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:
