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TMI Blog2022 (10) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... ial which compel us to deviate from the findings recorded by the CIT(A). Thus, while concurring with the findings of the ld. CIT(A) on this issue, we dismiss Ground of the assessee. Unsecured loans - We find that disallowance made u/s 68 of the Act by the lower authorities has no merit and we do not concur with the findings of the ld. 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. In this view of the matter, the ground of the assessee are allowed. - SHRI SANDEEP GOSAIN, JM AND DR MEETHA LAL MEENA, AM For the Assessee : Shri P.C. Parwal, CA For the Revenue : Smt. Monisha Choudhary, JCIT-DR ORDER PER: SANDEEP GOSAIN, JM Both these appeals filed by the assessee are directed against two different orders of the ld. CIT(A), National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] dated 27-10-2021 and 18-10-2021 for the assessment years 2012-13 2013-14 respectively. Since the issues in both the appeals are similar, therefore, the Bench decides to dispose off both the appeals through a common order for the sake of convenience and brevity of the case. 2.0 The grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/- may be deleted. 2.2. Without prejudice to above, the Ld CIT(A) erred in making the addition on the basis of statement of Vipul Vidur Bhatt without appreciating that appellant had proved the identity, creditworthiness and genuineness of the party by filing documentary evidences and Vipul Vidur Bhatt has retracted his statement and hence, addition u/s 68 of Rs 80,00,000/- may be deleted. 2.3. The Ld CIT(A) erred in making addition of Rs 80,00,000/- without considering the detailed submission and explanation dated 12-10-2021 thereby violating principles of natural justice and hence, addition u/s 68 of Rs. 80,00,000/- may be deleted. 2.4. The Ld CIT(A) erred in making addition of Rs. 80,00,000/- without admitting the additional evidences u/r 46A dated 12-10-2021 though appellant had given cogent explanation for admitting the additional evidences and hence, addition u/s 68 of Rs 80,00,000/- may be deleted. 2.1 First of all, we take up the appeal of the assessee for adjudication for the assessment year 2012-13. 3.1 Apropos Ground No. 1 and 1.1 of the assessee, brief facts of the case are that the assessee company filed its original return of income on 29.09.2012 at Nil income. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis. 3.3 During the course of hearing, the ld. AR of the assessee prayed that the notice issued by the AO u/s 148 of the Act and consequent assessment made by the AO is illegal and bad which should be quashed. To this effect, the ld. AR of the assessee has filed the detailed written submission as under with case laws also. 1. From the plain reading of the reasons recorded, it can be noted that notice u/s 148 is issued solely on the basis of information received from DDIT(Inv.), Unit-7(4), Mumbai where it referred to search conducted by income tax department in case of Mr. Vipul Vidur Bhatt and his related entities wherein in the statement recorded u/s 132(4) it was admitted by him that he was in the business of providing accommodation entries. On this basis, AO concluded that assessee has obtained bogus accommodation entries in the form of unsecured loans amounting to Rs. 80 lacs from 4 entities/ companies controlled and operated by Sh. Vipul Vidur Bhatt. Thus, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening of assessment only at the instance of Investigation Wing, Mumbai is illegal and bad in law. For this purpose, reliance is placed on the following cases: 1. Reynolds Shirting Ltd. vs ACIT (2022) 285 Taxman 554 (Bom.HC. 2. Kantibhai Dharmashibhai Narola vs ACIT (2021) 436 ITR 302 (Guj) 3. PCIT vs Meenakshi Overseas Pvt Ltd. (2017) 395 ITR 677 (Del. H.C.) 4. Balaji Health Care Pvt. Ltd. vs ITO (2019) 199 TTJ 966 (Jaipur Trib) 5. CIT Anr. Vs Dr. N. Thippa Shetty (2010) 322 ITR 525 (Ker.) 6. G.K. Consultants Ltd. VS ITO (ITA No.1502/Del/2013 dated 2706-2014 (Del. Trib) 7. ACIT vs Adhunik Cement Ltd. (2018) 168 DTR 25 (Kol-Trib) The ld. AR further submitted that the AO has reopened the assessment by invoking clause (b) of Explanation 2 to section 147 without recording any reason as to how he noticed that assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. Only on the basis of an information, without processing it further, it cannot be presumed that assessee has understated the income. In view of above, notice issued u/s 148 and the consequent assessment made by AO is illegal and bad in law and be quashed. 3.4 On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of assessee for which assessee submitted that during the year it raised loan only from 5 parties, i.e. (i) Rs. 20 lacs from M/s Lukand Textiles Pvt. Ltd., (ii) Rs. 30 lacs from M/s P Saji Textiles Ltd., (iii) Rs. 10 lacs fromM/s Sampada Chemicals Ltd., (iv) Rs. 20 lacs from M/s Santoshima Tradelink Ltd. (v) Rs. 30 lacs from M/s Dolex Commercial Pvt. Ltd., totalling to Rs. 1.10 crores. It was further explained that the loan was repaid during the year itself and copy of ledger account and bank statement in support was filed. However, in the reasons recorded, AO stated that reply of the assessee is not satisfactory and accordingly he treated the amount aggregating to Rs. 80 lacs received from 4 parties namely (i) M/s Lukand Textiles Pvt. Ltd., (ii) M/s P Saji Textiles Ltd., (iii) M/s. Sampada Chemicals Ltd. (iv) M/s Santoshima Tradelink Ltd. as bogus accommodation entry which has escaped assessment. Thus it can be noted that AO has accepted the amount of Rs. 30 lacs received from M/s Dolex Commercial Pvt. Ltd. which is of same nature as of amount received from other 4 parties. We noted from the ld. CIT(A) s order who confirmed the action of the AO as to issuance of notice u/s 148 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ITR Acknowledgment, extract of bankstatement reflecting the transaction with the assessee company and the financial statements of these creditors. The AO however held that assessee has taken credit entry in the form of unsecured loans from the entities which are managed by Sh. Vipul Vidur Bhatt for providing accommodation entries. The assessee company has rotated unaccounted money of Rs. 80 lacs in its bank account through the companies which are mentioned in the reasons recorded. During the search action statement of Vipul Vidur Bhatt was recorded on 09.02.2016 u/s 132(4) of the IT Act, 1961 wherein he has accepted that he is an entry operator and all the entities/ companies mentioned are bogus entities/ companies which are used by him for providing bogus accommodation entries. Accordingly, he added Rs. 80 lacs to the total income of assessee by treating it as unaccounted money. 4.2 Before Ld. CIT(A), assessee filed additional evidence in the form of affidavit of Sh. Vipul Vidur Bhatt retracting from the statement recorded u/s 132(4) of IT Act (PB 145-149) and affidavit of Director of loan creditors stating and confirming the transactions made by them with the assessee company ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redited in the books of accounts, then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. In the present case, the identity of the creditor is established from the company master data downloaded from MCA portal (PB 162-165) and ITR acknowledgment (PB 38, 67, 100 128). The genuineness of the transaction is established from the confirmation of accounts (PB 34, 63, 96 124), affidavit of Director of loan creditor companies (PB 150-161) and bank statements (PB 35-37, 64-66, 97-99 125-127) from which it can be noted that the transaction has been carried out through banking channel and the loan amount is repaid back during the year itself. The creditworthiness of the creditor is established from the Balance Sheet from which it can be noted that the net worth of M/s Lukand Textiles Pvt. Ltd. is Rs. 2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs. 3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs. 10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs. 45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DR supported the orders of the lower authorities. To this effect, the ld. DR relied on following case laws. 1.Pr. CIT vs Swati Bajaj (2022) 139 Taxmann.com 352 (Cal.) 2. Sant Kumar vs ACIT, Circle 36 (1), New Delhi (2020) 122 Taxmann.com 75 (Delhi-Trib) 3. Satish Kishore vs ITO, Ward 47(2), New Delhi (2019) 110 Taxmann.com 307 (Del. Trib) 4. Final order dated 6-09-2021by SEBI. 5. Smt. M.K. Rajeshwari vs ITO (2018) 99 taxmann.com 339 (Bangl. Trib) 6. N.K. Proteins Ltd. vs DCIT (2017) 84 Taxmann.com 195 (SC) 7. Investigation Report in the case of Project Bogus LTCG/STCL through BSE Listed Penny stocks (Directorate of Income (Investigation), Kolkata) 4.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the AO while making the assessment in the case of the assessee observed that during the year under consideration the assessee company had taken credit entries in the form of unsecured loan from the entities which are managed by Shri Vipul Vidur Bhatt for providing accommodation entries and rotated unaccounted money of Rs. 80 lacs in its bank through the these companies. Thus the AO added unaccounted money of Rs. 80 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The case laws and the report relied upon by the ld. DR are with reference 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 financial year. Hence, these cases are of no help to the revenue. As against this, the ratio laid down by the assessee are squarely applicable to the facts of the assessee. 1. ITO vs Om Shanti Realtors (ITA No. 5615/Mum/2017 dated 0103-2019 wherein the Bench observed as under:- 7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidence in order to show the identity and creditworthiness of the lender and genuineness of the transactions. We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lender was not in dispute. We have also co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have acquired the money deposited with him either in terms of sec. 68 or on general principle. Merely because the depositors explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to assessee itself. If the creditors explanation about the source of deposits is not found to be acceptable, the investment owned by such persons may be subjected to proceedings for inclusion of the amounts as their income from undisclosed sources or if they are found benami the real owner can be brought to tax. In the absence of anything to establish that the sources of the creditors deposits flew from the assessee, the cash credits cannot be treated as unexplained income of the assessee. 4. Kanhaialal Jangid vs ACIT (2008) 8 DTR 38 (Raj) wherein the Hon ble Court observed that While it is the assessee s burden to furnish the explanation relating to cash credits, the assessee s burden does not extend beyond proving the existence of the creditor and further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication.. I Reopening of assessment and issue of notice u/s. 148. 1. In the facts and circumstances of the case and in law, the Ld. A.O. had erred in issuing notice u/s 148 of the 1.T. Act on the basis of information from the Investigation wing only without application of mind and analysing the basic facts of the case. The notice issued on the basis of borrowed satisfaction is illegal and void and consequently assessment based on such notice may kindly be quashed. 1.1. That the Ld.CIT(A) has also erred in confirming the action with regard to reopening of the case without considering the fact that the Assessing Officer has not applied his mind and having no independent satisfaction with regard to reopening of the case u/s 148 and, as such, proceedings u/s 148 are liable to be quashed II. Addition u/s 68 of Rs 54,50,000/- being loan received from M/s Shyam Alcohol Chemicals Ltd. 2. The Ld. AO has erred both in law as well as in facts in making addition of Rs. 54,50,000/- by treating the unsecured loans received by the appellant as unexplained cash credit without appreciating the fact that the appellant has entered into genuine transactions with its loan creditors and complete de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies are bogus entities/ companies which are used by him for providing bogus accommodation entries to the various beneficiaries for commission. He also accepted that he is director in these entities/ companies and all other directors of these entities/ companies are dummy directors appointed by him. During the year assessee has obtained bogus accommodation entries in the form of unsecured loans from Shyam Alcohols amp; Chemicals controlled and operated by Sh. Vipul Vidur Bhatt amounting to Rs. 54,50,000/-. The assessee has rotated unaccounted money of Rs. 54,50,000/- in its bank account through this company. Thus, Rs. 54,50,000/- has escaped assessment. A letter u/s 133(6) was sent on 15.03.2018 (date of notice is 13.03.2018) and information was called. The assessee filed the reply on 20.03.2018. However, the reply of assessee is not satisfactory. No scrutiny assessment u/s 143(3) of the Act was made and therefore, the only requirement to initiate proceedings is reason to believe which has been recorded above. Thus, in terms of clause (b) of Explanation 2 to section 147, income chargeable to tax has escaped assessment. The assessee objected to the notice issued u/s 148 vide rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion statement of Vipul Vidur Bhatt was recorded on 09.02.2016 u/s 132(4) of the IT Act, 1961 wherein he has accepted that he is an entry operator and all the entities/ companies mentioned are bogus entities/ companies which are used by him for providing bogus accommodation entries. Accordingly, he added Rs. 54.50 lacs to the total income of assessee by treating it as unaccounted money. 7.2 Before Ld. CIT(A) assessee filed additional evidence in the form of affidavit of Sh. Vipul Vidur Bhatt retracting from the statement recorded u/s 132(4) of IT Act (PB 64-68) and affidavit of Director of loan creditor stating confirming the transactions made by him with the assessee company (PB 69-71). However, The Ld. CIT(A) held that from the facts and circumstances narrated by the AO, the unmistakable conclusion that can be drawn is that Sh. Bhatt through the bogus companies has given accommodation entries to the assessee. Unless the findings of Investigation Wing are found to be untrue, no amount of argument can changed the balance in favour of assessee. The retraction of statement cannot change the facts unearthed in course of search and therefore, retraction is a self serving statement. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan amount is repaid during the year itself. It is also noted from the records that the creditworthiness of the creditor is established from the balance sheet from where it can be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs. 2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs. 3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs. 10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs. 45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve loan creditors was less, therefore, they were not capable of lending. However, the AO ignored the fact that the lenders had substantial turnover and had a very large basis of assets as is reflected in the respective balance sheet. 2. Pr. CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj. H.C.) wherein the Hon ble Court observed at para 7. 7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e traced to the assessee itself. In the present case, while the existence of the creditor is not in doubt amp; he has admitted to have advance the loan to the assessee, the fact that the explanation furnished by the creditor about his source of such advancement has not been accepted by the revenue authority cannot lead to any presumption that the source of such advancement by creditor emanated from the assessee. Therefore, the addition in the income of the assessee as cash credit cannot be sustained. 5. Labchand 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 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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