9911796707
TMI Blog2025 (2) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... can he made the addition u/s.68 in the hands of the assessee. Nowhere in the various statements as referred by the ld. AO, there is any whisper about the assessee or any question was asked by the searched parties or the authorised officers that any such person or entity have given any kind of accommodation entry to the assessee or the loan given by these parties were bogus. The entire allegation of the AO based on the statement recorded and finding of the search parties is that these groups were doing either bogus sales or purchases or circular trading to get LC from the bank. There might be movement of funds from one company to other and overdrawing the money from the banks through Letter of Credit without any credentials at the time of Bill Discounting or for any other purpose, but nowhere there is any finding of investigation wing or any material found or statement during the search, that some unaccounted money has been given by the assessee company to accommodate any loan entry or there is any cash trail. Neither there is involvement of any kind of entry operator nor were these companies found to providing accommodation entry of loan by taking some temporary cash. Without s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred directly from one Group Company to the other group company and the unnecessary layering, and circular movements indicate mala fide intentions." 4. Where as in the cross objection, assessee has challenged the validity of search and the search warrant issued in the name of M/s. Asuti Trading Pvt. Ltd., where assessee had no direct or indirect co-relationship in the said entity; and secondly, addition has been made without any incriminating material and therefore, the addition is beyond the scope of Section 153A. After hearing the Ld. Counsel on these grounds, we were prima facie of the opinion that there not much substance as validity of search cannot be looked into by this Tribunal especially whether there was proper satisfaction or not or search in case of assessee was on some mistaken identity; and the addition made are based on findings of the search and statements. Thus, we are not going into the grounds raised by the assessee in the cross objection and accordingly, we are deciding the issue raised in Revenue's appeal. 5. The brief facts qua the issue of unsecured loans are that, a search and seizure action was carried out in the case of Jatia Group and other related gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and bogus sales therefore, he came to the conclusion that these companies did not have any genuine business transaction with the assessee company and accordingly, unsecured loan of Rs. 12 Crores taken from Lloyd Steel Ltd.; Rs. 2,10,00,000/- from M/s. Asuti Trading Pvt. Ltd. was treated as bogus and non-genuine. Regarding unsecured loans from the remaining two companies, i.e., M/s. Elecmec Engineering Products Pvt. Ltd., and Duli Trading & Commodities Pvt. Ltd. of loan of Rs. 14.90 Crores each, AO held that these were shell companies created by Uttam Value Group and Lloyd Group. In the course of search, statement of accountant of Shri Vinod Jatia was recorded wherein, he had admitted that the group was involved in bogus purchases /sales and circular trading to avail the benefit of LCs from various banks and there was no physical movement of goods. Based on this information and statement, the ld. AO without considering other documentary evidences filed by the assessee held that unsecured loan of Rs. 43.90 Crores as bogus. 7. The assessee during the course of the assessment proceedings had filed copy of ledger accounts, balance confirmation, their income tax returns, audited fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n LC facility from the banks, This funding was passed on to Uttam/Topworth/Lloyds group entities By providing this LC facility to his creditors who in tum passed on this funding to their group companies the searched entities of Vinod Jatia Group took burden of lot of risk on themselves. They did not receive any guarantee or LC from the parties to whom goods were allegedly sold. Therefore, the searched entities of Vinod Jatia Group would have eamed additicinal commission for providing additional facility of LC to various parties. In the case of searched entities where documents are on record-regarding mortgaging properties for LC facility, the income is estimated at rate of 7% of turnover However, the assessee company was not bearing risks of mortgaging properties, hence income is estimated at lower rate in the case of the assessee company Considering the market practices, facts in other similar cases and overall facts & circumstances of the case, the income on such turnover is estimated at 5% This estimated 5% income includes commission on accommodation entries of purchases and sales made/passed on to further the entries obtained from searched entities and other unaccounted incomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has taken loan of Rs. 14.9 crores in the financial year 2016-17 and the same has been repaid in the next financial year 2017-18. The closing balance as on 31.03.2018 is shown as nil 18.3.2 Further, the scrutiny assessment in case of Elecmec Engineering Pvt. Ltd for the A.Y 2017-18 has been completed u/s 153C rws 143(3) of the I.T. Act on 30.03.2022. On page No. 88 of the assessment order, the A.O has discussed the issue of rejection of books of accounts u/s 145(3) of the I.T. Act. After rejecting the books of accounts, the income is estimated at the rate of 5% on purchase of Rs. 460.95 crores. The A.O has not made any addition on account of funds received by this party. The A.O has further mentioned in the assessment order are as under "The searched entities of Vinod Jatia Group of companies used their goodwill and mortgaged their assets& properties with banks to obtain LC facility from the banks. This funding was passed on to Uttam/Topworth/Lloyds group entities By providing this LC facility to his creditors who in turn passed on this funding to their group companies, the searched entities of Vinod Jatia Group took burden of lot of risk on themselves. They did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steels Industries Limited - 18.4.1 Before me, the appellant has furnished the ledger account of this party in its books of account, statement of bank accounts of the appellant and Lloyds Steels Industries Limited, copies of audit report and income tax returns of Lloyds Steels Industries Limited. It is seen that the following transactions are appearing in the ledger account Opening balance as on 01-04-2016 Loan taken during the year Loan repaid during the year Closing Balance as on 31-03-2017 9,20,17,029 12,00,00,000/ NIL 21,00,00,000/- Opening balance on 01-04-2017 Loan taken during the year Loan repaid during the year Closing Balance as on 31-03-2018 21,00,00,000/- NIL 21,00,00,000/- NIL It can be seen that the appellant has taken loan of Rs. 12 crores during the year under consideration. The opening balance of loan as on 01.04.2016 was of Rs. 9,20,17,029/- Thus, the closing balance as on 31.03.2017 was Rs. 21 crores. This entire loan has been repaid in the next financial year and the closing balance as on 31.03.2018 is shown as nil. 18.4.2 Further, the scrutiny assessment u/s 153C of the I.T. Act has been completed for A.Y 2017-18 on 31.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant on account of unsecured loan received from this party 19. From the above discussion, It can be seen that the loans have been accepted through banking channels and the repayments have also been made through the banking channels. There are several judicial decisions wherein it is held that in case of repayment of loan through the banks, addition cannot be made u/s.68 of the I.T. Act. 9. Thereafter, ld. CIT (A) after referring to various judgments, finally deleted the addition after observing as under:- 20 In the appellant's case the loans were re received through banking channels and the repayments were also made through banking channels, Further, there were sufficient funds in the bank accounts of these parties and no cash was deposited immediately before advancing the loans to the appellant. The appellant has submitted loan confirmations from these parties and also submitted the copies of their Income tax returns, audit report etc. All these 4 parties are assessed with the same A.O as of appellant. Thus, the A.O was having the financial details of these four parties with him 21. Further, the A.O. who has completed the assessment in the case of appellant has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or put to cross examination and merely relying upon the statement wherein there is no reference of the assessee, no adverse inference can be drawn, when assessee had filed all the documents and especially in case of all these lender companies their creditworthiness and sources of funds have been examined under scrutiny by the same Assessing Officer in their regular assessments. Thus, the loans cannot be treated as non-genuine and assessee had discharged the entire onus cast upon it. 12. From the perusal of the records, we find that identity of all the four companies are not in doubt, because Asuti Trading Pvt. Ltd is one of the company forming part of Topworth Group of companies which is a very big group having turnover of several 100 Crores and are assessed to tax under the same Assessing Officer as that of the assessee. Similarly, Duli Trading & Commodities Pvt. Ltd. was forming part of Uttam Value Group, regularly assessed to tax and for these years has been assessed with the same Assessing Officer and they have disclosed the transaction in their financials. In the case of Elecmec Engineering Projects Pvt. Ltd. which is farming part of the Lloyds group, is also a big group an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of those entities with regard to the source of funds and loan given to the assessee. If ld. AO had any doubt about the source of funds then, he should have examined in the case of these parties. This fact as noted by the ld. CIT(A) as incorporated above has not been rebutted by the department before us. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) and the same is confirmed. 16. The entire allegation of the ld. AO seems to be based on finding that these entities were doing some circular trading and they had defrauded the bank by adopting modus operandi of rotation of funds from one entity to another and misusing the LC facility from these banks. Despite making such allegation in the respective assessment orders of these entities, he has applied the profit rate on the sales declared by these entities to assess their income. Nowhere in their cases any deemed income has been assessed or any finding have been given that they are bogus entities not doing business. Once ld. AO has accepted source of these loans in the case of these parties, then how can he made the addition u/s.68 in the hands of the assessee. 17. Further, nowhere in the various stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
