ITO Vs Hi Link City Homes Pvt. Ltd (ITAT Indore)
ITAT held that merely for not producing the cash creditors before the Ld. AO even when all the necessary documents as required to prove the identity, creditworthiness and genuineness of the cash creditors are furnished by the assessee, cannot be a reasonable basis to make addition for unexplained cash credit u/s 68 of the Act.
During assessment-proceeding, Ld. AO treated M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. as paper companies and the loans taken by assessee therefrom as mere accommodation-entries and, therefore, assessed the loans as undisclosed income of assessee u/s 68 of the act. During appellate-proceeding before Ld. CIT(A), the assessee made a detailed submission with documentary evidences to prove that the loans were genuine. The Ld. CIT(A) carefully considered the submission of assessee and deleted addition by holding as under:
“5.17 It is clear from the above facts and judicial decisions so discussed above that the AO had made the addition solely on the basis of nonappearance of the Principal Officer before the AO. But in the written reply, the appellant has relied on the decision of Delta Transformer (supra) of Jurisdictional Bench of ITAT, Indore wherein the Hon’ble Bench had given its findings that merely for not producing the cash creditors before the Ld. AO even when all the necessary documents as required to prove the identity, creditworthiness and genuineness of the cash creditors are furnished by the assessee, cannot be a reasonable basis to make addition for unexplained cash credit u/s 68 of the Act. Further, the appellant has also submitted all the required documents to prove the identity, creditworthiness and genuineness of the transactions. Hence, keeping in view the various judicial decisions so discussed above, the documents so submitted by the appellant and the fact that none of these evidences could be controverted by the AO neither in the assessment-order nor in the remand-report so submitted; the addition so made by the AO is hereby deleted and accordingly, this ground of appeal is hereby allowed.”
During hearing before us, representatives of both sides fairly agreed that the lenders i.e. M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. have been found as genuine companies and the loans taken by other assessees from those lenders have been found to be genuine and additions made by revenue u/s 68 in the assessment of those assessees, have been deleted in a plethora of decisions by ITAT, Indore Bench.
Respectfully following the decision of Co-ordinate Bench and taking into account fair acceptance by both sides, we are inclined to hold that the loan of Rs. 1,15,00,000/- and Rs. 85,00,000/- taken by assessee from M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. respectively do no warrant any addition u/s 68 and the Ld. CIT(A) was justified in deleting the addition made by Ld. AO.
FULL TEXT OF THE ORDER OF ITAT INDORE
Feeling aggrieved by appeal-order dated 26.08.2020 of learned Commissioner of Income-Tax (Appeals)-III, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 27.03.2015 passed by learned ITO, Ward-2(1), Indore [“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2012-13, the revenue has filed this appeal on following grounds:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the appeal of the assessee, though the Assessing Officer vide remand report requested to hold the decision of the appeal till the cross examination and confirmations of loans from the Principal Officers of the lenders company. The order of the Ld CIT(A) is against the principle of natural justice as it was passed without affording the opportunity to the Assessing Officer and therefore, same in perverse.
2 Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,50,00,000/-in respect of unsecured loans taken from M/s Jayant Securities and finance Ltd and Rs. 85,00,000/- form M/s Jay Jyoti India Pvt Ltd, without considering the fact the companies such as M/s Jayant Securities and Finance Ltd and M/s Jay Jyoti India Pvt Ltd have been prove to be entry provider companies after investigation by DDIT(Inv.), Unit-2(1), Kolkata who disseminated a very important report in respect of the malpractice of accommodation entries by shell companies M/s Jayant Securities and finance Ltd and M/s Jay Jyoti India Pvt Ltd.
3. Whether on the facts in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,50,00,000/-and Rs. 85,00,000/- ignoring the information available that assessee has taken and accommodation entry from M/s Jayant Securities and Finance Ltd and M/s Jay Jyoti India Pvt. Ltd, companies engaged purely in malpractice of accommodation entries to prospective beneficiaries.
4. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition on account of cash credit amounting to Rs. 24,52,910/from Nilesh Jain ignoring fact that Shri Nilesh Jain filled ITR for A.Y. 2012-13 at Rs. 3,14,240/- and he has not attended for examination to establish genuineness of the transaction, identity and credit worthiness.
5 Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition on account of commission for obtaining unexplained cash credits Rs. 6,00,000/- and Interest on unexplained cash credits Rs. 18,85,033/- as the assessee has filed the genuineness of transactions.”
2. The registry has informed that that the present appeal was required to be filed by 16.11.2020 but the same was actually filed on 05.01.2021, after a delay of 50 days. The Ld. AR prayed that the delay has occurred due to Covid-19 Pandemic. The Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted the Ld. DR who agreed to the submission of Ld. AR. In view of this, the appeal is proceeded with for hearing, there being no delay.
3. The assessee-company filed return of relevant-assessment year declaring a total income of Rs. 39,030/-, which was subjected to scrutiny, statutory notices u/s 143(2)/142(1) were issued and ultimately the assessment-order was passed u/s 143(3) at a total income of Rs. 2,49,76,970/- after making certain additions. Aggrieved, assessee filed appeal to Ld. CIT(A) and got relief. Being aggrieved by order of Ld. CIT(A), now the revenue is in appeal before us. We shall proceed ground by ground.
Ground No. 1:
4. At the time of hearing, no submission was made by appellant qua this ground. Hence the ground is taken as non-pressed and dismissed.
Ground No. 2 and 3:
5. In these Grounds, the issue involved is the addition of Rs. 1,15,00,000/- (Rs. 1,50,00,000/- is wrongly mentioned in ground) and Rs. 85,00,000/- in respect of loans taken by assessee from M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. respectively.
6. During assessment-proceeding, Ld. AO treated M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. as paper companies and the loans taken by assessee therefrom as mere accommodation-entries and, therefore, assessed the loans as undisclosed income of assessee u/s 68 of the act. During appellate-proceeding before Ld. CIT(A), the assessee made a detailed submission with documentary evidences to prove that the loans were genuine. The Ld. CIT(A) carefully considered the submission of assessee and deleted addition by holding as under:
“5.17 It is clear from the above facts and judicial decisions so discussed above that the AO had made the addition solely on the basis of nonappearance of the Principal Officer before the AO. But in the written reply, the appellant has relied on the decision of Delta Transformer (supra) of Jurisdictional Bench of ITAT, Indore wherein the Hon’ble Bench had given its findings that merely for not producing the cash creditors before the Ld. AO even when all the necessary documents as required to prove the identity, creditworthiness and genuineness of the cash creditors are furnished by the assessee, cannot be a reasonable basis to make addition for unexplained cash credit u/s 68 of the Act. Further, the appellant has also submitted all the required documents to prove the identity, creditworthiness and genuineness of the transactions. Hence, keeping in view the various judicial decisions so discussed above, the documents so submitted by the appellant and the fact that none of these evidences could be controverted by the AO neither in the assessment-order nor in the remand-report so submitted; the addition so made by the AO is hereby deleted and accordingly, this ground of appeal is hereby allowed.”
7. During hearing before us, representatives of both sides fairly agreed that the lenders i.e. M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. have been found as genuine companies and the loans taken by other assessees from those lenders have been found to be genuine and additions made by revenue u/s 68 in the assessment of those assessees, have been deleted in a plethora of decisions by ITAT, Indore Bench. A few decisions are quoted below:
(i) Decisions related to M/s Jayant Securities and Finance Ltd.:
(a) Radhishwari Developers P. Ltd. ITA No. 493/Ind/2018
(b) Sanjay Shukla Vs. ACIT ITA No. 333/Ind/2020
(c) Global Realcon Ltd. ITSSA No. 170 to 174/Ind/2020
(d) M/s Admanum Finance Ltd. ITA No. 331/Ind/2018
(e) Tirupati Construction ITA No. 522/Ind/2014
(f) K. Patel Finance Ltd. ITA No. 440/Ind/2010
(ii) Decisions related to M/s Jay Jyoti India Pvt. Ltd.:
(a) Radhishwari Developers P. Ltd. ITA No. 493/In/2018
(b) Sanjay Shukla Vs. ACIT ITA No. 333/Ind/2020
(c) Global Realcon Ltd. ITSSA No. 170 to 174/Ind/2020
8. We have perused the order of ITAT in Sanjay Shukla Vs. ACIT ITA No. 333/Ind/2020 (supra), where it was held thus:
“12.5. As regards the loan taken from Jayant Security and Finance Ltd. Badodara at Rs. 1.25 crores and interest paid thereon at Rs.8,79,041/-, we find that the alleged cash creditor is a limited Shri Sanjay Shukla, Indore 10 company, Permanent Account No. and address has been provided. Loan taken through proper banking channel Confirmation of account is on record. Jayant Security and Finance Ltd. is a nonbanking financial company having experience of 26 years. This company is regularly assessed to tax and has also been subjected to scrutiny assessment and the additions made thereon have traveled before Coordinate Bench Ahmedabad in the case of M/s. Jayant Security and Finance Ltd. in ITANo.753/Ahd/2012. We also find that the loan taken from alleged company has been treated as genuine and the additions made in the hands of other loan receivers have been deleted by this Tribunal in the case of M/s Tirupati Construction ITANo.533/Ind/2014 and M/s K.K. Patel Finance Ltd. ITANo.440/Ind/2010. We, therefore, find no reason to doubt the genuineness and creditworthiness of Jayant Security and Finance Ltd. and identity is well proved which has been rightly appreciated by Ld. CIT(A) in order to delete the addition made u/s 68 of the Act at Rs.1.25 cr and interest disallowance at Rs.8,79,041/-.
12.6. As regards the cash creditor namely M/s Jay Jyoti India Pvt. Ltd. Mumbai we find that this company was incorporated in 1999. As on 31.03.2013 it had share capital of Rs. 6,33,50,500/- and net reserves and surplus of Rs.1,08,62,25,646/-. Bank statement, confirmation of account, ledger statement, audited financial statement, Memorandum of Association and tax deducted at source certificate are placed on record which in totality are sufficient to prove identity of this company, genuineness of the transaction and creditworthiness of this company It is further proved with the fact Shri Sanjay Shukla, Indore 11 that it had merely advanced 0.75% of the funds which it was capable of i.e. it had financial capacity of advancing 133 times more than the loan given to the assessee company. Thus, Ld. CIT(A) has rightly appreciated these facts for deleting addition for made u/s 68 of the Act as well as the interest disallowance.”
9. Respectfully following the decision of Co-ordinate Bench and taking into account fair acceptance by both sides, we are inclined to hold that the loan of Rs. 1,15,00,000/- and Rs. 85,00,000/- taken by assessee from M/s Jayant Securities and Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. respectively do no warrant any addition u/s 68 and the Ld. CIT(A) was justified in deleting the addition made by Ld. AO. We, therefore, uphold the action of Ld. CIT(A). With, this Ground No. 2 and 3 of the revenue are dismissed.
Ground No. 4:
10. During assessment-proceeding, Ld. AO observed that the assesee-company had shown a cash-credit of Rs. 24,52,910/- from Shri Nilesh Jain. On enquiry by Ld. AO, the assessee submitted that it purchased stamp papers from Shri Nilesh Jain in regard to registries made for purchase of lands and the amounts of stamp-papers was outstanding. On further digging from database of Income-tax department, Ld. AO observed following financials of Shri Nilesh Jain:
