Bharti Lifestyle Pvt. Ltd. Vs ITO (ITAT Mumbai)
Summary: The ITAT Mumbai partly allowed Bharti Lifestyle Pvt. Ltd.’s five appeals for assessment years 2008-09, 2009-10, 2010-11, 2012-13 and 2014-15 arising from additions and related interest disallowances connected with alleged accommodation entries involving entities associated with Praveen Kumar Jain. The Tribunal upheld the reopening of assessments, holding that the investigation material and statements arising from the search of the entry provider furnished sufficient reason to believe that income had escaped assessment. However, on merits, it held that the Assessing Officer could not sustain additions merely by relying on the same investigation material used for reopening after the assessee had furnished documentary evidence concerning the identity, creditworthiness and genuineness of the lenders and transactions.
For the principal disputed additions, the assessee had furnished confirmations, ledger accounts, income-tax returns, audited financial statements, bank statements and other supporting material and had contended that the loans were received and repaid through banking channels. The Tribunal relied upon the coordinate-bench decision in Nisarg Life Space LLP and other decisions involving entities connected with the same alleged entry provider. It also referred to Sahakar Global Ltd., where additions were deleted in circumstances involving absence of cross-examination and non-furnishing of statements. The Tribunal observed that, after the assessee produced relevant evidence, the Assessing Officer did not make adequate further enquiries, including enquiries under Section 133(6), summon the relevant persons, or otherwise bring corroborative material on record to establish that the transactions were accommodation entries.
Relying also on the Supreme Court decision in PCIT v. NRA Iron & Steel P Ltd., the Tribunal reiterated that the assessee bears the initial onus under Section 68, but once the relevant material is produced, the Assessing Officer must conduct appropriate enquiry before drawing an adverse inference. Accordingly, the Tribunal deleted the Section 68 additions and consequential interest disallowances for the relevant years while dismissing the challenge to reopening. The appeals were consequently partly allowed.
List of Cases Discussed / Relied Upon
1. Meghavi Minerals (P.) Ltd. v. Income Tax Officer, Ward-3(1) — relied upon on validity of reopening based on investigation material concerning accommodation entries.
2. Nisarg Life Space LLP v. ITO 28(2)(3), Mumbai, ITA No. 629/M/2020, order dated 11 June 2021 — relied upon on deletion of Section 68 additions involving the same entry-provider group.
3. Sahakar Global Ltd. v. DCIT-CC-4(1), Mumbai — relied upon on the effect of failure to provide cross-examination and statements relied upon by the Revenue.
4. M/s. Kundali Jewels (India) Pvt. Ltd. v. ITO 12(3)(1), Mumbai, ITA Nos. 3511/Mum/2019 & 4337/Mum/2019, order dated 23 February 2021.
5. ITO-4(3)(1), Mumbai v. Nityanand Industries Pvt. Ltd. and Komal Agrotech Pvt. Ltd. v. ITO — cited in relation to transactions involving entities controlled by Praveen Kumar Jain.
6. Arceli Realty Ltd. v. ITO — cited on similar facts involving investor companies associated with Praveen Kumar Jain.
7. DCIT v. D.N.H. Spinners Pvt. Ltd. and ACIT v. Hetali Enterprises — cited as coordinate-bench decisions concerning the genuineness of the relevant loan parties.
8. PCIT v. NRA Iron & Steel P Ltd. — Supreme Court authority on the initial onus under Section 68 and the Assessing Officer’s duty to enquire after supporting evidence is produced.
9. CIT v. Precision Finance (P.) Ltd., Kale Khan Mohammed Hanif v. CIT and Roshan Di Hatti v. CIT — authorities referred to in the quoted discussion on Section 68.
10. Other authorities expressly appearing in the supplied order include PCIT v. Aquatic Remedies Pvt. Ltd., CIT v. Gagandeep Infrastructure Pvt. Ltd., Orient Trading Co. Ltd., Sarogi Credit Corporation, Shantilal Jain, Nemi Chand Kothari v. CIT, CIT v. Arunanda Textiles P. Ltd., CIT v. U.M. Shah, Proprietor, Shrenik Trading Co., CIT v. Daulat Ram Rawatmull and CIT v. Orissa Corporation Pvt. Ltd.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
01. These are the four appeals pertaining to one assessee Bharti Lifestyle private limited (appellant/assessee) for four different years involving identical issue and therefore those are disposed of by this common order.
02. ITA number 24 20/M/2021 is filed by the assessee for assessment year 2008- 09 against the appellate order passed by NATIONAL FACELESS APPEAL CENTRE (NFAC) [The learned CIT (A)] dated 28/10/2021. By this order, appeal filed by the assessee against the order passed by The Income Tax Officer, Ward – 9 (2) (1), Mumbai ( The Learned AO) u/s 143 (3) read with Section 147 of The Income Tax Act (The Act) dated 29/3/2016 was dismissed.
03. Assessee has raised following grounds of appeal
“The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against asse ssment order dated 29.03.2016 passed u/s. 143(3) rw.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:
1. The learned Commissioner of Income Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire rea ssessment proceedings are invalid, without jurisdiction, has no legs to stand and hence must be quashed.
2. On the facts and in the circumstances of the case, has erred in confirming the addition of Rs. 2,00,000/- u/s. 68 of the Income tax Act, 1961 as unexplained cash credit.
3. The learned Commissioner of Income Tax (Appeal) failed to note that the entire evidences do prove the identity, creditworthiness and genuineness of the loan transaction amounting Rs. 2,00,000/- and therefore the CIT(A) fell into error in confirming the addition of Rs. 2,00,000/-.
4. The learned Commissioner of Income Tax (Appeal) failed to note while confirming the addition of Rs.2 lakhs that the entire enquiry by DGIT (Inv.), Mumbai and the in formation received by the Assessing Officer about Mr. Praveen Kumar lain was used against the appellant without giving a copy of the evidence/statement received from the DGIT (Inv.). Mumbai, thus violating the principles of natural justice and on this grou nd alone, the entire assessment must be quashed and more so allowability of that addition of Rs.2 lakhs by the learned CIT(A).
5. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to con front the assessee with any material collected by the Assessing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing be rendered unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed. 6. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in an addition of Rs. 1973/- on account of interest paid on borrowed fund / Short Term Loans considered now as unexplained cash cred it u/s. 68 taken from loaner i.e. Olive Overseas Pvt. Ltd based on information received from investigation.”
04. Brief facts of the case shows that assessee is a company engaged in the business of textile trading, filed its return of income on 30/9/2008 declar ing a total income of ₹ 69,930/–. A ssessment was reopened as information was received from The Director Of Income Tax (Investigation) – II, Mumbai regarding the beneficiaries of accommodation entry obtained by the assessee from one company Olive overseas private limited of ₹ 2 lakhs which is controlled by a common entry provider Mr. Pravinkumar Jain. The notice u/s 148 of the act was issued on 27/3/2015. In response of the above notice the assessee filed a letter stating that original return filed u/s 1 39 (1) of the act may be treated as return filed in response to the above notice. Reasons of reopening were provided to the assessee on 4/2/2016. As sessee raised objection by letter dated 9/2/2016, which 26/2/2016. The assessee during the course of assessment proceedings invoked the provisions of Section 14 4A of the act seeking direction from The Joint Commissioner of Income Tax stating that the notice was issued u/s 148 of the act at wrong address and without jurisdiction. The objections raised by the assessee were disposed of and direction was given to the AO to proceed with the assessment.
05. The fact shows that assessee has taken an unsecured loan from Olive overseas private limited, which is one of the entities contr olled operated and managed by one Mr. Praveen Kumar Jain group. During the course of search and seizure on 1/10/2013, various incriminating evidences were found and the name of this assessee appears in the list of the beneficiaries who have taken accommod ation entries. Therefore based on the statement of various persons and information obtained during the course of search of that party, the learned assessing officer stated that neither the identity nor the creditworthiness of the depositor is proved. The entire sum of ₹ 200,000/- brought in by way of unsecured loan in the name of the above company whose identity, creditworthiness and genuineness could not be established by the assessee company beyond doubt with respect to the unsecured loans.
06. During the course of assessment proceedings assessee submitted (1) confirmation, (2) Ledger account from the company, (4) income tax return of the lender, (5) audited balance sheet of the lender company and (6) the af fidavit of the director of the lender company confirming the above transactions. Assessee also submitted that the transactions have been carried out by the account payee cheques. Thus, assessee claimed before the learned assessing officer that it has dis charged initial onus cast upon it u/s 68 of the income tax act.
07. The learned AO rejected submissions made by the assessee and held that as the lender company is a benami concern of an accommodation entry provider, the entire transaction shows that the funds of Rs 2 lakhs have been brought in by the name of above company as an unsecured loan whose identity creditworthiness and genuineness is not established by the assessee company. Therefore, the above sum was added u/s 68 of the income tax act. Consequent ly the assessment order was passed on 29/3/2016 u/s 143 (3) read with Section 147 of The Act wherein the addition of Rs 2 lakhs u/s 68 of the act was made along with the disallowance of interest expenditure of ₹ 1973/– accordingly total income of the assessee was assessed at ₹ 271,900/–.
08. Aggrieved with the order of the learned AO assessee preferred an appeal before the national faceless Appeal entre [learned CIT – A] challenging the reopening of the assessment as well as the addition of Rs 2 lakhs on the merits. On reopening of the assessment assessee submitted, mechanical manner without application of mind and the order is without jurisdiction. On merits it was argued that
[1] assessee has discharged initial onus,
[2] Assessment made is against the principles of natural justice as the statements relied upon by the learned AO was not provided to the assessee as well as an
[3] Opportunity of cross-examination was also not given,
[4] Addition has been made purely based on information received from the investigation wing
[5] On the information submitted by the assessee the learned assessing officer has not made any enquiry. Therefore, it was submitted that addition deserves to be quashed on the merits also.
09. The learned Commissioner of appeals dismissed the grounds of appeal against reopening of the assessment. On the issue of natural justice, it was stated that the assessing officer has extracted the statement in the assessment order and therefore there is no violation of the principles of natural justice. On the issue of addition on the merits, he held that that the argument of the assessee rests on the fact that full documents regarding taking of the loan were placed before the assessing officer and it was repaid along with interest. The assessee also stated that the statement by Mr. Jai n has been retracted and the opportunity of cross-exam ination was not afforded to the assessing officer is solely on the information received from investigation wing of the Department could not have resulted in the confirmation of addition. The learned CIT a ppeal stating that investigation Wing has carried out detailed enquiry, the statement of Mr. Jai n and its retraction is merely a self- serving statement and further the documents submitted by the assessee cannot be relied upon. Accordingly, appeal of the assessee was dismissed.
010. Aggrieved, assessee is in appeal. The learned authorised representative submitted a paper book containing 36 pages. He submitted that assessee has submitted the loan [1] confirmation, [2] income tax return, [3] annual audited accounts, [4] bank statement. [4] Ledger account of the party [5] affidavit of the directors of the lender company [6] the loan was taken by cheque, repaid by cheque along with interest. Therefore, initial onus is discharged. He submitted that the learned AO has merely relied upon the investigation wing’s report. O n the details submitted by the assessee, no enquiry has been made by the AO and therefore onus has not been thrown back by the AO. He further stated that the reliance on the statement is not warra nted because the same has been retracted by the person. He also placed on record his written submission containing 10 pages. In his written submission, he stated that it is mandatory for the assessing officer to confront the assessee with any material co llected by the AO at the back of the assessee and in case of statement of third party recorded at the back of the assessee, opportunity of cross- has to be given to the assessee failing which the s ame material or statement will be rendered unrel iable and addition cannot be made on the basis of such material. For this proposition, he relied on several decisions.
011. He also referred to the decision of the coordinate bench in ITA number 193 and 232/M/2018 in case of ACIT versus Abani sarbeshwar das w herein in the case of same lender on similar set of facts the addition is deleted. He also referred to the decision of SMC bench in ITO versus IDM Agro bio Tech Ltd ITA number 58 05/M/2017 wherein for the same lender on same facts the addition is deleted. He therefore submitted that in this issue is squarely covered in favour of the assessee. He further stated that the decision of the coordinate bench binds this bench.
012. Learned departmental representative vehemently supported orders of lower authority a nd submitted reopening of assessment is made based on information provided by investigation wing. On merits, he relied on the orders of lower authorities.
013. We have carefully considered the rival contention and perused the orders of the lower authorities. We also considered the various judicial precedents cited before us by the learned authorised representative as well as stated in the assessment order and appellate order of the lower authorities.
014. The ground number 1 is with respect to the reopening of the assessment. The claim of the assessee is that case of the assessee is reopened without application of mind and it is invalid. We find that the original return of income filed by the assessee was not picked up for scrutiny but was accepted as it is. Lat er on information is received that assessee has obtained an accommodation entry from entry operator, this information was emanating from such carried on that person and several statements on incriminating documents found during the course of search of accommodation entry provider namely Mr. Praveen Kumar Jain. In view of the extensive investigation of revenue Department, information unearthed clearly shows that assessing officer has reason to believe that income of the assessee escaped to the extent of loa n of Rs 2 lakhs obtained from Olive overseas private limited. The issue is also squarely covered against the assessee by the decision of [2019] 110 taxmann.com 174 (Gujarat) Meghavi Minerals (P.) Ltd. v. Income Tax Officer, Ward-3(1)* where the accommodation entry of Mr. Pravinkumar Jain was an issue. The case in hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. In view of this, ground number 1 of the appeal of the assessee is dismissed and action of the learned assessing officer in reopening the assessment is held to be justified.
015. On the merits of the case this issue is covered by the decision of Coordinate bench in M/S. NISARG LIFE SPACE LLP VERSUS ITO 28 (2) (3) MUMBAI [June 11, 2021] where the same party on identical facts and circumstances was considered a nd addition was deleted as under:-
“3.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee is engaged in the business of builders and developers. The return of income for the Asst Year 2013-14 was filed by the assessee LLP on 24.9.2013 declaring total loss of ₹ 13,36,999/-. This return was duly processed u/s 143(1) of the Act accepting the same. Thereafter, the case was selected for scrutiny by issuance of notice u/s 143(2) of the Act on 3.9.2014. Various details and documents that were called for by the ld AO wre duly submitted by the assessee during the course of assessment proceedings. The ld AO observed that on perusal of tax audit report for the year under consideration, it was seen that asses see had taken unsecured loans of ₹4 crores from 4 parties. A search and seizure action u/s 132 of the Act was conducted by the investigation wing of Income tax department on Shri Praveen Kumar Jain and the concerns managed by him on 1.10.2013, wherein it was unearthed that they were found to be indulged in the business of providing accommodation entries of bogus sales / purchases / loans and advances to many parties. The ld AO alleged that the assessee had taken accommodation entries of bogus loans from th e concerns used by Shri Praveen that the assessee had received unsecured loans during the year under consideration from the following parties for the purpose of its business, apart from other parties together with the details of interest paid to these parties are as under:-
| Name of the Loan Creditor | Loan Amount | Interest Amount |
|---|---|---|
| Sumukh Commercial Pvt Ltd | 50,00,000 | 4,81,667 |
| Olive Overseas Pvt Ltd | 1,00,00,000 | 10,21,667 |
| Josh Trading Co Pvt Ltd | 1,00,00,000 | 9,01,667 |
| Casper Enterprises Pvt Ltd | 50,00,000 | 5,45,000 |
| Nakshatra Business Pvt Ltd | 1,00,00,000 | 10,20,000 |
| 4,00,00,000 | 39,70,001 |
3.3. We find that the ld AO had observed that the aforesaid concerns were operated by Shri Praveen Kumar Jain and belong to his group. During the course of search action u/s 132(1) of the Act on 1.10.2013, Shri Praveen Kumar Jain had given statement on oath that his concerns are engaged in the business of providing accommodation entries and that his concerns do not indulge in real business activities. Accordingly, the ld AO issued a show cause notice to the assessee as to why the aforesaid loans should not be treated as unexplaine d cash credit u/s 68 of the Act and consequential disallowance of interest thereon should not be made.
3.4. We find that the assessee had responded to the ld AO by stating that a general confession made by a third party that all his transactions are bogus or that he had indulged only in bogus transactions cannot be the basis for addition in the hands of the assessee. It was specifically pointed out that in none of the statements given by Shri Praveen Kumar Jain or his accomplices, the name of the assessee h ad been mentioned. It was pleaded that the ld AO had not found any material pointing that the transactions of the assessee with the aforementioned loan parties are not genuine. It was also pointed out to the ld AO that Shri Praveen Kumar Jain had retracted his statement subsequently on 15.5.2014 by way of an affidavit filed before the income tax department. The assessee filed a copy of the said affidavit before the ld AO. Accordingly, it was pleaded that the sole basis for proposal for addition u/s 68 of th e Act is only statement of Shri Praveen Kumar Jain, which stood subsequently retracted by him. We find that the assessee from its part, had duly discharged its onus, by furnishing the following documents before the ld AO for all the 5 loan creditors:-
a) Confirmation letter from the companies (loan creditors) duly confirming the amount of loan given by them.
b) Master data of the companies (loan creditors) companies (ROC) showing that the compliance have been made by them with ROC and that the company is fully active.
c) Copy of the financial statements of the companies (loan creditors) for the financial year 2012-13.
d) Copy of ITR acknowledgement of the companies (loan creditors) for the Asst Year 2013-14.
e) Extracts of the bank statements of the companies (loan creditors) showing the amounts paid by them to the assessee.
f) Declaration given by the companies (loan creditors) duly confirming the loan transactions.
g) Copy of the letter filed by the said companies (loan creditors).
3.5. It was pleaded that based on the aforesaid documents, the loans taken by the assessee from the aforesaid 5 parties are genuine loans taken for commercial expediency for business purposes and not accommodation entries. The assessee also sought for cross- examination of Shri Praveen Kumar Jain before the ldAO, which was not provided by the ld AO.
3.6. We find that the ld AO completely ignored the aforesaid contentions of the assessee and the documentary evidences filed herein above and concluded that the assessee had not been able to creditworthiness of the unsecured loan credits totalling to ₹ 4 crores purported to have been taken from those 5 parties and accordingly treated the same as unexplained cash credit u/s 68 of the Act. Since the loans were added as income, the interest paid on such loans amounting to ₹ 39,70,001/- was sought to be disallowed by the ld AO in the assessment. This action of the ld AO was upheld by the ld CITA.
3.7. From the perusal of the assessment order, we find that the ld AO had given more emphasis in the entire assessment order to discuss the modus operandi adopted by Shri Praveen Kumar Jain and his group which had been unearthed during the search act ion carried out on him on 1.10.2013. We find that the assessee had submitted before the ld AO that nowhere in the statements of Shri Praveen Kumar Jain or his accomplices, the name of the assessee LLP had been mentioned. This fact has not been controverted by the ld DR before us. Moreover, the assessee had also sought for cross- examination of Shri Praveen Kumar Jain, which was never afforded to the assessee either by the ld AO or by the ld CITA. Hence we hold that the entire addition made by the ld AO and c onfirmed by the ld CITA, merely based on the statement of Shri Praveen Kumar Jain (third party) (which also stood subsequently retracted by him by way of an independent affidavit), deserve to be deleted on this count itself. No other corroborative evidence even remotely suggest that the loan transactions carried out by the assessee with the aforesaid 5 loan creditors to be ingenuine.
3.7.1. It is pertinent to note that the assessee had duly discharged its onus by subm itting all the relevant details (as listed supra) that are available with it before the ld AO. All these documents clearly prove the identity of the loan creditors, creditworthiness of the loan creditors and genuineness of transactions. We find that the ld AO had not even bothered to issue notice u/s 133(6) of the Act to the loan creditors to verify the veracity of the documents submitted by the assessee. In other words, the ld AO simply remained silent after receiving all the documentary evidences from the assessee. It is settled law that when documentary evidences are submitted by the assessee, the ld AO is duty bound to examine its veracity by making further enquiries in the manner known to law. Without testing such documents by making proper enquiries, n o adverse inference could be drawn by the ld AO on those documents. We hold that once all the relevant documents are submitted by the assessee regarding the loan creditors together with the latest addresses available with it supported by confirmations from them, the onus cast on the assessee u/s 68 of the Act stands duly discharged and no addition could be made in its hands. Reliance in this regard is placed on the decision of Hon’ble Industries P Ltd r eported in 397 ITR 136 (Bom). We further hold that no addition could be made on mere presumption that the assessee routed its own cash in the form of unsecured loans without any concrete evidence to this effect. Reliance in this regard is placed on the dec ision of Hon’ble Jurisdictional High Court in the case of PCIT vs Aquatic Remedies P ltd in ITA No. 83 of 2016 affirming the tribunal decision in ITA No. 6356/Mum/2014. We further find that all the loans were duly repaid by the assessee either in the same assessment year or in the immediately succeeding assessment year with interest after subjecting the interest to due deduction of tax at source. These facts are not controverted by the revenue before us. Hence the addition made u/s 68 of the Act deserve to be deleted on merits also. Correspondingly, the interest paid on such loans would become allowable expenditure u/s 36(1)(iii) of the Act as there is no dispute that the monies received in the form of loans had been utilised by the assessee LLP for its business purposes.
3.8. Moreover, we also find that all the aforesaid loan parties had been accepted to be genuine and additions made u/s 68 of the Act had been directed to be deleted by this tribunal in the following cases:-
a) DCIT vs D.N.H.Spinners Pvt Ltd in ITA Nos. 6315 & 6316/M/2017 for Asst Years 2013-14 & 2014- 15 dated 8.8.2019 (Mumbai Tribunal)
b) ACIT vs Hetali Enterprises in ITA No. 421/Mum/2018 for Asst Year 2013- 14 dated 9.4.2021 (Mumbai Tribunal)
3.9. In view of aforesaid observations and respec tfully following the judicial precedents relied upon hereinabove, we direct the ld AO to treat the loans received from aforesaid 5 parties as genuine and delete the addition made u/s 68 of the Act. Correspondingly, the interest paid on such loans also shou ld be allowed as deduction. Accordingly, the grounds 2 to 4 raised by the assessee in this regard are allowed.
4. In the result, the appeal of the assessee is partly allowed.”
016. Even on the issue of failure to afford cross- examination coordinate bench in identical facts and circumstances have deleted the addition in SAHAKAR GLOBAL LTD. VERSUS DCIT-CC-4 (1), MUMBAI AND (VICE-VERSA) [I.T.A. No 5125 to 5128/Mum/2017 and I.T.A. No 5340/Mum/2017 and I.T.A. No 5968/Mum/2017 and I.T.A. No 5341/Mum/2017 dated 26/03/2021] holding as under:-
“10.5 The third category includes 5 entities viz. (i) M/s Olive Overseas; (ii) M/s Yash V.Jewels; (iii) M/s Vanguard Jewels Ltd.; (iv) M/s Triangular Infocom Ltd.; (v) M/s Ansh Merchandise P. Ltd. 10.6 The addition has be en confirmed by Ld. CIT(A) on the basis of appellate order for AY 2009-10. Similar issue has also been dealt by us at preceding para 6.8 in AY 2011- 12 wherein it has been noted that the additions have primarily been made on the basis of statement of Shri P ravin Kumar Jain and in view of the allegations that there was buy back of shares in subsequent years. However, we have deleted the additions by observing that the opportunity to cross- examine Shri Pravin Kumar Jain was never provided to the assessee. Nor the copies of statements were furnished / confronted to the assessee. Resultantly, the additions would be unsustainable in the eyes of law as per settled legal position.
Further, all the stated entities have duly furnished replies along with sufficient doc umentary evidences. They have confirmed that there is no buy back of shares. These entities are not listed as entities to whom the cash is stated to have been paid by the assessee in exchange of accommodation entries. Therefore, the allegations of lower au thorities would have no legs to stand. Similar ratio is applicable to this category of investors, facts being pari- materia the same. Therefore, the addition as sustained by Ld. CIT(A) stand deleted.”
017. In M/S. KUNDALI JEWELS (INDIA) PVT. LTD. VERSUS THE INCOME TAX OFFICER 12 (3) (1), MUMBAI AND VICE- VERSA [I.T.A. No. 3511/Mum/2019 I.T.A. No. 4337/Mum/2019 February 23, 2021] it has been held that:-
“15. Under this issue the revenue has challenged the deletion of addition of ₹ 4,00,00,000/- made by AO u/s 68 of the I. T. Act, 1961. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the addition, therefore, the finding of the CIT(A) is not justifiable, hence is liable to be set aside. However, on the other hand, the Ld. Rep resentative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:-
“10. I have considered the facts of the case and submission of the appellant and findings by the AO. On the merits, the issue is of unexplained credits u/s 68, to which my findings are as under. The legal position is very well settled i.e. where any credits are found in the books of the assessee, the onus is on the assess ee to prove the genuineness of the same and on failure of the assessee, the presumption u/s 68 becomes absolute and the credits are treated as income of the assessee. The assessee can discharge the onus by producing confirmation from the share applicants, and proving the source of the credits. It is submitted by the AR that, when the share applicants accept/own the share application money paid the assessee is deemed to have discharged his onus and no further source from where the share applicants have acquired the amounts advanced to the assessee and in this regard, the AR placed reliance upon the decision of the Hon’ble Bombay High Court in the case of Orient Trading Co. Ltd. V/s. (1963) 49 ITR 723 (Bom). 10. 2 When share application money is received through normal banking channels, the identity of the share applicant stands proved. However, it is to be mentioned that merely because amounts have been received through banking channels, it is not sufficient to p rove the genuineness of the credits. But the existence of a bank account of the share applicant itself proves the existence of the share applicants. For this proposition, the appellant referred to the decision of the Hon‟ble Patna High Court in the case of Sarogi Credit Corporation V/s. CIT{1976 }103 ITR 344 (Pat). The AR further referred to these following decisions in support of its contention. In the case of Shantilal Jain ITXA/687/2004 decided on31.7.2007, the Hon‟ble jurisdictional High Court held that merely because the creditors are not assessed to tax, it does not follow that the amounts should be assessed as assessee’s income. Where the amounts are owned by the creditors, then even if it be presumed that the creditors had advanced the amounts from h sources, still it would become the income of the said creditor and not that of the debtor (the assessee). In the case of Nemi Chand Kothari V/s. CIT (2003) 264 ITR 254 (Gau.). the Hon’ble Gauhati High Court held that the assessee cannot be called upon to prove the source-of – source. In CIT V/s. Arunanda Textiles P. Ltd. {2011} 333 ITR 116 (Kar.). the Hon’ble Karnataka High Court held that where the assessee has submitted confirmations & affidavits from the creditors, the onus is not on the ass essee to prove the creditworthiness of the creditors.
10.3 A further cue for this proposition can be had from the proviso inserted in sec 68 by Finance Act, 2012 from A.Y. 2013-14. Under this proviso, where the assessee receives share application monies/premium, the assessee is expected to prove source-of- source as well. Firstly, in the case in hand, the amounts received were in the F.Y. i.e. A.Y.2012- 13 and further this proviso would apply only from AN. 2013-14. {Ref: decision of the Bombay High Court in Gangadeep Infrastructure 394 ITR 680 (Born.)). The Hon’ble jurisdictional High Court reiterated the said position in PCIT V/s. Veedhata Tower Pvt. Ltd. ITXA/819 of 2015 dated 17th April 2018. However, the said proviso was (unamended) was incapable of obliging the assessee to prove the source-of-source and hence the proviso was required to inserted. It follows that where the proviso doesn’t apply, the sec.68 does not put the burden on the assessee to prove the source-of-source. 10.4 From the above, as submitted by the AR, it follows that it is not the business of the assessee to find out the source of the money of his creditors {CIT V/s. Daulat Ram Rawaltmull 87 ITR 349 (SC). Reference can also be made to the decision of the Apex Court in CIT vs Orissa Corporation Pvt Ltd. 158 ITR 78 (SC). It is also possible that a creditor may have advanced funds from out of his exempted income. For eg. If the creditor has agricultural income which is exempt, then merely because the creditor is not assessed to tax, it does not follow that the credits are assessee’s income.
10.5 I have considered the above contentions raised and it is seen from the record that, the assessee has produced before the AO as well as before me the following documents:
1. PAN
2. Complete Name and Address of the Applicants
3. Copy of Board Resolution for making Share Application
4. Copy of Board Resolution for making Share Application in the Appellant Company.
5. Copy of Bank Statement of the applicant reflecting payment of Share Application Money and Source thereof.
6. Copy of Acknowledgement of Return of Income filed by the Appellant companies for the year under consideration.
7. Audited Financial Statements of the applicants for the year under consideration.
For the following Share Applicants
1. Nakshatra Business Pvt. Ltd. (Hema Trading Co. Pvt. Ltd)
2. Olive Overseas Pvt. Ltd. (Real gold Trading Pvt. Ltd)
3. Rangoli Commerce Pvt. Ltd.
4. Kavya Shares and Securities Pvt. Ltd.
5. Arawali Stock Braking Pvt. Ltd.
10.6 As is evident, the assessee has produced all evidences to prove the identity, source and the genuineness and credit worthiness. It is everything in its control to establish the bonafides. It is also submitted that, even if it proved that the creditor has advanced funds from undisclosed sources, still it would be the income of the creditor.
10.7 The assessee has produced all the details, confirmation with PAN, even the return of income of the sha re applicants. When such material is produced the assessee can be said to have discharged his onus and the onus would shift to the AO to bring some material on record which would prove that the material’s produced by the assessee is either not genuine or a re insufficient. The AO’s response to the assessee’s material is simply that the assessee has not proved the source of funds in the hands of the share applicants viz. 1] Nakshatra Business Pvt. Ltd. (Hema Trading Co. Pvt. Ltd), 2] Olive Overseas Pvt. Ltd. (Real gold Trading Pvt Ltd), 3 Rangoli Commerce Pvt. Ltd., 4] Kavya Shares and Securities Pvt. Ltd. & 5) Arawali Stock braking Pvt. Ltd. The AR also submitted and referred that, in the case of CIT V/s. U.M. Shah, Proprietor, Shrenik Trading Co. 90 ITR 396 (Bom.)). the Hon’ble jurisdictional High Court held that once credible material is produced before the AO, the AO is expected to make efforts to dislodge the explanation given by the AO. The AO cannot simply reject explanation/materials produced by the assessee without bringing any contrary findings on record. In this regard. I find that the decision referred by the appellant’s AR on the issue of company is managed and controlled by Praveen Kumar Jain/Bhawarlal Jain and also other Jurisdictional ITAT/High Court cases decided on similar facts in favour of the assessee which are binding on the undersigned, the case laws are as under:
| 1 | ITO-4(3)(1) Mumbai Vs. Nityanand Industries Pvt. Ltd. | ITA. No.4277 & 4278/M/2017 |
| 2 | Komal Agrotech Pvt. Ltd. Hyderabad Vs. The ITO, ward 2(1) Hyderabad | ITA. No. 437/Hyd/2016 |
| 3 | Arceli Realty Ltd. Vs. ITO 15(1)(1), Mumbia | |
| 4 | Shri Naresh Hiran VS. ITO 30(2)(4), Mumbai | ITA 1236/M/2017, ITAT Mumbai |
| 5 | ITO 25(3)(5), Mumbai VS. M/s. Vikram Kuktilal Vora | ITA. 842/Mum/2017 |
| 6 | M/s. Reliance Corporation Vs. ITO | IRA. NO.1069 to 1071/M/2017 |
| 7 | Sanghvi Realty P. Ltd. V DCIT Cirlce 5(3)(1) | 3018/M/2017, 3019/M/2017, 3020/M/2017 |
| 8 | ITO 32(1)(5) Vs. Gujarat Construction | |
| 9 | ACIT VS. M/s. Gujarat Estate | ITA.6990/M/2016 order dated 18.05.2018 |
| 10 | Sunshine Metals & Alloys Industries Pvt. Ltd. Vs. ITO 4(3)(4 | ITA. 3213/M/2014 |
| 11 | DCIT VS. M/s. Rohini Builders | (2002) 256 ITR Gujarat HC |
| 12 | CIT VS. M/s. Orchid Industries P. Ltd. | ITA. 1433 of 2014 |
| 13 | Rohini Builders Vs. DCIT | ITAT Ahmedabad (2001) 117 Taxmann.25 |
| 14 | CIT Vs. M/s. Gagandeep Infrastructure Pvt. Ltd. | |
| 15 | DCIT, Surat Vs. M/s. Rohini Builders | SLP |
| 16 | CIT Vs. Lovely Exports | 2016 CTR 195 |
10.8 In view of the above, facts and circumstances of the case and also in view of the decision of the Hon’ble ITAT in the cases of M/s. Nityanand Industries (P) Ltd. and Komal Agrotech (P) Ltd. and Arceli Realty Ltd. wherein the investor companies are controlled by Praveen Kumar Jain.
Similar to the appellant’s case and the Hon’ble ITAT after appreciating the facts on record, accepted that the transaction with these investor companies are genuine. Thus, the addition of ₹ 4,00,00.000/- u/s. 68 is not justified. The AO is. therefore, directed to delete the said addition of ₹ 4,00,00,000/-. Accordingly, this ground is allowed.”
16. On appraisal of the above mentioned finding, we noticed that the CIT(A) has examined all the necessary ingredients to prove the transactions such as identity, creditworthiness, genuineness of the claim. The details of the necessary documents have been mentioned by CIT(A) in his order. The CIT(A) has also relied upon the number of decisions which has been specifically mentioned in the order which is not repeated herein for the sake of brevity. Initially, the AO has not verified the claim of the assessee and was not having proper material to decline the claim of the assessee. The documents relied by the assessee record. Admittedly, all the necessary documents were filed by the assessee before the AO and n o adverse inference was drawn by the AO on the said documents except merely stating that the share subscribers have negative reserves in their balance sheet thereby doubting their creditworthiness. It is pertinent to note that the AO remained silent after this. He did not even resort to issue notice u/s 133(6) of the Act to the share subscribers and seek their replies before arriving at a conclusion that the receipt of share capital by the assessee is to be added as unexplained cash credit under section 68 of the Act. In these circumstances, the CIT(A) went through each and every document filed by the assessee before the AO and concluded that the assessee had duly proved all the three necessary ingredients viz identity and creditworthiness of share subscribe rs together with the genuineness of transactions, apart from placing reliance on various decisions. We find that the same parties from whom share subscription money is received by the assessee has been the subject matter of adjudication and this tribunal i n various decisions as listed by the CIT(A) had considered them to be genuine and having sufficient creditworthiness apart from proving their identity beyond doubt. The learned counsel for the assessee also placed reliance on the decision of Hon‟ble Jurisd ictional High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd in in support of his contentions and in support of the order of CIT(A). No contrary decision has been produced before us by revenu e. On appraisal of the finding of the CIT(A), we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Therefore, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue.”
018. The above decision of the coordinate benches have categorically held that the addition with respect to the above party cannot be made in the hence of the assessee. However, we do not comment on the merits of the case. But we hold that the addition cannot be made in the hence of the assessee wherein, assessee tries to discharge the onus initially by submitting whatever the details available with him and learned asses sing officer despite having enormous information in the form of investigation wing’s report did not do anything to throw back onus on the assessee, he even did not go beyond whatever is the information available in the investigation wing report. However, that information was good enough to reopen the case of the assessee. However, without bringing any further information on investigation during the course of assessment proceedings when assessee produces overwhelming evidence, addition merely on the basis on which the reopening of the assessment has been made cannot be sustained. If that were information is available for reopening of the assessment is good enough to make an addition u/s 68 in reassessment proceedings, there would not have been any need of issuing notices, making enquiries et cetera. In the whole assessment order starting from paragraph number three, except the investigation wing report based on which the reopening has been made, nothing else has been mentioned by the learned assessing officer. He even did not refer to the various evidences produced by the assessee and how those are inadequate to prove the identity, creditworthiness, and genuineness of the transaction. He did not ask assessee to produce the directors of the investor company or summon them. He also did not look at the transaction that how ₹ 2 lakhs were paid by the lender to the assessee and what is the source of such sum in the hands of the lender.
019. Honourable Supreme court in PCIT V NRA Iron & S teel P Ltd [ [2019] 103 taxmann.com 48 (SC)/[2019] 262 Taxman 74 (SC)] has held that:-
“8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit- worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P.) Ltd. [1995] 82 Taxman 31/[1994] 208 ITR 465 (Cal.):
♦ Proof of Identity of the creditors;
♦ Capacity of creditors to advance money; and
♦ Genuineness of transaction
This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, ge nuineness of the transaction, and credit- worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments m ade, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source.”
020. For this reason, only, we direct the learned assessing officer to delete the addition of ₹ 2 lakhs u/s 68 of the act. Accordingly, ground number 2 – 5 of the appeal is allowed.
021. In view of the addition of the principal amount, the disallowance of interest also does not survive. Accordingly the disallowance of ₹ 1 973/– also deserves to be deleted. Thus, ground number 6 of the appeal is allowed.
022. In the result ITA number 2420/M/2021 four assessments year 2008 – 09 is partly allowed.
ITA number 2417/M/2021 (assessment year 2009 – 10)
023. this appeal is filed by the assessee against the order passed by National faceless appeal Centre (NFA C), Delhi for assessment year 2009 – 10 dated 28/10/2021 wherein the appeal filed by the assessee against the order passed u/s 143 (3) with Section 147 of the income tax act passed by the earned income tax Officer, Ward – 9 (2) (1), Mumbai dated 29th of March 2016 was dismissed confirming the addition of ₹ 15 lakhs u/s 68 of the income tax act.
024. The facts in this case are identical to the facts in the appeal of the assessee for assessment year 2008 – 09 including the lender entities except one party. The sequence of events, information received, reopening of the proceedings, reassessment proceedings, information submitted by the assessee and the manner of making the addition u/s 68 is same.
025. Brief facts of the case shows that assessee filed its return of income on 24/9/2009 declaring nil income. Information obtained by the assessee from Messer’s nakshatra Business private limited of Rs. 10 lakhs and from Olive overseas private limited of ₹ 5 lakhs. The assessments were reopened. During the course of assessment proceedings assessee submitted various details. However, the learned assessing officer based on the information available at the time of reopening of the assessment made an addition u/s 68 of the income tax act of ₹ 15 lakhs. Assessee preferred an appeal before the learned CIT – A the addition on the same basis in which he confirmed the addition in the case of assessee for a ssessment year 2008 – 09. Therefore, assessee is in appeal before us.
026. Assessee has raised following grounds for A.Y. 2009-10:-
“The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 29.03.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:
1. The learned Commissioner of In come Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assess ing officer had applied his mind to the issue are invalid, without jurisdiction, has no legs to stand and hence must be quashed. 2. On the facts and in the circumstances of the case, The learned Commissioner o f Income Tax (Appeal) has erred in confirming the addition of Rs. 15,00,000/- u/s. 68 of the Income tax Act 1961 as unexplained cash credit. 3. The learned Commissioner of Income Tax (Appeal) failed to note that the entire evidences do prove the identity, creditworthiness and genuineness of the loan transaction amounting Rs. 15,00,000/- and therefore the CIT(A) fell into error in confirming the addition of Rs.15,00,000/-.
4. The learned Commissioner of Income Tax (Appeal) failed to note while confirming the addit ion of Rs. 15,00,000 that the entire enquiry by DGIT (Inv.), Mumbai and the information received by the Assessing Officer about Mr. Praveen Kumar Jain was used against the appellant without giving a copy of the evidence/statement received from the DGIT (In v.), Mumbai, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed and more so allowability of that addition of Rs.15,00,000 by the learned CIT(A).
5. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to confront Assessing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assesse e, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed. 6. On the facts and in the circumstances of the case. The learned Commissioner of Income Tax (Appeal) has erred in an addition of Rs. 1,18,603/- on account of inter est paid on borrowed fund / Short Term Loans considered now as unexplained cash credit u/s. 68 taken from loaner i.e. Olive Overseas Pvt. Ltd and Nakshatra Business Pvt. Ltd based on information received from investigation. 7. The appellant craves to add, am end or alter the grounds of appeal at the time of or before the hearing of appeal.”
027. The arguments of the parties also remained the same as they advanced in appeal of the assessee for assessment year 2008 – 09.
028. We have carefully considered the rival content ion and perused the orders of the lower authorities. We have dealt with the facts and circumstances of the case, as well as the reason for confirming the reopening of the assessment and deleting the addition. There is no change in the facts and circumstances of the case. The assessee has produced relevant details before the learned assessing officer however without looking at that information the learned assessing officer proceeded to use the same material, which were available before him for reopening o f the assessment for confirming the addition u/s 68 of the income tax act. For assessment year 2008 – 09 we have held that when initial onus is discharged by the assessee, the learned assessing officer should have made a minimum enquiry, which the learned assessing officer has failed to do so, in that circumstances, the addition cannot be sustained.
029. In view of this we dismiss ground number 1 of the appeal of the assessee with respect to reopening of the assessment and allow ground number 2 – 5 of the appe al with respect to the addition u/s 68 of the income tax act and also 6 of the appeal with respect to the disallowance of interest paid to those parties.
030. Accordingly, appeal of the assessee in ITA number 2417/M/2021 four assessment year 2009 – 10 is partly allowed.
ITA number 2418/M/2021 assessment year 2010 – 11
031. this appeal is filed by the assessee for the assessment year 2010 – 11 against the order passed by the National faceless appeal Centre, Delhi dated 28/10/2021 wherein the addition of ₹ 5 lakhs made u/s 68 of the income tax confirmed. In the present case, the assessee has obtained a loan of ₹ 5 lakhs from Olive overseas private limited.
032. The facts and circumstances in the case of this year ar e identical to the facts and circumstances in the case of the assessee for assessment year 2008 – 09 and 2009 – 10. There is no change in the orders of the lower authorities as well as the submissions made by the assessee.
033. The learned assessing officer has reopened the assessment based on the information received from investigation wing. Assessee has submitted the details of the identity, creditworthiness, and genuineness of the above party. However the learned assessing offi cer has made the addition of ₹ 5 lakhs in the hence of the assessee on the same material which was available before him for reopening of the assessment.
034. Assessee has raised following Grounds for A.Y. 2010-11:-
“GROUNDS OF APPEAL
The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 29.03.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:-
1. The learned Commissioner of Income Tax (Appeal) failed to note that the learned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to ce open the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs to stand and hence must be quashed.
2. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 5,00,000/- u/s. 68 of the Income tax Act 1961 as unexplained cash credit.
3. The learned Com missioner of Income Tax (Appeal) failed to note that the entire evidences: do prove the identity, creditworthiness and genuineness of the loan transaction amounting Rs. 5,00,000/- and therefore the CIT(A) fell into error in confirming the addition of Rs. 5,00,000/-.
4. The learned Commissioner of Income Tax (Appeal) failed to note while confirming the addition of Rs.5,00,000 that the entire enquiry by DGIT (Inv.), Mumbai and the information received by the Assessing Officer about Mr. Praveen Kumar Jain was use d against the appellant without giving a copy of the evidence/statement received from the DGIT (Inv.). Mumbai, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed and more so allowability of that addition of Rs.5,00,000 by the learned CIT(A).
5. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assessing Officer at the b ack of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc, will be rendered unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed. 6. On the facts and in the circumstances of the case, The learned Co mmissioner of Income Tax (Appeal) has erred in an addition of Rs. 1,66,019/- on account of interest paid on borrowed fund / Short Term Loans considered now as unexplained cash credit u/s. 68 taken from loaner i.e. Olive Overseas Pvt. Ltd based on informati on received from investigation.
7. The appellant craves to add, amend or alter the grounds of appeal at the time of or before the hearing of appeal.”
035. For assessment year 2008 – 09 and 2009 – 10 we have the addition as the learned assessing officer has made the addition on the same material which was available before him for the purpose of reopening of the assessment despite assessee furnishing the requisite details for proving the identity, creditworthin ess and genuineness of the transactions. The learned assessing officer did not look that this information at all and proceeded to make an addition u/s 68 of the income tax act without making any enquiry. For the same reasons, we confirm the reopening of th e assessment for this year and dismiss ground number 1 of the appeal. However on the merits of the case, ground number 2 – 5 of the appeal are allowed with respect to the deletion of addition u/s 68 of the income tax act and consequently the ground number 64 deletion of disallowance of interest paid of ₹ 166,019/–.
036. Accordingly appeal filed by the assessee for assessment year 2010 – 11 in ITA number 2418/M/2021 is partly allowed.
ITA number 2419/M/2021 assessment year 2012 – 13
037. this appeal is filed by the as sessee against the order passed by the National faceless appeal Centre dated 28/10/2021 wherein the appeal filed by the assessee against the order passed u/s 143 (3) of the act read with Section 147 of the act passed by the learned assessing officer income tax Officer, Ward 9 (2) (1), Mumbai on 23/12/2016 was dismissed and the addition made by the well as the disallowance of interest expenditure of ₹ 173,443/– was confirmed.
038. Aggrieved with the above order of the assessee has preferred following grounds of appeal for A.Y. 2012-13
“The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 23.12.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:-
1. The learned Commissioner Income Tax (Appeal) failed to note that the le arned Assessing Officer merely relied on the information received from DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issu e and therefore the entire reassessment proceedings are invalid, without jurisdiction, has no legs must be quashed. stand and hence must be quashed.
2. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erre d in confirming the addition of Rs. 30,00,000/- u/s. 68 of the Income tax Act 1961 as unexplained cash credit.
3. The learned Commissioner of Income Tax (Appeal) the identity, creditworthiness and genuineness of the loan transaction amounting Rs. 30,00,000/- and therefore the CIT(A) fell into error in confirming the addition of Rs. 30,00,000/-.
4. The learned Commissioner of Income Tax (Appeal) failed to note while confirming the addition of Rs. 30,00,000 that the entire enquiry by DGIT (Inv.), Mumbai and the information received by the Assessing Officer about Mr. Praveen Kumar Jain was used against the appellant without giving a copy of the evidence/statement received from the DGIT (Inv.), Mumbai, thus violating t he principles of natural justice and on this ground alone, the entire assessment must be quashed and more so allowability of that addition of Rs.30,00,000 by the learned CIT(A). The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact tha t it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assessing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examin ation has to be offered to the assessee, failing which the said material/statement etc. will be rendered unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed.
5. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in an addition of Rs. 1,73,443/- on account of interest paid on borrowed fund / Sh ort Term Loans considered now as unexplained cash credit u/s. 68 taken from loaner Le. Olive Overseas Pvt. Ltd, Nakshatra Business Pvt. Ltd and Duke Business Pvt. Ltd based on information received from investigation.”
039. The fact shows that assessee has filed its return of income on 14th/9/2012 declaring a total income of ₹ 1,791,116/–. The above return was accepted as it is. Subsequently notice u/s 148 of the act was issued on 4/3/2016 days on the information received from the investigation wing of the department with respect to the search conducted on one Shri Praveen Jain wherein assessee is found to be the beneficiary of accommodation entries with respect to a sum of ₹ 30 lakhs. Assessee is found to have obtained ₹ 10 lakhs from Olive overseas pri vate limited, ₹ 10 lakhs from Nakshatra business private limited and ₹ 10 lakhs from Duke Business Pvt Ltd. Corresponding interest paid to these parties was also held to be disallowable u/s 69C of the act of ₹ 173,443/–. Accordingly the assessment was pas sed u/s 143 (3) read with Section 147 of the income tax act at Rs 4989560/–.
040. During the course of assessment proceedings the assessee furnished the requisite details called for as it furnished for assessment year 2008 – 09 to assessment year 2010 – 11. Th addition u/s 68 of the income tax act without putting any efforts of making any enquiry on the information furnished by the assessee during the course of assessment proceedings but solely relying on the mat erial available made by the investigation wing. Therefore assessee aggrieved, filed appeal before the learned CIT – A who also dismiss the appeal of the assessee in identical manner in which disposed of the appeal of the assessee for earlier years. Therefore assessee is in appeal before us.
041. Both the parties confirmed that their arguments, and submissions are identical to what they already made in earlier years.
042. We have carefully considered the rival contention and perused the orders of the lower authorities. However, the issue on the merit is squarely covered in favour of the assessee by the decision of the several decisions of the coordinate benches. However, we following our own decisions in the earlier years in the case of the assessee for assessment year 2008 – 09 to assessment year 2010 – 11 wherein we have upheld reopening of the assessment u/s 147 of the income tax act. However we have deleted the addition u/s 68 of the income tax act for the sole reason that the assessing officer has not made any enq uiry on the information furnished by the assessee during the course of assessment proceedings but solely relying on the information available with him made by investigation wing which were used by him for reopening of the assessment. We have given our deta deleting the addition for those years. As there is no change in the facts and circumstances of the case, we confirm the reopening of the assessment and dismiss ground number one of the appeal of the assessee. We allow ground number 2 – 5 of the appeal of the assessee deleting the addition u/s 68 of the act and also ground number 6 deleting the addition on account of interest paid of ₹ 173,443/–.
043. Accordingly appeal filed by the assessee for assessment year 2012 – 13 is partly allowed.
ITA number 2416/M/2021 assessment year 2014 – 15
044. this appeal is filed by the assessee for assessment year 2014 – 15 against the order passed by the National faceless appeal Centre dated 28/10/2021 and aggrieved with that order Assessee has preferred following grounds of appeal
“The appellant has preferred an appeal against the order dated 28.10.2021 passed by National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 13.12.2018 passed u/ s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:
1. The learned Commissioner of Income Tax (Appeal) merely relied on the information received f rom DGIT (Investigations), Mumbai to reopen the assessment and neither the assessment order nor the reasons communicated indicate that the Assessing officer had applied his mind to the issue and therefore the entire reassessment proceedings are invalid, wi thout jurisdiction, has no legs to stand and hence must be quashed.
2. The Learned Commissioner of Income Tax (Appeal) erred in ignoring the Fact that it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assess ing Officer at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered unrel iable and additions made on the basis of such material/statement etc. shall be rendered illegal, thus violating the principles of natural justice and on this ground alone, the entire assessment must be quashed.
3. On the facts and in the circumstances of the case, The learned Commissioner of Income Tax (Appeal) has erred in disallowing of Rs. 2,14,521/- on account of interest paid on borrowed fund/Short Term Loans considered now as unexplained cash credit u/s. 68 taken from loaner i.e. Olive Overseas Pvt. Ltd,
Duke Business Pvt. Ltd based on information received from investigation.”
045. Facts of the case shows that assessee filed its return of income on 25/9/2014 for assessment year 2014 – 15 at a total income of ₹ 548,290/–. Case of the assessee was reopened by issue of notice u/s 147 of the income tax act. Consequently the assessment order u/s 143 (3) read with Section 147 of the income tax act was passed on 13/12/2018 making an addition of ₹ 214,521/– being the disallowance of inte rest on account of loan obtained by the assessee from various forms which are controlled by Mr. Praveen Kumar Jain as per information available made by the investigation wing. Assessee preferred an appeal before the learned CIT – A who confirmed the addit ion. Therefore, assessee is in appeal before us.
046. As in the earlier years i.e. assessment year 2008 – 09 to assessment year 2012 – 13, we have confirmed the reopening of the assessment made by the learned assessing officer and therefore we dismiss ground nu mber 1 of the appeal of the assessee.
047. With respect to ground number 2 – 3 of the appeal are concerned is only with respect to the disallowance of interest. As we have already deleted the addition u/s 68 of the act, the consequent disallowance of interest w ill also not survive. Accordingly we allow these grounds.
048. Accordingly appeal of the assessee is partly allowed.
049. In the Result, all the 5 appeals filed by the assessee for assessment year 2008 – 09 to assessment year 2014 – 15 are disposed of by this common order.
Order pronounced in the open court on 29.06.2022.
