Deduction of TDS or payment via account payee cheque doesn’t justify non-genuine transaction

Bhagwab Mahavir Education Foundation Vs DCIT (ITAT Surat)

ITAT Surat held that mere deduction of TDS or mere payment by account payee cheque doesn’t make non-genuine transaction a genuine one.

Facts- The case of the assessee was re-opened u/s 147 of the Act for the reason that the assessee trust had received accommodation entries from Shri Arvind Kumar Jain and Shri Naresh Kumar Jain (Jain Brothers) who were found to be engaged in the business of providing accommodation entries and the assessee trust was one of the beneficiaries of the shell companies/entities floated by Jain brothers.

AO noted that the assessee had taken the accommodation entry of Rs.1,57,00,005/- from such shell companies floated by Jain Brothers. AO has accordingly re-opened the assessment u/s. 148 of the Act. The notice u/s.148 of the Act was issued on 31.03.2017 and also a reminder noticed was issued on 04.05.2017. In response to this notice, the assessee has filed the reply dated 15.05.2017 along with the copy of return of income filed in response to notice u/s 148 of the Act. The assessee raised its objections against the re-opening of the assessment vide its letter dated 28.08.2017 which were disposed of by passing an order dated 04.10.2017.

Further, AO observed that the assessee has obtained unsecured loans amounting to Rs.2,40,00,000/- from 9 different companies. All these nine companies were held to be shell/benami companies floated by Jain Brothers. Therefore, the assessing officer made addition.
CIT(A) confirmed the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- In various case laws it has been held that “mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine [Precision Finance Pvt. Ltd. vs. CIT – 208 ITR 465 (Cal).]”. The burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence. Moreover, the fact that TDS has been deducted, does not mean that transaction is genuine, therefore contention raised by the ld. Counsel is not acceptable and is hereby rejected.

FULL TEXT OF THE ORDER OF ITAT SURAT

Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2010-11, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-9, Ahmedabad [in short “the ld. CIT(A)”], in Appeal No. CIT(A)-9/10354/DCIT(E) Cir-2/17-18 dated 08.04.2019, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 29.12.2017.

2. The grounds of appeal raised by the assessee are as follows:

“1. The ld. CIT(A) erred on facts and in law in confirming validity of reassessment proceeding u/s 148 of Income Tax, Act.

2. The ld. CIT(A) erred on facts and in law in confirming additions of cash credits u/s 68 for various reasons.

3. The ld. CIT(A) erred on facts and in law in confirming addition made beyond what was recorded in the reasons for reopening, without any fresh information.

4. The ld. CIT(A) erred on facts and in law in not giving benefit of the amount added for application of income.

5. The ld. CIT(A) erred both on facts and in law in not allowing claim of depreciation on the ground that Hon’ble SC decision was prospective. He also erred in not allowing set off against income added.

6. The assessee reserves the right to add amend or alter any of the Grounds of appeals as above.”

3. In ground Nos. 1 and 3, the assessee has challenged the validity of reassessment proceeding under section147/ 148 of the Act.

4. The relevant material facts, as culled out from the material on record, are as follows. The assessee had filed its original return of income on 08.10.2010 declaring total income at Rs.NIL, which was also accepted at the same figure vide assessment order passed u/s 143(3) of the Act on 30.03.2013. Thereafter, the case has been re-opened u/s 147 of the Act for the reason that the assessee trust had received accommodation entries from Shri Arvind Kumar Jain and Shri Naresh Kumar Jain (hereinafter referred to as “Jain Brothers”) who were found to be engaged in the business of providing accommodation entries and the assessee trust was one of the beneficiaries of the shell companies/entities floated by Jain brothers. It had been further noticed by the A.O. that the assessee had taken the accommodation entry of Rs.1,57,00,005/- from such shell companies floated by Jain Brothers. The A.O. has accordingly re-opened the assessment u/s. 148 of the Act. The notice u/s.148 of the Act was issued on 31.03.2017 and also a reminder noticed was issued on 04.05.2017. In response to this notice, the assessee has filed the reply dated 15.05.2017 along with the copy of return of income filed in response to notice u/s 148 of the Act. The assessee raised its objections against the re-opening of the assessment vide its letter dated 28.08.2017 which were disposed of by passing an order dated 04.10.2017.

5. After that, assessing officer issued show cause notice to the assessee. The assessee has complied with the show cause notice dated 01.11.2017 and 10.11.2017 vide its letters dated 23.11.2017 and 26.12.2017 which have also been reproduced in the assessment order. As per the information provided by the Joint Director of Income-tax (Inv.),Unit-1, New Delhi who carried out the search and seizure Operation u/s 132 of the Act in the case of Jain Brothers and during the course of this search & seizure operation, it was noticed that the assessee trust had obtained accommodation entries under the garb of unsecured loans of Rs.2,40,00,000/- from various companies. The A.O. has reproduced the information so provided by the Investigation Wing of New Delhi in para 5.1 of the assessment order which runs into pages 10 to 114 which described the modus operandi of providing accommodation entries to various beneficiaries including the assessee trust. In para 5.2, the A.O. has observed that the assessee has obtained unsecured loans amounting to Rs.2,40,00,000/- from 9 different companies, the details of which were also reproduced in this para of the assessment order. All these nine companies were held to be shell/benami companies floated by Jain Brothers. Therefore, the assessing officer made addition observing as follows:

“5.2 During the course of reassessment proceedings on verification of Schedule-2 of the Balance sheet as on 31.03.2010, it was found that during the F.Y.2009-10 assessee has received unsecured loans amounting to Rs. 2,40,00,000/- from the bogus concern run by the Jain Brothers. In para 5.1 it is already proved by the Investigation wing after making deep analysis and investigations that entities which have provided unsecured loans to the assessee trust, are bogus concern run by the Jain Brothers and are shell companies which were created by entry providers to provide the accommodation entries. Details of unsecured loan taken by the assessee trust during the F.Y. 2009-10 is as below:

5.3 In view of the facts mentioned above, it is clear that unsecured loans received by the assessee trust amounting to Rs.2,40,00,000/- is nothing but the accommodation entries provided by the Jain brothers. Further, it is revealed that the information in possession of undersigned had relationship with the unaccounted income of income of Rs.2,40,00,000/- in form of unsecured loan chargeable to tax. Modus operand! for availing accommodation entries is already explained in detail in preceding para. Further, it is also stated that name of the bogus concern from whom assessee had availed accommodation entries amounting to Rs.2,40,00,000/- are found in the seized material seized during the course of search and was also cross verified with the employees and related parties of the Jain Brothers and it was proved that these concern are operated by the: Jain brothers. Hence, contention of the assessee that amount provided by department of Rs.1,57,00,005/- regarding unsecured loan are not found in the books of account of the assessee, cannot be accepted. Further, when the parties are proved to be bogus and identification of parties had been made during the course of the post search investigation than there is no question remains to specify the amount of entry. In simple words, in the case of assessee bogus concerns operated by the Jain brothers had been identified and it is also proved that it is the accommodation entries of unsecured loan thus, nature of accommodation entries had also been specified and Assessment year in which said entries have been taken had also been specified than what remains to do is to verify the books of accounts, to identify the bogus concern operated by the Jain Brothers which have provided unsecured loan. With regard to the question of the amount of unsecured loan, it is very well understood that amount will be the same as it is reflected in the books of accounts of the assessee. For example, in case, department is having information of accommodation entries of bogus donation taken by the trust but in the books of account of the said trust, if there is no entry of donation received then it is understood that no addition was possible to made for bogus donation in the case of said trust. In the instant case, this office had received an information from New Delhi wing that assessee has taken accommodation entries of unsecured loan. Further, New Delhi wing had also provided the analysis of search material and search findings and list of bogus concern operated by Jain Brothers. Now what A.O. is required to do is to take the amount of unsecured loan taken by the trust from the bogus concern operated by the Jain brothers which is reflected in the books of account of the assessee. Thus, claim of the assessee that A.O. had not provided specific amount of unsecured loan is wrong, in actual assessee is in better position to calculate the total amount of the accommodation entries because amount is already reflected in the books of account of the assessee.

5.3.1 The Unsecured loans received amounting to Rs.2,40,00,000/- during the year was bogus and crediting in the books for sake of only crediting and to bring the unaccounted fund in the books. Therefore, from the above discussion it is proved that the unsecured loan received by the assessee trust is bogus unsecured loans.

5.3.2 Further, it is also stated that during the course of post search investigation in the case of the Shri Anand Kumar Jain and Shri Naresh Kumar Jain, it was also gathered that assessee trust, Bhagwan Mahavir Education Trust had received cash from the Jain Brothers after repayment of unsecured loan in cheque. It can be proved from the following facts ascertained from the tally data seized during the search.

Thus, in view of the facts mentioned above, contention of the assessee that assessee trust had received genuine unsecured loan, is not acceptable. Further, in the submission, assessee has provided the confirmation of parties from which assessee trust had received unsecured loan. In this regard, it is stated that mere confirmation of party on paper cannot prove the genuineness of the transaction. Further, A.O. is not denying the fact that transactions of unsecured loans was taken place with the bogus concern operated by the Jain Brothers. Here, the contention of the A.O is said transactions are accommodation entries provided by the Jain brothers to introduced unaccounted income of the trust in the books of account of the trust. Hence, mere confirmation of unsecured loan given by respective party cannot prove the genuineness of transactions.

5.3.3 Further, regarding the transactions of accommodation entries of unsecured loan made by the trust, it is stated that it is not one year in which assessee trust had taken accommodation entries of unsecured loan but it is for A.Y. 2010-11 to 2015-16 in which assessee trust had taken accommodation entries of unsecured loan amounting to Rs. 14.81 from the bogus concerns operated by the Jain Brothers. Further, in this regard, it is also stated that it is not one entry provider from whom assessee had taken accommodation entries, but as per information received from Kolkata Wing by this office, for A.Y. 2011-12 assessee trust had availed accommodation entries of bogus donation amounting to Rs. 2 Cr. Thus, every time if assessee trust is found in fault of availing the accommodation entries than it cannot be considered a mistake of the department but it is the assessee trust which is continuously trying to convert the black income of the trust in white by availing accommodation entries. Thus, the claim of the assessee that just because loan is taken from the party who is involved in accommodation entry business, it cannot be assumed that these loan is also bogus, cannot be accepted because every time it cannot be possible to happen coincident with the assessee trust that bogus parties operated by the entry provider from whom assessee is taking donation/unsecured loan are genuine in the case of the assessee and bogus/ entry providers in the case of others.

5.3.4 Regarding the request of the assessee to provide opportunity to cross examine the said parties and to provide the copies of statements given by the Jain Brothers, it is stated that assessee had made request to cross examine the parties at the last juncture of the assessment proceedings. Further, it was found that parties with whom cross examination was requested were based in Delhi.

Hence, practically, it was not possible for A.O. to provide an opportunity for cross examination to the assessee. With regard to statement of income of parties, it is stated that said statements were received by the A.O. on the last day of assessment proceedings from the concerned A.O. Hence, practically, it was not possible for A.O to provide the copy of bank statements to the assessee. Further, it is also stated that not allowance of cross examination with the parties due to time constraints and other constraints, cannot be denied the fact that the transactions done by assessee trust for unsecured loans are accommodation entries in nature, because in para 5.1 mentioned above, it is very well established by the department that how assessee trust has converted its black income into white income by taking the help of professional entry providers.

5.3.5 The assessee trust failed to explain satisfactorily genuineness of transaction of unsecured loans received from the bogus concern operated by the Jain Brothers. As per the section 68 of the act, the explanation given by assessee about nature and source of credit entries in books, is not satisfactory in the opinion of the A.O, the sum may be charged to income tax as the income of the assessee of that previous year. In this regard reliance is placed on following judgement.

“In the case of Khandelwal Constructions v. CIT 227 ITR 900 (Guj.) It has been held that Section 68 of the I.T. Act, 1961, empowers the A.O. to make inquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources.”

5.3.6 The provisions of the Section 68 are also applied to the bogus unsecured loans. Provision applies to all credit entries. In the cases where credit entry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries to all credit entries. The language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party as held in the case of Gamani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. & Har.)

5.3.7 The proper inquiry have been made regarding to cross verify the genuineness and source of such credit and from the such inquiry,it is proved that the entries are not genuine. It is not the duty of the Assessing Officer to locate the exact source of the cash credit. The burden to identify the source not discharged by the assessee trust. The assessee trust has failed to explain the genuineness of the unsecured loan. The onus does not get discharges merely by such confirmatory letters as found in CIT vs. United Commercial and Industrial Co. (Pvt.) Ltd. (1991) 187 ITR 596 (Cal).

5.3.8 In the case of Shankar Industries vs. CIT (1978) 114 6890 (Cal.), the Calcutta High Court held that it is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of accounts. Such proof includes proof of the identity of person, Creditworthiness of person capacity of person and lastly the genuineness of the transactions. Only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts to the department, Similar view has been taken in C. Kant & Co. v/s. CIT [1980] 126 JTR 63 (Cal.)

5.3.9 In addition to the above, the case laws quoted by the assessee trust are not applicable in this case as the facts of those cases are different to that of the present case.

5.3.10 From the above discussion, it is crystal clear that the unsecured loan of Rs.2,40,00,000/- shown as received by assessee trust from the bogus concern run by the Jain brothers is bogus and crediting in the books for sake of only crediting and to bring the unaccounted fund in the books and thereby the same is added to the total income of the assessee trust as an unexplained cash credit U/s. 68 of the I.T. Act, 1961. Further, it is also stated that as per provisions of section 11 of the act income which is derived from the property held by the trust will be exempted under section 11 to 13 of the Act. In the instant case, unsecured loan amounting to Rs. 2,40,00,000/- credited in the books of account of the assessee was received as accommodation entries from the bogus concerns run by the Jain Brothers to covert the black income of the trust into white. Hence, same is not the income of the trust which was derived from the property held by the trust. Hence, on the said amount of Rs.2,40,00,000/- assessee will not be eligible to claim exemptions as per the provisions of section 11 to 13 of the Act”.

6. Therefore, after considering the reply of the assessee and judicial pronouncements relied on by the assessee, as referred to in the assessment order vide para 5.3 to 5.3.8, the addition of Rs.2,40,00,000/- was made by the assessing officer u/s 68 of the Act.

7. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the assessing officer. The ld CIT(A) noted that reasons recorded by the assessing officer were valid and sanction for reopening the case was given by appropriate authority and notice under section 143(2) was received by the assessee on time. On merits, ld CIT(A) noted that assessee trust is engaged in fraudulent activities and accommodation entries, which are not the object of the assessee trust, therefore, ld CIT(A) confirmed the addition made by the assessing officer.

8. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before us.

9. Learned Counsel for the assessee argued before the Bench that reasons recorded by the assessing officer is defective therefore reassessment proceedings initiated by the assessing officer is bad in law. He further stated that original assessment was framed under section 143(3) of the Act, that is, scrutiny assessment, so Assessing Officer has examined the issue under consideration, hence the reopening of assessment after four years is bad in law.The satisfaction recorded by the Income Tax Authority is also not in accordance with law. The assessing officer did not apply his mind while recoding the reasons.

10. The Ld. Counsel also argued that in the approval note, the approval has not been given by ld. CIT, and it is approved by ld. JCIT, the approval for initiating the reassessment proceedings in the assessee’s case should be given by the ld CIT which is absent and therefore, the approval for initiating the proceedings under section 147/148 of the Act is itself defective.

11. The Ld. Counsel further submitted that notice under section 143(2) of the Act has not been served on the assessee.

12. Therefore, ld Counsel contended that on these technical grounds itself, as narrated above, the reassessment proceedings may be quashed.

13. On merits, ld Counsel submitted that all the amounts were paid through account payee cheque and TDS has been deducted. Some of the loans were paid in same year and some loan amounts were paid in subsequent years. Therefore, ld Counsel stated that addition should be deleted and for that ld Counsel relied on the judgment of the Co-ordinate Bench of this Tribunal in the case of Rajhans Construction in ITA No.1450/AHD/2016 for AY.2007-08, order dated 14.03.2022.

14. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue submitted that approval for initiation of proceedings under section 148 has been given by the CIT through online. The proof of online approval given by the CIT is submitted by the Ld. Sr. DR before the Bench.

15. So far reasons of reopening is concerned, the Ld.DR submitted that the Department can reopen the assessment based on the information from the Investigation Wing/Directorate of information. Further, the reasons were recorded by the assessing officer as per the provisions of law.

16. The Ld.DR further submitted that notice under section 143(2) was served on the assessee within the prescribed time limit under the Act. The ld DR also submitted written submission before the Bench, which is reproduced below:

“Sub: Submission of relevant documents in the case of Bhagwan Mahavir Education Foundation in ITA No. 698/Ahd/2019 for A.Y. 2010-2011 – reg.

Kindly refer to the above.

2. During the course of hearing, the Hon’ble Bench has directed the department to file copy of approval granted by Id. CIT u/s. 148 and copy of notice issued u/s. 143(2) of the Act.

3. In this connection, a report has been received from the o/o. the CIT(Exemption) which is self-explanatory is enclosed for your kind perusal.

4. The notice u/s 148 was issued after grant of approval of the competent authority i.e. CIT(E), Ahmedabad. The proposal for reopening assessment was submitted online on 30.03.2017 through AST module of the ITD system of the Department by the then DCIT(E) after recording his reasons to believe that income chargeable to tax has escaped assessment. Such proposal has been recommended by the Range head and then approved by the Ld. CIT(E), Ahmedabad on 30.03.2017 (Screen shot is enclosed). The ITD system software has an inbuilt mechanism where a proposal seeking approval u/s 151 for issue of notice u/s 148 of the Act goes through proper channel to the appropriate approving authority and only after approval granted by the CIT(E), Ahmedabad on 30.03.2017, a notice u/s 148 could be generated through the ITD system and was issued bearing letter no.. ITBS/AST/S/148/2016-17/1003770877(1). It is crystal clear with digital evidence that the notice u/s 148 was issued only after grant of approval of the competent authority i.e. CIT(E), Ahmedabad. Regarding physical copy of proposal, it is to state that after development of ITD / ITBA system, in addition to submitting online proposals for initiation of reopening proceedings, such proposals in physical copy may or may not be sent, but the approval has to be mandatorily granted online on the system by the competent authority and to enable generation of a notice u/s 148 on the system and then issue thereof. In this case, notice u/s 148 was generated vide letter No. ITBS/AST/S/148/2016-17/1003770877(1) after grant of online approval by the competent authority i.e. CIT(E), Ahmedabad.

5. As per case records available in this office for A.Y. 2010-2011 it is to submit that notice u/s 143(2) was issued to the assessee on 19.06.2017 (Copy enclosed). Assessee has also given reply to these notices vide its letter dated 01.07.2017. It is also to bring to your kind notice that during the course of appellate proceedings, Id. CIT(A) vide its letter dated 25.03.2019 has called for the case records of the assessee which was submitted before Id. CIT(A) by AO vide its letter dated 26.03.2019 (copy enclosed). After going through the case records Id. CIT(A) has decided the matter in favour of revenue and rejected the plea of assessee on validity of reopening and assessment.”

17. On merits, Ld. DR submitted that the assessee trust is engaged in providing accommodation entries and this has been proved by many evidentiary documents and just because the transactions were routed through banking channels, and TDS deducted thereon, does not mean that transactions are genuine. No doubt, the part payment of loan was made by assessee in same year or subsequent year, however, the said money again came back to the assessee, as noted by the assessing officer, therefore, ld Counsel contended that addition made by the Assessing Officer may be upheld.

18. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that satisfaction recorded by the Income Tax Authority is in accordance with law. We have also gone through the online approval given by the CIT and noted that approval given by CIT is in accordance with law, therefore plea taken by the ld Counsel to the effect that approval was not given in accordance with law, hence it is not acceptable.

19. The notice under section 143(2) of the Act, has been served on the assessee. The ld Counsel provided vague information before the Bench and contended that notice under section 143(3) of the Act, was not served on the assessee. Hence, we reject the contention raised by ld Counsel.

20. Now, we shall take the arguments of Learned Counsel to the effect that reasons recorded by the assessing officer is defective and original assessment was framed under section 143(3) of the Act, so Assessing Officer has examined the issue under consideration, hence the reopening of assessment after four years is bad in law. At this Juncture, it is appropriate to go through the reasons recorded by the assessing officer, which is mentioned in assessee`s paper book and the same is reproduced below:

21. We have gone through the reasons recorded by the Assessing Officer and noted that assessing officer has recorded the reasons after getting the information from the Directorate of Information New Delhi and applied his own mind in respect of the information received by him. The assessing officer examined the information received from the Directorate of Information and satisfied himself and applied his own mind to issue notice under section 147/148 of the Act. Therefore, assessing officer did not accept the information from the Directorate of Information blindly and without application of mind. We note that in the reasons recorded the figure mentioned at Rs.1,57,00,055/- is part of the total amount of Rs.2,40,00,000/-, therefore, reasons recorded by the assessing officer can not vitiate on account of arithmetical figure. The findings of ld CIT(A) in this regard is reproduced below for better appreciation of facts:

“6.1 After dealing with the above contentions which are mainly raised on technicality of the issue of re-opening the assessment, now I deal with the issue on merit for which the assessee had made submissions vide para 2 of the submissions. The first contention raised against the addition of Rs.2,40,00,000/-as against the amount of Rs.1,57,00,055/- for which the reasons were recorded and the A.O. has exceeded her authority by adding more amount than the amount recorded in the reasons for re-opening and in absence of new information which has come to her notice in the course of re-assessment proceedings. To this contention, it has to be stated that the issue was obtaining accommodation entries during the year under consideration for which the assessment had been re-opened by the A.O. For the purpose of recording the reasons, the A.O. has taken the closing balances or the figures as available in the balance-sheet and schedules therein. She might have committed some mistake in taking the figures while re-opening the assessment. However, at the same time, the assessee did not come with comparison of the figures as per the accounts as appearing in its books of accounts and also the contra accounts so as to identify that the remaining difference was not the amounts of unsecured loans taken from these shell companies. Therefore, this contention of the assessee is rejected considering the fact that in the re-opened assessment, the core issue of taking unsecured loans from the accommodation entries providers has been examined in depth with the help of the Investigation report reproduced in the assessment order, to which the assessee did not raise any comments or objections with regard to its contents and findings.”

Thus, the reasons recorded, by the Assessing Officer, are prima facie in accordance with law. In the reasons so recorded, there should not be any final adjudication of the issue involved, by the assessing officer, in fact the reasons are recorded prima facie as per the scheme of the Act. Therefore, we do not find any infirmity in the order of ld. CIT(A) in holding that reassessment proceedings are in accordance with law.

22. Now, we shall take arguments of ld Counsel to the effect that assessment was reopened after a period of four years and assessee has disclosed fully and truly all material facts in the original assessment u/s 143(3) of the Act, hence reopening is not valid. We note that Hon’ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transaction itself on the basis of subsequent information is found to be bogus transaction and in such event, mere disclosure of the transaction cannot be said to be true and full disclosure and the Income-tax Officer would have jurisdiction to reopen the concluded assessment. The Apex Court in the case of Phul Ghand Bajrang Lal (supra), observed as following:

“…one has to look to the purpose and intent of the provisions. One of the purposes of Section 147 appears to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice to turn around and say ‘you accepted my lie, now your hands are tied and you can do nothing’. It would, be travesty of justice to allow the assessee that latitude.”

23. The Hon’ble Gujarat High Court in the case of Dishman Pharmaceuticals and Chemicals Ltd. vs. DCIT (OSD), Ahmedabad (2012) 346 ITR 228 (Guj) has summed up the requirements of the law, in such circumstances and has held as following:

“There is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons which assumes importance. In other words, a mere statement that the Assessing Officer had reason to believe that certain income has escaped assessment and such escapement of income was on account of non-filing of the return by the assessee or failure on his part to disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor, absence of any such statement would be fatal, if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs.”

24. A three Judges bench of Hon’ble Gujarat High Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.

25. In fact, in three recent judgments; the Hon’ble Gujarat High Court has upheld the reopening, as valid reopening, on similar facts. The case is squarely covered by these judgments, against the assessee, which are:

• Yogendrakumar Gupta vs. ITO 366 ITR 186 (Guj)
• Peass Industrial Engineers (P) Ltd. 73 taxmann.com 185 (2016)
• Order dated March 25, 2014 in the case of Lalita Ashwin Jain vs. ITO, Special Civil Application No. 1626 and 1627 of 2014.

26. As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the assessee is engaged in accommodation entries, which were non-genuine and therefore bogus, (clearly meaning that what was disclosed in original assessment was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal.

27. The Ld Counsel’s contention that the report/information of the Directorate (Inv) of Income Tax Department, cannot constitute a reason to believe within the meaning of section 147 is misplaced in law and facts. The Supreme Court in the case of Purushottam Das Bangur & Another, 224 ITR 362 (SC) held as under:

“Assessee claiming long-term capital loss on sale of shares. Income-Tax Officer accepts the claim. Later on receipt of a letter from DDI that the fair market value of the share on the date of sale is much more than the Official Quotation due to the fact that the company was prospering at the time, the Income-tax Officer issued notice for reopening assessment u/s 147(b). The High Court held the notice not valid. Whether the notice u/s147(b) is valid and the assessment could be re-opened? Yes, on the basis of the facts & information contained in the DDI’s letter, the Income-tax Officer without further investigation could have formed the opinion that there was reason to believe that the income of the assesses chargeable to tax has escaped assessment. Hence the notice u/s. 147 (b) was valid.”

28. The Hon`ble Gujarat High Court in some of the recent judgments has held that reopening on the basis of the information of the Investigation Wing, is valid. In the case of Peass Industrial Engineers Pvt. Ltd 73 taxmannn.com 185(2016) (Gujarat), it was held that whether at the instance of same material of another wing, whether reopening is permissible or not. While dealing with said issue this Court has examined the said aspect and has come to the conclusion that reopening is permissible. In the said group of appeals, the substantial question of law posed before the Court, whether the (ITAT was justified in setting aside the reassessment orders on the ground that reopening of assessment under Section 147 of the Act was bad in law. In that particular group of matters, the reopening was initiated by the authority based upon the show cause notice along with accompanied material forwarded by the Excise Department to the Income-Tax Department and on the basis of said material provided by the Excise Department, the Assessing Officer has reopened the assessment of the assessee by issuing notice under Section 148 of the Act. The assessee of that case in the similar manner in this case has contended that the information provided by a different Investigating Team may not be ipso facto utilized to reopen the assessment which has become final by the Income-tax authority. It was also contended by the assessee that there was no independent application of mind on the part of Assessing Officer and just based upon said information provided by the Excise Department, the authority resorted to Section 148 of the Act to reopen the assessment. This issue in extenso dealt with by the Division Bench and by a detailed judgment, came to conclusion that the Assessing Officer has merely relied upon the show cause notice issued by the Excise Department and has not concluded finally and therefore, there is no illegality or irregularity in arriving at a belief that assessment deserves to be reopen. Relying upon the decision delivered by the Apex Court in the case of Purushottam Das Bangur & Another, 224 ITR 362 (SC), it was held that action of reopening of assessment was found to be justified.

29. Similar view has been held by the Hon`ble Gujarat High Court, in the case of Pushpak Bullion (P) Ltd [2017] 85 taxmann.com 84 (Gujarat) wherein the court held that the AO had tangible materials at his command to form a bonafide belief on the basis of the information received from Investigation Wing. At the stage of issuance of notice the only question is whether there was the relevant material on which a reasonable person could have formed a reasonable belief.

30. Therefore, based on these facts and circumstances, ground No.1 and 3 raised by the assessee are dismissed.

31. The grounds Nos. 2, 4 and 5 raised by the assessee are on merits. We note that so far ground no.2 and 4 are concerned, the assessee has not submitted entire documents and evidences before the lower authorities. The conclusion reached by ld CIT(A) in respect of ground No. 2 and 4 are reproduced below:

“6.2 The evidences filed by the assessee which were also examined by the A.O. during the course of assessment proceedings have also been considered afresh one by one and commented upon as under:-

(a) The assessee has filed the copy of account as appearing in the books of accounts M/s. Danodia Consultants (Pvt.) Ltd. As per this ledger account, the assessee has received two cheques of Rs.10,00,000/- and Rs.20,00,000/- on 21.07.2009 and 08.03.2010. However, as per the copy of account as appearing in the books of accounts, the entry of cheque of Rs.20,00,000/-had been shown as credited in the account of M/s. Danodia Consultants (Pvt.) Ltd. along with other entry of Rs.5,00,000/- through bank on 28.03.2011 and interest provided @ 6% of Rs.1,08,295/-. This confirmation has been signed by one director of M/s Gropone Information Services (Pvt.) Ltd. as per the rubber stamp affixed on this. The signature on these two pages also differs from each other. The bank account reflected that prior to clearance of cheque of Rs.10,00,000/-, there were credits through transfer for the Rs.21,00,000/- in this bank through fund transferred to this bank account. Similarly, for clearance of cheque of Rs.20,00,000/- on 08.03.2010, the amounts were received through fund transfer. The copy of ITR-V filed in respect of by this company reflected the income of Rs.1,20,669/- and the return of income has been signed by one Shri Nitin Chhaddha. Thus, there is no creditworthiness of this company which provided the loan of Rs.30,00,000/- to the assessee-trust. Further, the copy of bank statement maintained with State Bank of Patiala in Sonepat (Haryana) reflected the immediate cash withdrawal of Rs.20,00,000/- on 18.03.2010 and except these two entries, no major amounts are found. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(b) The next evidence filed by the assessee is the copy of account of M/s. Danodia Impex (Pvt.) Ltd. as per the books of accounts of the assessee which reflected that the assessee trust received total loan of Rs.1,15,00,000/- and repaid the loan of Rs.50,00,000/- on 14.09.2009. The copy of bank account of this company has been filed which reflected incomplete details and the information has been found to be available in respect of one transaction of Rs.15,00,000/- being the amount of unsecured loans received on 31.07.2009. This page of bank account further reflected that the amount of Rs.15,67,087/-has been credited on 28.07.2009 so as to build the balance for clearing of this cheque. The copies of bank accounts maintained by this company reflected frequent transfer of funds through RTGS/cheques. The copy of ITR-V for the return of income filed for A.Y.2010-11 by this company reflected the income of Rs.2,20,749/- and the return is verified/signed by Shri Naresh Jain, as director who is one of the Jain Brothers. As per the bank account of the assessee-trust, the amount of Rs.20,00,000/- has been credited on 10.03.2010 but prior to that on the same date, the amount of Rs.24,00,056/- has been transferred to somebody else. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(c) The assessee has filed the copy of account as appearing in its books of accounts in respect of the loan transactions alleged to have been received from M/s Sai Inforwea (Pvt.) Ltd., which reflected that the assessee had received unsecured loan of Rs.20,00,000/- through two different cheques credited on 13.07.2009 and 25.08.2009. As per the copy of the bank account of this company, frequent transfers of funds have been reflected. The copy of ITR-V for the return of income filed for A.Y.2010-11 by this company reflected the income of Rs.12,524/- and the return is verified/signed by Shri Sanjeet, as director and one of the persons controlled/managed by Jain Brothers. As per the bank account of the assessee-trust, the entries of Rs.10,00,000/- have been reflected in this bank account but the assessee has chosen to file the selected pages of bank transactions. Therefore, the utilization of these alleged unsecured loans was not found to be verified. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(d) The next evidence is the copy of account of M/s Vardhman Network Solution Pvt. Ltd. from which the amount of Rs.20,00,000/- has been claimed to be received. The bank account of this company reflected that prior to clearance of this cheque of Rs.20,00,000/-, different cheques were deposited so as to clear this cheque along with other cheque of Rs.20,00,000/- given to somebody else. This account also reflected frequent transfer of the funds. The copy of ITR-V filed in respect of this company reflected the total income of Rs.3,10,627/- and this return is verified by one Shri Nitin Chaddha, a person managed and controlled by Jain Brothers. The copy of bank account filed by the assessee showed that the amount of Rs.20,00,000/- has been credited on 23.02.2010 and on the same date, the amount of Rs.20,00,000/- has been withdrawn. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not explained or proved beyond doubt.

(e) The next evidence is the copy of account of M/s Binary Network Solution Pvt. Ltd. for the amount of Rs.30,00,000/- which has been claimed to be received from this company, on 27.03.2010. The assessee did not file the copy of bank account of this company and also the copy of ITR-V filed in respect of this company as filed in other cases. The copy of its bank account filed by the assessee showed that the amount of Rs.30,00,000/- has been credited on 23.02.2010 and on the same date, the amount of Rs.10,00,000/- has been withdrawn. The assessee has filed only one page of this bank account. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(f) The next evidence is the copy of account of M/s Gallant Computetch Pvt. Ltd. for the amounts of Rs.55,00,000/- through two cheques credited on 13.07.2009 for Rs.30,00,000/- and on 09.03.2010 for Rs.25,00,000/- which have been claimed to be received from this company. The assessee had filed only the relevant page of the bank account of this company which reflected the clearance of cheque of Rs.25,00,000/- and for the other amount, no such details have been filed. Further, this account did not explain as to how the bank balances have been built up in the account of this company. This account also reflected frequent transfer of the funds. No details in the form of copy of ITR-V have been filed in respect of this company as filed in the other cases as mentioned above. Further, the copy of bank account filed by the assessee showed that the amount of Rs.25,00,000/- has been credited on 09.03.2010 and it reflected the only one page showing this transaction. Therefore, the sources of funds built up in this bank account prior to clearance of the cheque have not been found to be verifiable. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(G) The next evidence is the copy of account of M/s Macro IT Systems (Pvt.) Ltd. for the amount of Rs.10,00,000/- through cheque credited on 14.07.2009 which has been claimed to be received from this company. The bank account of this company has not been filed. Therefore, the transaction could not be verified with reference to the bank statement. No details in the form of copy of ITR-V filed in respect of this company have been filed as filed in the other cases as mentioned above. Further, the copy of bank account filed by the assessee showed that the amount of Rs.10,00,000/- has been credited on 14.07.2009 and it reflected the cash withdrawn from this bank account prior to receiving of the cheque. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(h)The next evidence is the copy of account of M/s New Era Tradexpo (Pvt.) Ltd. for the amount of Rs.20,00,000/- through one cheque credited on 02.03.2010 which has been claimed to be received from this company. The bank account of this company has not been filed. Therefore, the transactions remained unverified with reference to the bank account of this company. No details in the form of copy of ITR-V filed in respect of this company have been filed as filed in the other cases as mentioned above. Further, the copy of bank account filed by the assessee showed that the amount of Rs.20,00,000/- has been credited on 02.03.2010 and it reflected there were cash withdrawn on the same date through two cheques of Rs.10,00,000/- each. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

(i) The next evidence is the copy of account of M/s Technosoft Info System (Pvt.) Ltd. from the amounts of Rs.20,00,000/- through one cheque credited on 31.03.2010 which has been claimed to be received from this company. The copy of the bank account of this company has not been filed. Therefore, the loan transactions stood unverified in absence of this document. Further, the assessee had filed the relevant page of its bank account which reflected the deposit of cheque of Rs.20,00,000/- on 31.03.2010. Prior to this date, there was cash withdrawal of Rs.24,50,000/- on 30.03.2010. No details in the form of copy of ITR-V filed in respect of this company have been filed as filed in the other cases as mentioned above. Since the bankbook has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained or proved beyond doubt.

6.3 The above fresh analysis of the details made available through written statement which have also been claimed to be placed before the A.O. and during the course of assessment proceedings, the following facts are noticed on such analysis:-

(a) The assessee enjoys the registration in the state of Gujarat and has opened bank account with State Bank of India in Sonepat of Haryana State and the address of the assessee trust has been shown at village Jagdishpur, Dist. Sonepat.

(b) The assessee-trusts is an educational trust running number of colleges and technical institutions in Engineering, Pharmacy and other faculties and the possibility of collection capitation fees in cash from the students cannot be ignored in the case of the assessee-trust.

(c) The frequent cash withdrawals from the bank account against the cheques so received either on the same date, some days before the depositing of cheques or after some days are reflected in the bank account maintained with State Bank of India. The assessee did not come forward with bank book and the cash book either during the course of assessment proceedings or in the present appellate proceedings. Therefore, the explanation for utilizing the cash remained unverified in absence of such details.

(d)The names of all the nine companies are found to be included in the Investigation report of the Investigation Wing of Delhi which carried out the search & seizure operation. In this report, the modus operandi of the Jain brothers for floating shell/dummy companies in the different names with dummy directors who were mainly the persons themselves or their employees/relatives etc. there have also been confessional statements of the persons and reproduced by the A.O. in the assessment order stating that they had floated the dummy/shell companies for the purpose of providing accommodation entries to the beneficiaries. The assessee-trust was also found to be included in the list of such beneficiaries. The A.O. has explained how the assessee-trust managed to provide the cash by citing one example on page 117 of the assessment order for the transactions with one M/s New Era Trade Expo (Pvt.) Ltd.

(e) There has been confession of Shri Naresh Kumar Jain and Shri Anand Kumar Jain that these two Jain brothers used to receive the cash back after repayment of unsecured loans to the above-mentioned companies so as to settle the accounts.

(f) The assessee adopted this modus operandi for the Assessment Years 2010-11 to 2015-16 in which also the similar additions have been made for the same reasons. The assessee also used to obtain accommodation entries not from the Jain brothers but also from the Kolkata based various companies as per the report of the Investigation Wing of Kolkata for A.Y.2011-12 which also showed the bogus donation entries of Rs.2 crores.

32. So far merits of the assessee`s case is concerned, we have observed from the above findings of ld CIT(A), that assessee has not furnished the important documents and evidences before the lower authorities for their examination and conclusion on the factual position. We note that assessee did not submit copy of the bank account in respect of certain parties, as noted by ld CIT(A) above, therefore loan transactions stood unverified. The assessee had filed the relevant page of its bank account which reflected the deposit of cheque of Rs.20,00,000/- on 31.03.2010 and prior to this date, there was cash withdrawal of Rs.24,50,000/- on 30.03.2010. No details in the form of copy of ITR-V filed. Since the bank book has not been furnished during the course of appellate proceedings, the veracity of this cash fund so withdrawn could not be explained. We have highlighted in bold words, in the above findings of ld CIT(A), about the documents and evidences, which were not furnished by assessee during appellate proceedings. We note that ld Counsel relied on the judgment of the Co-ordinate Bench of this Tribunal in the case of Rajhans Construction in ITA No.1450/AHD/2016 for AY.2007-08, order dated 14.03.2022, however, this judgment does not assist the assessee-trust, as the assessee trust, as per the findings of the assessing officer, had received back the amount, again from the respective parties by way of cheque/cash. The findings of the assessing officer, in this respect, is reproduced below:

“5.3.2 Further, it is also stated that during the course of post search investigation in the case of the Shri Anand Kumar Jain and Shri Naresh Kumar Jain, it was also gathered that assessee trust, Bhagwan Mahavir Education Trust had received cash from the Jain Brothers after repayment of unsecured loan in cheque. It can be proved from the following facts ascertained from the tally data seized during the search.

Thus, in view of the facts mentioned above, contention of the assessee that assessee trust had received genuine unsecured loan, is not acceptable. Further, in the submission, assessee has provided the confirmation of parties from which assessee trust had received unsecured loan. In this regard, it is stated that mere confirmation of party on paper cannot prove the genuineness of the transaction. Further, A.O. is not denying the fact that transactions of unsecured loans was taken place with the bogus concern operated by the Jain Brothers. Here, the contention of the A.O is said transactions are accommodation entries provided by the Jain brothers to introduced unaccounted income of the trust in the books of account of the trust. Hence, mere confirmation of unsecured loan given by respective party cannot prove the genuineness of transactions.

33. Learned Counsel also pleads before us that payment was made by account payee cheque therefore transaction is genuine. We do not find force in the arguments of ld Counsel, it is important to mention that in various case laws it has been held that “mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine [Precision Finance Pvt. Ltd. vs. CIT – 208 ITR 465 (Cal).]”. The burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence. Moreover, the fact that TDS has been deducted, does not mean that transaction is genuine, therefore contention raised by the ld. Counsel is not acceptable and is hereby rejected.

34. Thus, we have observed from the order of ld. CIT(A) that assessee-trust has failed to furnish certain evidences and documents before the lower authorities, as noted by us above, hence we are of the view that one more opportunity should be given to the assessee-trust to plead his case and furnish these documents and details before the ld. CIT(A).Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, ground No. 2 and 4 are allowed.

35. In ground No. 5, the contention of the ld. Counsel is that assessee-trust was not allowed claim of depreciation and was not allowed set off against income added. We have heard both the parties and note that depreciation claim of the assessee and claim of set off, if any, should be allowed as per the provisions of law, therefore, we direct the ld. CIT(A) to examine the claim of the assessee and adjudicate the issue in accordance with law. The ground no. 5 raised by the assessee is allowed for statistical purposes.

36. In the result, appeal filed by the assessee is partly allowed for statistical purposes, in above terms.

Order is pronounced on 28/11/2022 by placing the result on the Notice Board.