS there and ther the provisions of the Act. Relying on the various decisions of the Courts and the Tribunal, the Ld. CIT (A) has held that the assessee has discharged its onus of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said amount to the income of the assessee. In the first appeal, the Ld. CIT (A) deleted the addition on legal ground as well as on merits. The revenue challenged the action of the Ld. CIT (A) before the ITAT. The coordinate Bench of the Tribunal upheld the findings of the Ld. CIT (A) holding as under:- 33. We have carefully considered the submissions and perused the records. We find that the first issue in this case relates to the addition of unsecured loan taken from corporate entities u/s. 68 of the Act. In this regard, it is noted that it is the claim of the assessee which has been found correct by the ld. CIT(A) that the assessee has duly paid interest on these loans, deducted TDS, filed the TDS return. The Id. CIT(A) has also found that this loans have been duly repaid. 34. The addition in this case has been made on the ground that some of the corporate entities were found to have been controlled and operated by Shri Pravin Kumar Jain, who was one of the leading entry operator. For the other corporate entities, it was found that the assessee has obtained loan from these companies which was arranged by Shri Rakesh Doshi, who on survey had admitted to be arranging bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order nullify in as much as it amounted to violation of principles of Natural Justice because of which the assessee was adversely affected. The order was vacated. 2. Kishinchand Chellaram v. C.I.T. (1980) 1251TR 0713 (SC) 3.Ponkunnam Traders V. Addl. . . . Anr. (1972)831TR508(Ker) 4. ACIT V Tristar Jewellery Exports Pvt. Ltd. ITA/7593/MUM/2011 (Mumbai ITAT) 36. As regards the merits of the addition, it is noted that the assessee had supplied the following in this regard: (i) Confirmation of the party who gave the loan. (ii) Copy of Return of Income filed by them alongwith PAN No. of the loanees. (iii) Copy of Balance Sheet, P/L Account alongwith all Schedules, (iv) Copy of Certificate of incorporation, original and the latest one. (v) Copy of Bank Statement of the loanee from which the loan have been given to the assessee, as well as Repayment made if any by the assessee. 37. The A.O. has disregarded the evidences submitted by the assessee on the ground of a statement of Shri Pravin Kumar Jain and Shri Rakesh Doshi and the director of the assessee company. In this regard, as already referred hereinabove, the ld. CIT(A) has already found the issues of non submissions of the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o credited may be previous income tax as the income of assessee of that previous year : Provided that where the assessee is company (not being a company in which the public are substantially interested)and the sum so credited consists of a share application money, share capital, share premium or any amount by whatever name called, any explanation offered such amour assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.) 39. In this regard, we note that by giving the confirmation, return of income, the detail of PAN, copy of balance sheet and P L account and copy of its bank statement, the assessee has duly discharged its onus. The A.O. has not found default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal: (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the provise to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming of the Act laid down by the pre the genuineness of the transaction, identity and the namelty of the investor have all been examined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV. Confirmatory letters given by the creditors V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions. 23. The assessing officer has made no enquiry with reference to the above. He did not seek any further explanation or detail from the assessee. He solely relied upon the investigation wing enquiry regarding the Bhanwarilal group. The Id. Commissioner of Income Tax (Appeals) in this regard has correctly made the observation that the assessee having given all the necessary details and has discharged its onus, it was incumbent upon the assessing officer to make further inquiry if he was not convinced by the submissions of the assessee. We find that assessing officer has displayed total lack of application of mind by not even issuing a notice to the loan creditors. 24. We find that it is settled law that while making any disallowance/addition, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14) 366 ITR 232 (P H), Hon'ble Gujarat High Court decision in the case of CIT Communications others. Sachitel P. Ltd. (2014) 227 Taxman 219 (Mag) and others. 42. In our considered opinion, these case laws duly support the proposition canvassed by the assessee. In our considered opinion, the A.O. has not brought on record any cogent, adverse material to rebut the credibility of the corporate entity from whom loan has been taken. As already pointed out by us as above, that these corporate entities were found by the A.O. to have acquired funds by borrowals and acceptance of share capital and share premium. This by itself cannot lead to presumption that these sources are bogus without any enquiry. In these circumstances, in our considered opinion, the Id. DR's request that this issue be again remitted to the file of the A.O. to make further necessary enquiries cannot be entertained. The decision of the Hon'ble Karnataka High Court referred by the ld. DR was on a different set of facts, wherein, the Hon'ble Karnataka High Court on the facts and circumstances of the case had upheld the certain direction of the ITAT. In the present case, as pointed out hereinabove, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the result, appeal filed by the revenue for assessment year 2012-2013 is dismissed 9. The Hon ble Tribunal Jaipur Bench in the case of M/s. Noble Tradelink Pvt Ltd Vs. ITO. In ITA No.302 303/JP/2021 . .2012-13 A.Y.2013-14 order dated 10.10.2022 has considered the provisions and facts on the submissions of the assessee on the unsecured loans and granted relief observing at Page 25 Para 7.3 of the order read as under: 7.3 We have heard both the parties and perused the materials available addition of Rs. 54.50 relating to Shri Vipul on record. In this case, the AO made an lacs holding it as unaccounted money accommodation entries and rotating it in the bank account through these companies during the year. In first appeal, the Id. CIT(A) has confirmed the action of the AD. It is not imperative repeat the facts of the case as similar issue had been raised by the assessee in ITA No. 302/JP/2013 for the assessment year 2012-13 wherein the Ground No. 2 to 2.4 of the assessee has been allowed. Since the similar points are involved in the appeal of the assessee for the assessment year 2013-14, therefore, applying the same analogy, we feel that the Id. CIT(A) is not justified in confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Id. AR of the assessee further submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. The case laws and the report relied upon by the ld. DR are with reference 28 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR to the LTCG claimed exempt u/s 10(38) of the Act which are not relevant to the facts of the assessee's case where he took loan and also repaid during the same fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd that the share application money of Rs. 50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse. 3. Aravali Trading Co. vs ITO (2008) 8 DTR 199 (Raj) wherein the Hon'ble Court observed that ... Once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stands discharged and the latter is not further required to prove the source from which the creditors could ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Bohra vs ITO (2008) 219 CYR 571 (Raj) wherein the Hon'ble Court observed that Identity of the creditors having been established who have confirmed the credits by making statements on oath and the amounts having been advanced by account payee cheques, impugned addition in respect of the entries in the names of said creditors cannot be sustained. Capacity of the lender to advance money to the assessee is not a matter which could be required to be established by the assessee, as that would amount to calling upon him to establish source of the source In view of the above deliberations, the decisions relied on above, we find that disallowance made of Rs. 80 lacs u/s 68 of the Act by the lower authorities has no merit and we do not concur with the findings of the Id. CIT(A) as the assessee has proved the identity and creditworthiness of the party from whom the amount was received and genuineness of the transaction. Thus, the decision taken by us in 31 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR Ground No. 2 to 2.4 of the assessee in ITA No.302/JP/2021 for the assessment year 2012-13 shall apply mutatis mutandis in Ground No. 2 to 2.4 of the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processed u/s 143(1) of the Act. Later, on receipt of information from DDIT (Inv.), Mumbai, the case of the assessee was re-opened. The information was that during search conducted in the case of Shri Vipul Vidur Bhatt [and other related entities] in Feb, 2016, books pertaining to 347 paper companies were discovered; and he admitted that he was controlling these entities either as a Director or through his dummy Directors. And that he was mainly engaged in providing accommodation entries to beneficiaries. And since the assessee had shown to have transaction with two of the paper companies of Shri Vipul Bhat to the tune of Rs. 1.17 cr., the AO asked the assessee to prove the nature and source of Rs. 1.17 cr. Pursuant to which, the assessee replied that he had taken loan of Rs. 77 Lakhs from M/s. Shipra and Rs. 40 Lakhs from M/s. Lunkad; and in order to prove the nature and source of the same, the assessee filed copy of return of income along with computation of income, Balance-Sheet, P L Account, Audit Report, details of bank accounts, details of short term capital gains on sale of land/DRC, copy of confirmation from M/s. Shipra Fabrics Pvt Ltd and M/s. Lunkad Textile Pvt. Ltd. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and source of the same, the assessee brought to his notice that nature of the amount was loan taken from two entities (i) M/s. Shipra (Rs.77 Lakhs) and (ii) M/s. Lunkad (Rs.40 Lakhs). In order to prove the identity of M/s. Shipra Fabrics Pvt. Ltd, the assessee filed the return of income of M/s. Shipra which is found placed at page no. 1 to 12 of PB, which reveals that the PAN of M/s. Shipra is AAACS5527M and that it is a Pvt. Ltd Company which falls in the jurisdiction of Central Circle-39, Mumbai and has shown gross total income of Rs. 22,66,889/- in AY 2014-15. The Paper Book (PB) filed before us, reveals that loan amount of Rs. 77 Lakhs has been received by assessee on 08.07.2013 through banking channel which is discerned from perusal of page no. 10 11 of PB. The bank statement of Bank of Baroda of the assessee company A/c 12460200000447 shows that on 08.07.2013 an amount of Rs. 77 Lakhs has been credited in the account of the assessee. The assessee has also filed the confirmation of the loan transaction from M/s. Shipra which is found placed at page no. 9 of the PB. And in order to prove the creditworthiness of the M/s. Shipra, the Ld. AR drew our attention to the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatt had admitted during search that M/s. Shipra as well as M/s. Lunkad were his paper companies and were indulging providing accommodation entries. Even though, the assessee brought to the notice of the AO that Shri Vipul Vidur Bhatt has retracted the admission alleging duress and coercion on the part of the search team, the AO brushed it aside by pointing out that the DDIT (Inv.) report did not mention anything about the purported retraction. According to the AO, therefore loan shown by the assessee from these two concerns of Shri Vipul Vidur Bhatt were bogus transaction and therefore, he added the entire amount of Rs. 1.17 cr u/s 68 of the Act and the interest expenditure to these entities to the tune of Rs. 4.80 cr was disallowed/added, which action of the AO was confirmed by the Ld.CIT(A). We do not countenance the impugned action of the Ld.CIT(A) for the simple reason that the assessee has discharged the burden to prove the nature and source of the credit entries Rs. 1.17 Crs. (from M/s.Shipra Fabrics Pvt. Ltd., Rs. 77 lakhs and Rs. 4 lakhs from M/s.Lunkad Textile Pvt. Ltd.) by adducing primary/relevant documents/material as discussed supra; and the AO has not been able to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble High Court in the case of PCIT v. Paradise Inland Shipping (P.) Ltd., as reproduced under: 5. We have given our thoughtful considerations to the rival contentions of the learned Counsel and we have also gone through the records. The basic contention of the learned Counsel appearing for the Appellants revolves upon the stand taken by the Appellants whether the shareholders who have invested in the shares of the Respondents are fictitious or not. In this connection, the Respondents in support of their stand about the genuineness of the transaction entered into with such Companies has produced voluminous documents which, inter alia, have been noted at Para 3 of the Judgment of the CIT Appeals which reads thus: - The assessment is completed without rebutting the 550 page documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows:- 1. Sony Financial Services Lid-CIN U74899DL1995PLC068362- Date of Registration 09.05.1995 (a) Memorandum of Association and Article of Association (b) Certificate of Incorporation (c) Certificate of Commencement of Business (d) Acknowledgement of the Return of Income AY. 2008-09 (e) Affidavit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, apart from issuing notices under S. 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. 9. This Court in the Judgments relied upon by the learned Counsel appearing for the Respondents, have come to the conclusion that once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR emphasized that the assessee has discharged its burden by submitting the financial statements of the lenders where the payment is made through banking channel and identity, creditworthiness and genuineness of the lender company was proved in the assessment proceedings. Further the Ld.AR demonstrated the details submitted by the assessee before the Assessing Officer i.e the audited financial statements, confirmations, Bank statements, copy of the income tax returns and the repayment details to substantiate the genuineness and credit worthiness of loan creditors, which are placed at page 34 to 47 of paper book. The Ld.AR demonstrated the copy of bank statements reflecting the repayment of unsecured loans in the paper book which is not disputed by the revenue. Further, the A.O has failed to make further enquiries and relied on the statement recorded, overlooking the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The Ld. AR referred to the copy of details of unsecured loans provided by the lenders and subsequent repayment of loans along with the financial statements, confirmations and bank statements filed by the two unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X
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