DCIT, Cir.-1, Nashik V. Bharat Glass Tube ltd., Nashik

ITA 1167/PUN/2011

• Counselvise Citation: 116724514 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Unexplained cash credit; Source of fund; Proportionate interest
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1100/PN/2011 (ASSESSMENT YEAR : 2007-08) BHARAT GLASS TUBE LTD., F-2, MIDC, MALEGAON, SINNAR, DIST : NASHIK-422103 .. APPELLANT PAN NO.AABCB5703D VS. ADDL.CIT, RANGE-1, NASHIK .. RESPONDENT ITA NO. 1167/PN/2011 (ASSESSMENT YEAR : 2007-08) DY.CIT, CIRCLE-1, NASHIK .. APPELLANT VS. BHARAT GLASS TUBE LTD., F-2, MIDC, MALEGAON, SINNAR, DIST : NASHIK-422103 .. RESPONDENT PAN NO.AABCB5703D ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 13-04-2015 DATE OF PRONOUNCEMENT : 29-05-2015 ORDER PER R.K.PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AN D ARE DIRECTED AGAINST THE ORDER DATED 11-07-2011 OF THE CIT(A)-II, NASHIK RELATING TO ASSESSMENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY THIS COMMON ORDER. 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SELLING OF ROLLED, FIGURED AND WIRED GLASSES. IT FILED ITS RE TURN OF INCOME ON 29-11-2007 DECLARING INCOME OF RS.51,27,037/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS SHOWN RECEIPT OF FRESH UNSECURED LOANS DURING T HE YEAR. THE CONFIRMATION LETTERS FILED BY THE ASSESSEE SHOWED T HAT ALL CREDITORS WERE OPERATING FROM 2 OR 3 COMMON ADDRESSES. ONLY PHOTOCOPIES WERE AVAILABLE WITH NO ORIGINAL SIGNATU RES OF THE CREDITORS. HE THEREFORE SENT A LETTER OF ENQUIRY T O THE ADIT(INVESTIGATION) MUMBAI IN RESPECT OF THOSE 9 CR EDITORS. SUBSEQUENTLY, THE AO NOTED THAT CONFIRMATION LETTER S HAD NOT BEEN FILED IN RESPECT OF THE FOLLOWING 5 PARTIES FR OM WHOM LOANS HAVE BEEN OBTAINED : 1. SHRI ANEKANT SHARES & SECURITIES PVT. LTD., MUMBA I 2. PALASIA LEASING & INVESTMENT PVT. LTD., MUMBAI 3. SAMYAK SHARES & STOCK BROKER PVT. LTD., MUMBAI 4. SKY TOUCH INFRASTRUCTURE PVT. LTD., MUMBAI 5. UNNO INDUSTRIES LTD., MUMBAI THEREFORE, THE AO ISSUED ANOTHER LETTER TO THE ADIT(INVESTIGATION) MUMBAI SEEKING FURTHER ENQUIRY IN THE CASE OF 14 CREDITORS WHICH INCLUDED THE ABOVE 5 CREDITOR S. THUS, THE AO REQUESTED ENQUIRY IN THE CASE OF 23 LOAN CREDITO RS. FROM THE REPORT OF THE ADIT(INVESTIGATION) MUMBAI THE AO NOT ED THAT OUT OF 23 CASES REFERRED TO HIM ONLY TRANSACTIONS IN RE SPECT OF 2 PARTIES NAMELY CYBERTECH ONLINE LTD., MUMBAI AND M/ S. SAR ENGINEERING LTD., MUMBAI COULD BE CONFIRMED. IT WA S STATED THAT THE ABOVE 2 PARTIES EXIST ON THE GIVEN ADDRESSES AN D AS PER THEIR 3 BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, THE TRAN SACTIONS WITH THE ASSESSEE ARE REFLECTED. HOWEVER, IN RESPECT OF THE OTHER 21 CREDITORS THE ADIT(INVESTIGATION) MUMBAI REPORTED T HAT THE ADDRESSES GIVEN ARE BOGUS/NON-GENUINE AND NO CONCER N WITH THE STATED NAME IS RUNNING ON THESE ADDRESSES. 3. IT WAS FURTHER STATED THAT IN RESPECT OF PARTIES AT SL.NO.1 TO 9 THESE COMPANIES FORM PART OF THE KHANDAR GROUP OF CASES AND ARE INCOME-TAX DEFAULTER COMPANIES WITH HUGE ARREAR S OF TAX AND NO SOURCE OF INCOME. ON BEING CONFRONTED BY THE AO , THE ASSESSEE FILED THE COPIES OF INCOME-TAX RETURN/ACKN OWLEDGEMENT FORM IN RESPECT OF SOME OF THE CREDITORS TO SUPPORT THE CLAIM REGARDING THE GENUINENESS OF LOANS RECEIVED BY IT. HOWEVER, THE AO NOTED THAT THE INCOME RETURNS REVEALED THAT THE CONCERNED PARTIES HAVE NEGLIGIBLE OR NO INCOME, THE DETAILS O F SUCH PARTIES ARE AS UNDER : SR.NO. NAME OF THE PARTY INCOME RETURNED LOAN GIVEN DURING THE YEAR (RS.) 1 UNNO INDUSTRIES LTD., NIL 65,00,000/- 2 PALASIA LEASING & INVESTMENT (P) LTD., NIL 25,00,000/ 3 SKYTOUCH INFRASTRUCTURE (P) LTD., 2,445/- 10,00,000/ 4 SAMYAK SHARES & STOCK BROKER (P) LTD., 352/- 20,00,000/ 5 SHRI ANEKANT SHARES & SECURITIES (P) LTD., 777/- 20,00,000/ HE OBSERVED THAT SIMILAR IS THE CASE WITH OTHER CRE DITORS WHOSE TAX RETURN ACKNOWLEDGMENTS HAVE BEEN FILED. THEREF ORE, APPLYING THE PROVISIONS OF SECTION 68 OF THE I.T. A CT, THE AO MADE ADDITION OF RS.4,72,15,000/- IN RESPECT OF 21 PARTIES ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE THE ON US CAST ON HIM 4 BY PROVING THE IDENTITY AND CAPACITY OF THE CREDITO R AND GENUINENESS OF THE TRANSACTION. SIMILARLY, THE AO DISALLOWED AN AMOUNT OF RS.43,57,009/- OUT OF THE TOTAL INTEREST PAID DURING THE YEAR AT RS.78,30,449/- BEING INTEREST RELATABLE TO 21 ALLEGED CREDITORS AS UNEXPLAINED CASH CREDIT. 4. TO VERIFY THE PURCHASES SHOWN BY THE ASSESSEE, T HE AO ISSUED NOTICE U/S.133(6) TO 9 PARTIES. REPLIES WER E RECEIVED FROM ONLY 2 PARTIES NAMELY M/S. BOTTLE SAMRAT, NASHIK AN D M/S. D.R. BOTTLE TRADERS, NASHIK. IN RESPECT OF 4 OTHER PART IES NAMELY (1) M/S. ASHWINI BOTTLES AND SCRAP CENTER, PUNE,(2) M/S . M.V. GLASS AND MINERALS, MUMBAI, (3) M/S. ABDULLAH TRADE RS, RAMPUR (UP) AND (4) M/S. SIDDIQUI ENTERPRISES (UTTA RANCHAL) NOTICES WERE ISSUED BUT NO RESPONSES WERE RECEIVED TILL THE DATE OF ASSESSMENT. SIMILARLY, IN RESPECT OF THE REMAIN ING 3 PARTIES NOTICES WERE RETURNED UNSERVED WITH THE NOTING NOT KNOWN. THE AO, THEREFORE, ASKED THE ASSESSEE TO FURNISH BA NK ACCOUNT OF THESE PARTIES AND THEIR CONFIRMATIONS. 5. HOWEVER, THE ASSESSEE FURNISHED ITS OWN BANK ACC OUNT SHOWING CHEQUE PAYMENTS TO THESE PARTIES. THE AO O BSERVED THAT WHILE THE BANK ACCOUNT REVEALS THAT THE PAYMEN TS HAVE BEEN MADE IN THE NAMES OF THE 7 PARTIES, HOWEVER, IT DOE S NOT REVEAL THE END RESULT OF THE MONEY WHICH HAS BEEN CREDITED TO THE ACCOUNT OF THOSE PARTIES. ACCORDING TO THE AO, IT IS NOT CLEAR WHETHER CASH HAS BEEN WITHDRAWN AFTER THE CHEQUE HA S BEEN DEPOSITED IN THE ABSENCE OF THE BANK ACCOUNTS OF TH OSE PARTIES. THE AO, THEREFORE, TREATED THE PURCHASES FROM M/S. AJAY 5 ENTERPRISE, AMIT TRADERS AND RAJA TRADERS AS INFLAT ION OF PURCHASES AND MADE ADDITION OF RS.1,93,66,348/- THE DETAILS OF WHICH ARE AS UNDER : M/S. RAJA TRADERS : RS.1,18,16,453/- M/S. AMIT TRADERS : RS.27,13,144/- M/S. AJAY ENTERPRISES : RS.48,36,751/- --------------------- TOTAL : RS.1,93,66,348/- --------------------- THUS, THE AO MADE ADDITION OF RS.7,09,38,357/- TO T HE TOTAL INCOME OF THE ASSESSEE. 6. BEFORE CIT(A) THE ASSESSEE FILED DETAILED WRITTE N SUBMISSION ALONG WITH CERTAIN NEW EVIDENCES. IT WA S SUBMITTED THAT THE AO ASKED THE ASSESSEE TO FURNISH CONFIRMAT ION LETTERS FROM THE LOAN CREDITORS AND DETAILS OF PARTY-WISE P URCHASES FOR THE FIRST TIME ON 18-11-2009 AND WITH RESPECT TO CERTAI N PARTIES GROUPED UNDER THE HEAD TRADE DEPOSITS ETC. ON 14-12 -2009 AND 18- 11-2009. THOSE DETAILS WERE SUBMITTED ON 14-12-200 9, 18,12- 2009 AND 23-12-2009. IT WAS SUBMITTED THAT ONLY ON 23-12-2009 THE AO INFORMED THE ASSESSEE THAT THE LOAN PARTIES COULD NOT BE TRACED ON THE ADDRESSES GIVEN AND THEY DID NOT FILE THEIR INCOME- TAX RETURNS FOR THE A.Y. 2007-08. ACCORDINGLY, THE ASSESSEE WAS CALLED UPON TO SUBSTANTIATE THE LOAN RECEIPTS AND P ROVE THE GENUINENESS AND IDENTITY OF THE LOAN CREDITOR WITH THE HELP OF BANK ACCOUNT STATEMENTS OF THE LENDERS. SIMILARLY, THE ASSESSEE WAS ASKED ON 23-12-2009 TO SUBSTANTIATE CERTAIN PUR CHASES BY PRODUCING CONFIRMATION LETTERS AND BANK ACCOUNT STA TEMENTS. SINCE THE TIME GIVEN BY THE AO WAS VERY LITTLE THE ASSESSEE COULD 6 NOT FURNISH ALL THOSE DETAILS/EVIDENCES AND THE ORD ER WAS PASSED BY THE AO ON 31-12-2009. IN VIEW OF THE ABOVE THE ASSESSEE REQUESTED THE LD.CIT(A) TO ADMIT THE NEW EVIDENCES. 7. BASED ON THE REQUEST OF THE ASSESSEE, THE LD.CIT (A) ADMITTED THE NEW EVIDENCES FILED BEFORE HIM FOR THE FIRST TIME UNDER RULE 46A AND FORWARDED THE SAME TO THE AO AND CALLED FOR A REMAND REPORT FROM THE AO. THE AO OBJECTED TO TH E ADMISSION OF THE NEW EVIDENCES FILED BEFORE HIM FOR THE FIRST TIME. 8. SO FAR AS THE MERIT OF THE CASE IS CONCERNED THE AO ALSO SENT HIS REPORT WHEREIN IT WAS STATED THAT SUMMONS U/S.131 OF THE I.T. ACT WERE ISSUED TO THE LOAN CREDITORS AND TRAD E CREDITORS IN WHOSE CASES THE ADDITIONS WERE MADE TO THE TOTAL IN COME OF THE ASSESSEE. THE PRINCIPAL OFFICERS OF THE 21 COMPANI ES FROM WHOM LOANS WERE TAKEN AND THE 3 TRADE CREDITORS WERE SUM MONED U/S.131 OF THE I.T. ACT. THE LOAN CREDITORS WERE A SKED TO PRODUCE THE EVIDENCES TO SUBSTANTIATE THEIR IDENTITY AND CA PACITY TO EXTEND SUCH LOAN AND THE GENUINENESS OF THE TRANSACTIONS B Y PRODUCING RELEVANT I.T. RETURN WITH BALANCE SHEET/SCHEDULES R EFLECTING THE ABOVE LOAN, COPY OF THE BANK ACCOUNTS AND OTHER SUP PORTING DOCUMENTS. SIMILARLY, THE TRADE CREDITORS WERE ALS O ASKED TO ATTEND THE OFFICE OF THE AO WITH DETAILS/EVIDENCES TO SUPPORT THEIR IDENTITY AND CAPACITY TO EXTEND SUCH CREDIT AND GEN UINENESS OF THE TRANSACTION BY PRODUCING THEIR RELEVANT BOOKS OF AC COUNT, BANK STATEMENTS AND OTHER DETAILS. ALL THE LOAN CREDITO RS RESPONDED TO THE SUMMONS SENT BY THE AO U/S.131 OF THE ACT AND C ONFIRMED TO HAVE GIVEN LOAN TO THE ASSESSEE. 7 9. HOWEVER, THE AO NOTED THAT ALTHOUGH THE CREDITOR S HAVE FURNISHED COPIES OF THEIR BANK ACCOUNTS, INCOME-TAX PARTICULARS AND OTHER DOCUMENTS SUBSTANTIATING THEIR IDENTITY A ND HAVE CONFIRMED TO HAVE RECEIVED THE INTEREST, HOWEVER, T HE LOAN RECEIVED FROM KHANDAR GROUP OF COMPANIES CANNOT BE ACCEPTED SINCE THESE COMPANIES WERE NOT MAINTAINING THE BOOK S OF ACCOUNT AND THE LAST RETURN FILED BY THESE COMPANIES WAS FO R A.Y. 2000- 01. THE AO FURTHER NOTED THAT THESE ASSESSEES DEPO SED BEFORE THE AO THAT CONSEQUENT TO SEARCH ACTION U/S.132 IN THEI R GROUP OF CASES (KHANDAR GROUP) CONDUCTED IN THE YEAR 1992 AT MUMBAI, GROUP HAD OFFERED RS.2.10 CRORES IN THE NAME OF 108 ENTITIES WHICH WAS ACCEPTED BY THE HONBLE HIGH COURT OF BOM BAY. AFTER THE SEARCH THE ENTIRE FINANCIAL AFFAIRS OF TH E COMPANIES/ENTITIES OF THE GROUP WERE IN TOTAL MESS AS A RESULT OF WHICH NONE OF THE COMPANIES OF THE GROUP HAVE FILED THEIR INCOME-TAX RETURNS. SUBSEQUENTLY, IT WAS DEPOSED B EFORE THE AO THAT THERE WAS A FIRE IN THE OFFICE AT MASJID BANDA R OF MUMBAI ON 02-11-2001 WHICH DAMAGED ALL THE BOOKS OF ACCOUNT. IN RESPECT OF THIS CLAIM COPY OF THE FIR REPORT WAS SUBMITTED. IT WAS ACCORDINGLY CLAIMED THAT AFTER THAT INCIDENT NONE O F THE GROUP COMPANIES HAVE FINALIZED THEIR ACCOUNTS NOR FILED T HEIR INCOME- TAX RETURNS. ON A QUERY IN RESPECT OF THE CREDITS SEEN IN THE BANK ACCOUNTS PRIOR TO ADVANCING LOANS, IT WAS DEPOSED B EFORE THE AO THAT THE SAME ARE THROUGH INTERNAL FUND ARRANGEMENT S. 8 10. THE LD.CIT(A) CONFRONTED THE REMAND REPORT OF T HE AO TO THE ASSESSEE AND AFTER RECEIVING THE COMMENTS OF TH E ASSESSEE AGAINST SUCH REMAND REPORT THE LD.CIT(A) SUSTAINED ADDITION OF RS.2,40,00,000/- OUT OF THE TOTAL ADDITION OF RS.4, 61,50,000/- AND DELETED THE REMAINING ADDITION MADE BY THE AO U/S.6 8OF THE I.T. ACT. HE ALSO ACCEPTED THE CONTENTION OF THE ASSESS EE THAT THE AO HAS WRONGLY MADE ADDITION OF RS.4,72,15,000/- INSTE AD OF RS.4,61,50,000/- U/S.68 OF THE I.T. ACT. THUS, HE GAVE RELIEF OF RS.2,21,50,000/- ON ACCOUNT OF ADDITION MADE ON ACC OUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT. 11. SO FAR AS THE DISALLOWANCE OF INTEREST ON UNSEC URED LOAN IS CONCERNED, HE HELD THAT SINCE AN AMOUNT OF RS.2,21, 50,000/- HAVE BEEN ACCEPTED AS GENUINE LOAN IN THE HANDS OF THE A SSESSEE, THEREFORE, INTEREST RELATABLE TO SUCH CASH CREDITS ON RS.2,21,51,000/- CANNOT BE SUSTAINED. HENCE, HE DE LETED THAT. HE HOWEVER SUSTAINED INTEREST OF LOAN AMOUNTING TO RS. 2,40,00,000/. THE REVENUE IS NOT IN APPEAL AGAINST THE RELIEF GRA NTED BY THE LD.CIT(A) OUT OF ADDITION U/S.68 AND PROPORTIONATE INTEREST THEREON. 12. SO FAR AS THE DISALLOWANCE OF PURCHASE OF RAW M ATERIAL AGGREGATING TO RS.1,93,606,348/- FROM THE 3 CONCERN S ARE CONCERNED THE LD.CIT(A) DELETED THE ADDITION. WHIL E DOING SO, HE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUS INESS OF MANUFACTURE OF ROLLED, FIGURED AND WIRED GLASSES FR OM THE SCRAP OF GLASS. THE SUPPLIERS OF THE ASSESSEE ARE SCRAP DEALERS. HE FURTHER NOTED THAT ONE OF THE SUPPLIERS NAMELY M/S. RAJA TRADERS 9 RESPONDED TO THE SUMMONS BY HIS PERSONAL ATTENDANCE AND PRODUCED THE DESIRED RECORDS INCLUDING VAT AND AUDI T REPORT ETC. IN SUPPORT OF THE SUPPLIES MADE BY HIM. HOWEV ER, 2 OTHER CREDITORS NAMELY AJAY ENTERPRISES AND M/S. AMIT TRA DERS DID NOT PERSONALLY ATTEND BUT ASKED FOR ADJOURNMENT. HOWEV ER, THE ASSESSEE HAD FURNISHED COMPLETE DETAILS/EVIDENCE IN RESPECT OF THE PURCHASES EFFECTED FROM THE SAID CONCERNS AT RS.27, 13,144/- AND RS.48,36,751/-. HE FURTHER NOTED THAT THE SUBMISSI ON OF THE ASSESSEE THAT IN ABSENCE OF THE PURCHASES FROM THES E PARTIES, IT WOULD NOT HAVE BEEN POSSIBLE TO ATTAIN THE SALES MA DE AND THE INVENTORY MAINTAINED WHICH HAS NOT BEEN CONTROVERTE D BY THE AO. IN VIEW OF THE ABOVE, THE LD.CIT(A) HELD THAT THE MAIN REASON FOR DISALLOWANCE OF PURCHASES, I.E. NON SERV ICE OF NOTICE U/S.133(6) NO MORE SURVIVES. SINCE SUFFICIENT EVID ENCES WERE PRODUCED BEFORE THE AO DURING REMAND PROCEEDINGS IN RESPECT OF THE PURCHASES MADE HE HELD THAT THE DISALLOWANCE OF PURCHASES AGGREGATING TO RS.1,33,66,348/- CANNOT BE SUSTAINED . HE ACCORDINGLY DELETED THE ADDITION. 13. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CI T(A) THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFOR E US WITH THE FOLLOWING GROUNDS : GROUNDS BY ASSESSEE : WHEREVER CONTEXT SO REQUIRE, THE FOLLOWING GROUNDS OF APPEAL & PRAYERS ARE WITHOUT PREJUDICE TO ONE ANOTHER AND IN ALTERNATIVE - 1 . IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, EVIDENCES ON RECORD AND THE PROVISIONS OF LAW, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION U/S 68 OF THE IT. A CT, 1961, OF RS.2,40, 00,000/- ON THE GROUND OF FAILURE OF THE ASSE SSEE TO ESTABLISH THE CREDIT WORTHINESS OF THE CONCERNED LOAN C REDITORS AND THE GENUINENESS OF TRANSACTIONS, WITH RESPECT TO THE LOANS OF 10 RS. 2,40,00,000/-, FROM THE COMPANIES BELONGING TO TH E KANDHAR GROUP. THEREFORE, IT IS PRAYED THAT THE ADDITION OF RS.2,40,00,000/-, CONFIRMED BY THE LEARNED CIT (A) U /S 68, MAY PLEASE BE CANCELLED/DELETED. 2. THE LEARNED CIT(A) ERRED IN OBSERVING THAT - 'T HE APPELLANT'S OWN ADMISSION THAT THE ENTIRE FINANCIAL AFFAIRS OF THE COMPANIES/ENTITIES OF THE GROUP WERE IN THE TOTAL FI NANCIAL MESS ........' TO JUSTIFY THE CONCLUSION THAT '.......THIS ADMISSION OF APPELLANT ITSELF IS A SUFFICIENT GROUND TO DOUBT THE G ENUINENESS OF THE TRANSACTIONS BETWEEN THE APPELLANT AND THE SAID CO MPANIES', WHEN IN FACT NO SUCH ADMISSION WAS EVER MADE BY APPELLA NT. THEREFORE, IT IS PRAYED TO DELETE THE ADDITION OF RS. 2,40,00,000/-, CONFIRMED U/S 68 BY THE LEARNED CIT (A), BASED ON THE ALLEGED ERRONEOUS ADMISSION. 3. IN ANY CASE, THE LEARNED CIT (A) ERRED IN REJEC TING THE CREDIT WORTHINESS AND THE GENUINENESS OF LOANS FROM KANDHAR GR OUP COMPANIES, ON THE GROUND OF ALLEGED FAILURE OF APPEL LANT TO PROVE THE SOURCE OF THE SOURCE (103 ITR 344 (PAT), 197 ITR 461 (MP) & 32 TTJ 300 (PUNE) RELIED). 4. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADD ITION OF RS.2,40,00,000/-, MADE U/S. 68, BY REJECTING THE NUME ROUS EVIDENCES AVAILABLE ON RECORD, SUPPORTING THE CREDIT WORTHINESS OF THE LOAN CREDITORS AND THE GENUINENESS OF THE LOAN TRANSACTIONS AND WITHOUT BRINGING ON RECORD ANY MATER IAL AGAINST THE AUTHENTICITY OF ANY OF THEM. 5. THE LEARNED CIT (A) ERRED IN UPHOLDING THE DISALL OWANCE OF INTEREST PAID BY ACCOUNT PAYEE CHEQUES, AFTER MAKI NG DUE TDS, ON THE LOANS FROM THE KANDHAR GROUP OF COMPANIES. 6. APPELLANT CRAVES LEAVE TO ADD / AMEND / ALTER AN Y GROUNDS OF APPEAL AND / OR PRAYERS BEFORE OR AT THE TIME OF HE ARING. GROUNDS BY REVENUE : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A)-I NASHIK IS JUSTIFIED IN HOLDING THAT TH E SUPPLIERS M/S. AJAY TRADERS AND M/S. AMIT TRADERS ARE GENUINE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I NASHIK WAS JUSTIFIED IN DELETING THE A DDITION OF RS.75,49,895/- MADE BY THE AO ON ACCOUNT OF INFLATIO N OF PURCHASES? 3. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFIC ER MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENC E TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCC ASION DEMANDS. 11 14. THE LD. COUNSEL FOR THE ASSESSEE WHILE ARGUING THE DISALLOWANCE CONFIRMED BY THE CIT(A) ON ACCOUNT OF LOAN TAKEN AMOUNTING TO RS.2,40,00,000/- FROM THE KHANDAR GROU P OF COMPANIES SUBMITTED THAT THE ASSESSEE HAS TAKEN LOA N FROM 9 CONCERNS OF THE KHANDAR GROUP AMOUNTING TO RS. 2,40 ,00,000/-. ALL THE 9 PRIVATE LIMITED COMPANIES HAVE CONFIRMED TO HAVE GIVEN LOAN TO THE ASSESSEE AND THEIR CONFIRMATION LETTERS ARE PLACED AT PAGE 58 TO 119 OF THE PAPER BOOK. REFERRING TO VAR IOUS PAGES OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE CERTIFICATE OF INCORPORATION OF ALL THESE COMPA NIES ARE PLACED IN THE PAPER BOOK. HE SUBMITTED THAT EXCEPT IN THE CASE OF KAPIL MARKETING PVT. LTD. AND KUSHAL DYE-CHEM PVT. LTD. T HE PAN NUMBER OF ALL THE CREDITORS ARE FURNISHED IN THE PA PER BOOK, COPY OF BANK STATEMENTS OF ALL THE CREDITORS ARE ALSO PL ACED IN THE PAPER BOOK. HE SUBMITTED THAT THE LOAN TAKEN FROM THESE PARTIES HAVE BEEN RECEIVED THROUGH BANK CHEQUES. ALL THE ABOVE PARTIES HAVE APPEARED BEFORE THE AO AND CONFIRMED TO HAVE GIVEN THE LOANS TO THE ASSESSEE COMPANY AND THIS FACT IS ALSO NOTED BY THE AO AT PARA 4.4 TO 4.6 OF THE REMAND REPORT A COPY OF WHIC H IS PLACED AT PAGES 700 TO 703 OF THE PAPER BOOK. HE SUBMITTED T HAT THE COPIES OF THE STATEMENTS RECORDED U/S.131 OF THESE PARTIES ARE NOT AVAILABLE WITH THE ASSESSEE. REFERRING TO THE COPY OF THE REMAND REPORT THE LD. COUNSEL FOR THE ASSESSEE DREW THE AT TENTION OF THE BENCH TO PARA 6 OF THE REMAND REPORT AND SUBMITTED THAT THE AO HAS STATED THAT THE ASSESSEE HAS DULY ESTABLISHED T HE IDENTITY OF THE ABOVE COMPANIES. HOWEVER, HE HAS DOUBTED THE G ENUINENESS 12 AND CREDIT WORTHINESS OF THE ABOVE CREDITORS FOR WH ICH HE HAS MADE THE ADDITION. HE SUBMITTED THAT THE REPAYMENT S OF THESE LOANS ARE ALSO MADE BY BANK CHEQUES. 15. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. JAI BAJRANG GINNING AND PRESSING PVT. LTD. VIDE ITA NO.1430/PN/2009 ORDER DATED 23-1 2-2011 FOR A.Y. 2006-07 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS DISMISSED THE APPEAL OF THE REVENUE WHERE THE C IT(A) HAS ACCEPTED THE LOANS OBTAINED FROM VARIOUS AGRICULTUR ISTS. IT HAS BEEN OBSERVED THAT THE APPLICATION OF SECTION 68 OF THE ACT HAS TO BE KEPT IN MIND QUA THE BURDEN CAST ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE CREDIT APPEARING IN ITS BO OKS OF ACCOUNT. NO DOUBT THE BURDEN IS CAST ON THE ASSESSEE TO DO S O. HOWEVER, THE SAME CANNOT BE EXTENDED TO MEAN THAT IT IS THE DUTY OF THE ASSESSEE TO INFALLIBLY DEMONSTRATE THE SOURCE OF TH E CREDITORS WHO LENT MONEY TO THE ASSESSEE. THE TRIBUNAL HELD THAT OSTENSIBLY THE CREDITORS HAVE TO EXPLAIN THEIR OWN SOURCE AND IF A T ALL THE AO IS NOT SATISFIED REGARDING THE AVAILABILITY OF MONIES WITH THE CREDITORS, SAME CANNOT IPSO FACTO MEAN THAT ASSESSE E HAS FAILED TO DISCHARGE THE BURDEN CAST ON IT U/S.68 OF THE ACT Q UA THE CREDIT APPEARING IN THE ASSESSEES ACCOUNTS BOOKS. REFERR ING TO THE SAID DECISION HE FURTHER SUBMITTED THAT THE TRIBUNAL FUR THER HELD THAT IN CASE WHERE THE CREDITOR APPEARS, CONFIRMS ADVANC ING OF LOAN TO THE ASSESSEE AND ALSO EXPLAINS THE SOURCE OF INCOME , THERE IS NO REQUIREMENT THEREAFTER QUA THE ASSESSEE TO INFALLIB LY TO PROVE SUCH SOURCE OF THE CREDITOR. UNDER THESE CIRCUMSTANCES THE BURDEN 13 SHIFTS ON THE AO TO DEMONSTRATE THAT THE AMOUNTS AD VANCED TO THE ASSESSEE HAVE PROXIMITY TO THE ASSESSEE OR THAT SUC H FUNDS ARE TRACEABLE TO THE ASSESSEE ITSELF. HE ACCORDINGLY S UBMITTED THAT IN VIEW OF THE ABOVE DECISION SINCE THE DIRECTORS OF T HE CREDITOR COMPANIES HAVE APPEARED BEFORE THE AO AND HAVE CONF IRMED TO HAVE GIVEN THE LOAN TO THE ASSESSEE COMPANY, THEREF ORE, ADDITION, IF ANY, HAS TO BE MADE IN THEIR HANDS AND NO ADDITI ON CAN BE MADE IN THE HANDS OF THE ASSESSEE SINCE THE ASSESSEE HA S DISCHARGED THE BURDEN CAST ON IT. THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF THE SOURCE. HE ACCORDINGLY SUBMITTED THA T THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS NOT J USTIFIED SINCE THE ASSESSEE HAS PROVED THE SOURCE OF THE CAS H CREDIT AND HE IS NOT REQUIRED TO PROVE THE SOURCE OF THE SOURCE. 16. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D HE SUBMITTED THAT THE AO DISALLOWED THE PURCHASES FROM AJAY ENTERPRISES AMOUNTING TO RS.48,36,751/-, AMIT TRADE RS AMOUNTING TO RS.27,13,144/- AND M/S. RAJA TRADERS A MOUNTING TO RS.1,18,16,453/-. ALTHOUGH THE CIT(A) HAS DELETED THE PURCHASES MADE FROM THE ABOVE 3 PARTIES, THE REVENUE HAS FILE D THE APPEAL IN RESPECT OF DELETION OF PURCHASES FROM M/S.AMIT T RADERS AND M/S.AJAY ENTERPRISES AMOUNTING TO RS. 27,13,144/- A ND RS.48,36,751/- RESPECTIVELY. REFERRING TO PARA 5.1 TO 6.1 OF THE REMAND REPORT, THE LD. COUNSEL FOR THE ASSESSEE DRE W THE ATTENTION OF THE BENCH TO THE FINDINGS GIVEN BY THE AO IN THE REMAND REPORT AND SUBMITTED THAT ALTHOUGH THE 2 TRA DE CREDITORS, I.E. AJAY ENTERPRISES AND AMIT TRADERS DID NOT ATTE ND THE 14 PROCEEDINGS BY FILING THE ADJOURNMENT LETTERS, HOWE VER, COMPLETE DETAILS/EVIDENCES IN RESPECT OF ALL THE PURCHASES E FFECTED FROM THE SAID CONCERNS WERE FURNISHED BY SHRI RAVINDRA KUMAR JAIN OF BHARAT GLASS TUBE LTD. HE SUBMITTED THAT BASED ON THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN RESPECT OF THE PURCHASES FROM THE ABOVE 2 PARTIES THE CIT(A) HAS DELETED THE ADDI TION. THEREFORE, THE ORDER OF THE CIT(A) BEING IN ORDER S HOULD BE UPHELD AND THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 17. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAD STRONGLY SUPPORTED THE ORDER OF THE AO SO FAR AS TH E APPEAL OF THE REVENUE IS CONCERNED. HE SUBMITTED THAT THE ORDER OF THE CIT(A) IS MERELY BASED ON THE GROUND THAT THE ASSESSEE HAS SHOWN THE SALES AND FURNISHED THE INVENTORY OF STOCK. THIS A CCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE DOES NOT ABSOLVE TH E ASSESSEE TO PROVE EXPENSES MADE ON ACCOUNT OF PURCHASES FROM AJ AY ENTERPRISES AT RS.27,13,144/- AND AMIT TRADERS AT R S. 48,36,751/-. HE SUBMITTED THAT DESPITE GIVING OPPO RTUNITIES DURING ASSESSMENT PROCEEDINGS THE SUPPLIERS DID NOT FURNISH ANY EVIDENCE. THE EVIDENCES TO SUPPORT THE PURCHASES E FFECTED FROM THE SAID PARTIES WERE NOT FURNISHED BY THE ASSESSEE S REPRESENTATIVE. THEREFORE, THE GENUINENESS OF THE TRANSACTION/PARTY REMAINS IN QUESTION. HE ACCORDIN GLY SUBMITTED THAT THE CLAIM OF EXPENSES MADE BY THE ASSESSEE ON ACCOUNT OF PURCHASES MADE FROM AJAY ENTERPRISES AT RS.27,13,14 4/- AND AMIT TRADERS AT RS. 48,36,751/- IS NOT GENUINE AND IT PROVES THAT 15 THE ASSESSEE HAS CONCEALED THE INCOME BY INFLATING ITS PURCHASES. THEREFORE, THE ADDITION DELETED BY THE LD.CIT(A) NO T BEING PROPER SHOULD BE REVERSED AND THAT OF THE ORDER OF THE AO ON THIS ISSUE BE RESTORED. 18. SO FAR AS THE AMOUNT OF RS.2,40,00,000/- SUSTAI NED BY THE LD.CIT(A) IS CONCERNED HE SUBMITTED THAT THE LD.CIT (A) HAS THOROUGHLY DISCUSSED THE ISSUE. THE ASSESSEE HAS N OT PROVED THE CAPACITY OF THE LOAN CREDITORS AND THE GENUINENESS OF THE LOAN TRANSACTION. SINCE FOR ALLOWING CASH CREDIT THE AS SESSEE HAS NOT ONLY TO PROVE THE IDENTITY BUT ALSO HAS TO PROVE TH E GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE LOAN CRE DITOR, THEREFORE, MERELY BY FILING THE DOCUMENTS LIKE CERTIFICATE OF REGISTRATION WITH ROC, MEMORANDUM AND ARTICLES OF ASSOCIATION, B ANK STATEMENTS ETC., THE ASSESSEE CANNOT BE ABSOLVED FR OM THE ONUS CAST ON IT. THE ASSESSEE IN THE INSTANT CASE HAS FA ILED MISERABLY TO SUBSTANTIATE THE CREDIT WORTHINESS OF THE ABOVE COM PANIES ESPECIALLY WHEN THEY HAVE NOT FILED THEIR RETURN OF INCOME AFTER A.Y. 2000-01. HE ACCORDINGLY SUBMITTED THAT THE OR DER OF THE CIT(A) ON THIS ISSUE BE UPHELD. 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. SO FAR AS THE APPEAL FILED BY THE ASSESSEE IS CONCERNED, WE FIND THE AO MADE ADDITION OF RS.4,72,15,000/- U.S.68 OF THE I.T. ACT IN RESPECT OF 21 CREDITORS ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE THE 16 ONUS CAST ON IT REGARDING THE INGREDIENTS OF SECTIO N 68 SUCH AS THE IDENTITY AND CAPACITY OF THE CREDITORS AND THE GENU INENESS OF THE TRANSACTION. WE FIND THE LD.CIT(A) DELETED THE ADD ITION IN RESPECT OF 12 CREDITORS AMOUNTING TO RS.2,32,15,000 /- FOR WHICH THE REVENUE IS NOT IN APPEAL. SO FAR AS THE AMOUNT SUSTAINED BY THE CIT(A) AMOUNTING TO RS.2,40,00,000/- IS CONCERN ED, THE ASSESSEE IS IN APPEAL BEFORE US. 19.1 WE FIND IN THE INSTANT CASE ON THE BASIS OF VA RIOUS DOCUMENTS FILED BY THE ASSESSEE THE LD.CIT(A) CALLE D FOR A REMAND REPORT FROM THE AO WHO REPORTED AS UNDER : 1. KINDLY REFER TO THE ABOVE. 2, AS DIRECTED BY THE LD CIT(A)-II NASHIK, SU MMONS U/S. 131 OF THE INCOME TAX ACT, 1961 WERE ISSUED TO THE LOAN CREDIT ORS AND TRADE CREDITORS IN WHOSE CASES THE ADDITIONS WERE MADE TO THE TOTAL INCOME OF BHARAT GLASS TUBES LTD., SINNAR (BGTL) AS PER DETAI LS FURNISHED IN THE REPORT SUBMITTED UNDER LETTER OF EVEN NO. 2128 DATE D 14/02/2011. PARTY WISE DETAILS AND THE AMOUNTS INVOLVED IN THE IMPUGNED TRANSACTIONS ARE AS GIVEN BELOW. (A) LOAN CREDITORS : SR.NO. NAME OF PARTIES AMOUNT INVOLVED (RS.) 1 BPC FINANCIAL SERVICES PRIVATE LIMITED, MUMBAI 25 0000 2 CYBERTECH INTERACTIVE LIMITED, MUMBAI 250000 3 PRECIOUS REALITIES & INVESTMENTS PVT. LTD., MUMBAI 1450000 4 SAMAYAK MULTITRADE PRIVATE LIMITED, DOMBIVILI (E) 250000 5 SAYONARA PROPERTIES PRIVATE LIMITED, MUMBAI 14500 00 6 DURATEX INDIA PRIVATE LIMITED, MUMBAI 3000000 7 ROSELIN PLASTIC PRIVATE LIMITED, MUMBAI 1500000 8 SHRI ANEKANT SHARES & SECURITIES PRIVATE LIMITED, MUMBAI 2000000 9 PLASIA LEASING & INVESTMENTS PRIVATE LIMITED, MUMBAI 2500000 10 SAMAYAK SHARES & STOCK BROKERS PVT. LTD., MUMBAI 2000000 11 SKYTOUCH INFRASTRUCTURE PRIVATE LIMITED, MUMBAI 1000000 12 UNNO INDUSTRIES LIMITED., MUMBAI 6500000 13 AMRUT MARKETING PRIVATE LIMITED, MUMBAI 5050000 14 KAPIL MARKETING PRIVATE LIMITED, MUMBAI 2600000 15 KAUSAL DIE CHEM PRIVATE LIMITED, MUMBAI 900000 16 MONA TRADERS PRIVATE LIMITED, MUMBAI 2600000 17 SENIOR MARKETING PRIVATE LIMITED, MUMBAI 3100000 18 INDIAGATE SOFT TECH LTD., MUMBAI 2500000 19 NAHESHRI MARKETING LTD., MUMBAI 4750000 17 20 SAFFRON SURGICAL SYSTEM PVT. LTD., MUMBAI 110000 0 21 NAMRATA EXPORTS PVT. LTD., MUMBAI 1400000 B. TRADE CREDITORS : 22 M/S. AMIT TRADERS PROP. SMT. MAYAVATI G. VERMA, MUMBAI 2713144 23 M/S. AJAY ENTERPRISES PROP. GYANCHAND VERMA, MUMBAI 4836751 24 M/S. RAJA TRADERS PROP. RAJMOHAL ASSOMAL DODEJA, ULHASNAGAR, DIST : THANE 11816453 3. THE PRINCIPAL OFFICERS OF ALL THE ABOVE COMPANI ES/CONCERNS WERE SUMMONED U/S 131 OF THE I.T. ACT, 1961 FOR ATT ENDANCE ON 07/03/2011 AND 08/03/2011. BGTL WAS ALSO INFORMED A BOUT THE ABOVE PROCEEDINGS VIDE THIS OFFICE LETTER DATED 25/ 02/2011 AND THE PRESENCE OF THEIR REPRESENTATIVE WAS REQUESTED FOR, IN CASE THEY WOULD LIKE TO CROSS EXAMINE ANY OF THE ABOVE PERSONS. THE LOANS CREDITORS WERE ASKED TO ATTEND THIS OFFICE WITH THE FOLLOWING DETAILS/EVIDENCE. (I) EVIDENCE WITH RESPECT TO THEIR IDENTITY. (II) COPY OF THE RELEVANT INCOME TAX RETURN ALONG WITH THE BALANCE SHEET / SCHEDULE, REFLECTING THE ABOVE LOAN. (III) COPY OF THE BANK ACCOUNT REFLECTING THE ABO VE LOANS (IV) BOOKS OF ACCOUNTS PERTAINING TO THE ABOVE PER IOD. (V) DETAILS / EVIDENCE IN RESPECT OF RECEIPT OF I NTEREST ON THE ABOVE LOAN AND ITS REFLECTION IN THE HOOKS OF ACCOUNTS/INCOME TAX RETURN 3.1 THE TRADE CREDITORS WERE ASKED TO ATTEND THIS O FFICE WITH THE FOLLOWING DETAILS/EVIDENCE. (I) EVIDENCE WITH RESPECT TO THEIR IDENTITY (II) COPY OF RELEVANT INCOME TAX RETURN ALONG WIT H THE BALANCE SHEET/SCHEDULE REFLECTING THE ABOVE PURCHAS ES. (III) DETAILS OF RECEIPTS RELATED TO THE PURCHAS ES. (IV) COPY OF BANK ACCOUNT REFLECTING THE RECEIPTS RELATED TO THE ABOVE PURCHASES (V) BOOKS OF ACCOUNTS PERTAINING TO THE ABOVE PERIOD, (VI) BILLS, TRANSPORT/OCTROI RECEIPTS PERTAININ G TO THE PURCHASES. 4. ALL THE ABOVE, MENTIONED PERSONS EXCEPT TWO OF T HE TRADE CREDITORS I.E. M/S. AJAY ENTERPRISES AND M/S.AMIT TRADERS ATT ENDED IN COMPLIANCE TO THE SUMMONS AS MENTIONED ABOVE. THE D ETAILS INDICATING THE FACTUAL REPORT OF THE PROCEEDINGS AR E SUBMITTED AS BELOW. 4.1 NAME OF THE COMPANY DETAILS OF FILING OF RETURNS PRECIOUS REALITIES AND INVESTMENTS PVT. LTD., MUMBAI AAACP6618E IN COMPLIANCE TO THE SUMMON ISSUED SHRI KUMAR RAICHAND MADAN, DIRECTOR OF THE COMPANY ATTENDED. HIS STATEMENT WAS RECORDED U/S. 131 OF THE I.T. ACT 1961. THE DEPONENT CONFIRMED THAT LOAN AMOUNT AS MENTIONED IN PARA 2 ABOVE WAS ADVANCED TO THE BGTL AND ALSO CONFIRMED RECEIPT OF INTEREST. IN SUPPORT OF THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. 18 MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFICATE OF INCORPORATION, COPY OF MCA- 21, COPIES OF BANK ACCOUNTS RELATING TO ADVANCING THE LOAN, REPAYMENT, AUDITED FINANCIAL STATEMENTS, COPY OF INCOME TAX RETURNS, DULY CONFIRMED ACCOUNT EXTRACTS ETC WERE SUBMITTED DURING THE PROCEEDINGS. BOOKS OF ACCOUNTS WERE PRODUCED AND THE LEDGER ACCOUNTS WERE SUBMITTED. THE COMPANY IS REGULARLY ASSESSED TO TAX. THE DEPONENT HAS FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED, REPAYMENTS DURING THE. YEAR UNDER CONSIDERATION WHICH ARE GIVEN IN THE NOTE (**) BELOW CYBER TECH INTERACTIVE PRIVATE LTD, THANE (AABCC7746H) -DO- BPC FINANCIAL SERVICES PVT .LTD. MUMBAI AABCB8612M -DO- SAMAYAK MULTITRADE PRIVATE LTD., MUMBAI (AAFCS9135A) -DO- SYONARA PROPERTIES PRIVATE LTD., MUMBAI AAFCS6125A -DO- (**) NAME OF COMPANY DETAILS OF LOANS (RS.) OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 PRECIOUS REALITIES AND INVESTMENTS PVT. LTD., MUMBAI 1093071 1450000 143127 93072 2593126 CYBERTECH INTERACTIVE PVT. LTD., THANE 00 250000 14024 00 264024 BP FINANCIAL SERVICES PVT. LTD., MUMBAI 00 250000 14024 00 264024 SAMAYAK MULTITRADE PVT. LTD., MUMBAI 1093684 250000 85996 593684 835996 SYONARA PROPERTIES PVT. LTD., MUMBAI 00 1450000 50055 00 1500055 NAME OF COMPANY DETAILS OF FILING OF RETURNS ROSELIN PLASTICS PVT. LTD., MUMBAI BANDAR, MUMBAI (AABCR2098D) IN COMPLIANCE TO THE SUMMON ISSUED SHRI KUMD R VYAS , ACCOUNTANT OF THE COMPANY DULY AUTHORIZED BY THE DI RECTOR OF THE COMPANY ATTENDED. HIS STATEMENT WAS RECORDED U/S.131 OF THE I.T. ACT. THE DEPONENT CONFIRMED TH AT LOAN AMOUNT AS MENTIONED IN PARA 2 ABOVE WAS ADVANCED TO THE BGTL AND ALSO CONFIRMED RECEIPT OF INTEREST. IN SUP PORT OF THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS, MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFICATE OF 19 INCORPORATION, COPIES OF BANK ACCOUNTS RELATING TO ADVANCING THE LOAN, REPAYMENT, AUDITED FINANCIAL STATEMENTS, COPY OF INCOME TAX RETURNS, DULY CONFIR MED ACCOUNT EXTRACTS ETC WERE SUBMITTED DURING THE PROCEEDINGS. BOOKS OF ACCOUNTS WERE PRODUCED AND TH E LEDGER ACCOUNTS WERE SUBMITTED. THE COMPANY IS REGU LARLY ASSESSED TO TAX. THE DEPONENT HAS FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED, INTEREST RECEIVE D, REPAYMENTS OF THE YEAR UNDER CONSIDERATION WHICH AR E GIVEN IN THE NOTE(**) BELOW DURATEX INDIA PVT. LTD., MASJID BANDAR, MUMBAI (AABCD3996N) -DO- (**) NAME OF COMPANY DETAILS OF LOANS OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 ROSELIN PLASTICS PVT. LTD., 4375961 1500000 459240 375961 5959240 DURATEX INDIA PVT. LTD., MUMBAI 3115979 3000000 388989 215979 6288989 4.3 NAME OF COMPANY DETAILS OF FILING OF RETURNS SHRI ANEKANT SHARES AND SECURITIES PRIVATE LTD., MUMBAI (AAKCS4932J) IN COMPLIANCE TO THE SUMMON ISSUED SHRI SANIA Y A CHOUDHARY, C.A AUTHORIZED BY THE DIRECTOR OF THE COMPANY ATTENDED. HIS STATEMENT WAS RECORDED U/S 13 1 OF THE I.T. ACT 1961. THE DEPONENT CONFIRMED THAT L OAN AMOUNT AS MENTIONED IN PARA 2 ABOVE WAS ADVANCED TO THE BGTL IN SUPPORT OF THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. MEMORANDUM AND ARTICLE OF ASSOCIA TION, CERTIFICATE OF INCORPORATION, COPIES OF BANK ACCOUN TS RELATING TO ADVANCING THE LOAN, REPAYMENT, AUDITED FINANCIAL STATEMENTS, COPY OF INCOME TAX RETURNS, DULY CONFIRMED ACCOUNT EXTRACTS ETC WERE SUBMITTED DURIN G THE PROCEEDINGS. BOOKS OF ACCOUNTS WERE PRODUCED AND T HE LEDGER ACCOUNTS WERE SUBMITTED. THE COMPANY IS REGULARLY ASSESSED TO TAX. THE DEPONENT HAS FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED, INTER EST RECEIVED, REPAYMENTS OF THE YEAR UNDER CONSIDERATIO N WHICH ARE GIVEN IN THE NOTE (**) BELOW PALASIYA LEASING AND INVESTMENT (P) LTD., MUMBAI (AABCP4363M) -DO- SAMAYAK SHARE AND STOCK BROKERS PVT. LTD., MUMBAI (AAKCS3497C) -DO- SKYTOUCH INFRASTRUCTURE PVT. LTD. MUMBAI (AAJCS9934R) -DO- 20 UNNO INDUSTRIES LTD., MUMBAI (AAACU4777B) -DO- (**) NAME OF COMPANY DETAILS OF LOANS OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 SHRI ANEKANT SHARES AND SECURITIES PVT. LTD., MUMBAI 00 2000000 00 00 2000000 PALASIYA LEASING AND INVESTMENT (P) LTD., MUMBAI 00 2500000 00 00 2500000 SAMAYAK SHARE AND STOCK BROKERS PVT. LTD., MUMBAI 00 2000000 00 00 2000000 SKY TOUCH INFRASTRUCTURE PRIVATE LTD., MUMBAI 00 1000000 00 00 1000000 UNNO INDUSTRIES LTD., MUMBAI 00 6500000 00 00 6500000 NAME OF COMPANY DETAILS OF FILING OF RETURNS AMRUT MARKETING PRIVATE LIMITED, MUMBAI (AADCA1750F) IN COMPLIANCE TO THE SUMMON ISSUED SHRI DIPAK JAYAN TILAL DESAI, DIRECTOR OF THE COMPANY ATTENDED. HIS STATE MENT WAS RECORDED U/S.131 OF THE I.T. ACT, 1961. THE DE PONENT CONFIRMED THAT LOAN AMOUNT AS MENTIONED IN PARA 2 A BOVE WAS ADVANCED TO THE BGTL AND ALSO CONFIRMED RECEIPT OF INTEREST. IN SUPPORT OF THE IDENTITY AND GENUINENE SS OF THE TRANSACTIONS, MEMORANDUM AND ARTICLE OF ASSOCIATION , CERTIFICATE OF INCORPORATION, COPIES OF BANK ACCOUN TS RELATING TO ADVANCING THE LOAN, REPAYMENT ETC WERE SUBMITTED DURING THE PROCEEDINGS. THE COMPANY HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND THE LAST RETURN FI LED BY THE COMPANY WAS OF A.Y. 2000-01. IN THIS REGARD, I T IS DEPOSED THAT CONSEQUENT TO SEARCH ACTION U/S.132 IN THEIR GROUP OF CASES (KANDHAR GROUP) CONDUCTED IN THE YEA R 1992 AT MUMBAI, THE GROUP OFFERED TO TAX AN AMOUNT OF RS.2.10 CRORES IN 108 ENTITIES WHICH WAS ACCEPTED B Y THE HONBLE HIGH COURT OF BOMBAY. AFTER THE SEARCH, TH E ENTIRE FINANCIAL AFFAIRS OF THE COMPANIES /ENTITIES OF THE GROUP WERE IN THE TOTAL MESS, AS A RESULT OF WHICH NONE O F THE COMPANIES OF THE GROUP HAVE FILED THEIR INCOME TAX RETURNS SUBSEQUENTLY. FURTHER, IT WAS ALSO DEPOSED THAT TH ERE WAS A FIRE IN THE OFFICE AT MASJID BANDAR, MUMBAI ON 02-1 1-2001 WHICH DAMAGED ALL THE BOOKS OF ACCOUNTS. IN SUPPOR T OF THIS CLAIM, COPY OF THE FIRE REPORT IS ALSO SUBMITTED. HENCE, AFTER THAT INCIDENT, NONE OF THE GROUP COMPANIES HA VE FINALISED THEIR ACCOUNTS/NOT FILED THEIR IT RETURNS . ON A QUERY IN RESPECT OF THE CREDITS SEEN IN THE BANK AC COUNTS PRIOR TO ADVANCING LOANS, IT IS DEPOSED THAT THE SA ME ARE THROUGH INTERNAL FUND ARRANGEMENTS. THE DEPONENT HA S FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED , 21 INTEREST RECEIVED, REPAYMENTS DURING THE YEAR UNDER CONSIDERATION WHICH ARE GIVEN IN THE NOTE (**) BELO W. SENIOR MARKETING PVT. LTD., MUMBAI (AAACS9166N) -DO- KAPIL MARKETING PVT. LTD., MUMBAI (AABCK6480C) -DO- KAUSAL DYECHEM PVT. LTD., MUMBAI (AAACK2595F) -DO- MONA TRADERS PVT. LTD., MUMBAI (AAACM4652M) -DO- (**) NAME OF COMPANY DETAILS OF LOANS OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 AMRUT MARKETING PRIVATE LTD 3552762 5050000 605874 2060302 7148334 SENIOR MARKETING PVT. LTD., 1755674 3100000 294018 2005674 3144018 KAPIL MARKETING PVT. LTD., 2009052 2600000 346887 1509052 3446887 KAUSAL DYECHEM PVT. LTD., 501275 900000 123645 1275 1523645 MONA TRADERS PVT. LTD., 1004080 2600000 293444 504080 3393444 4.5 NAME OF COMPANY DETAILS OF FILING OF RETURNS INDIAGATE SOFTECH LIMITED (AABCI2456G) IN COMPLIANCE TO THE SUMMON ISSUED SHRI PRAFULLA MANSUKHLAL KANDHAR, DIRECTOR OF THE COMPANY ATTENDE D. HIS STATEMENT WAS RECORDED U/S.131 OF THE I.T. ACT, 196 1. THE DEPONENT CONFIRMED THAT LOAN AMOUNT AS MENTIONED IN PARA 2 ABOVE WAS ADVANCED TO THE BGTL AND ALSO CONFIRMED RECEIPT OF INTEREST. IN SUPPORT OF THE IDENTITY AN D GENUINENESS OF THE TRANSACTIONS, MEMORANDUM AND ART ICLE OF ASSOCIATION, CERTIFICATE OF INCORPORATION, COPIE S OF BANK ACCOUNTS RELATING TO ADVANCING THE LOAN, REPAYMENT ETC WERE SUBMITTED DURING THE PROCEEDINGS. THE COMPANY HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND THE LAST RETURN FI LED BY THE COMPANY WAS OF A.Y. 2000-01. IN THIS REGARD, I T IS DEPOSED THAT CONSEQUENT TO SEARCH ACTION U/S.132 IN THEIR GROUP OF CASES (KANDHAR GROUP) CONDUCTED IN THE YEA R 1992 AT MUMBAI, THE GROUP OFFERED TO TAX AN AMOUNT OF RS .2.10 CRORES IN 108 ENTITIES WHICH WAS ACCEPTED BY THE HO NBLE HIGH COURT OF BOMBAY. AFTER THE SEARCH, THE ENTIRE FINANCIAL AFFAIRS OF THE COMPANIES/ENTITIES OF THE GROUP WERE IN THE TOTAL MESS, AS A RESULT OF WHICH NONE OF THE COMPAN IES OF THE 22 GROUP HAVE FILED THEIR INCOME TAX RETURNS SUBSEQUEN TLY. FURTHER, IT WAS ALSO DEPOSED THAT THERE WAS A FIRE IN THE OFFICE AT MASJID BANDAR, MUMBAI ON 02-11-2001 WHICH DAMAGED ALL THE BOOKS OF ACCOUNTS. IN SUPPORT OF T HIS CLAIM, COPY OF THE FIRE REPORT IS ALSO SUBMITTED. HENCE, AFTER THAT INCIDENT, NONE OF THE GROUP COMPANIES HAVE FINALISE D THEIR ACCOUNTS/NOT FILED THEIR IT RETURNS. ON A QUERY IN RESPECT OF THE CREDITS SEEN IN THE BANK ACCOUNTS PRIOR TO ADVA NCING LOANS, IT IS DEPOSED THAT THE SAME ARE THROUGH INTE RNAL FUND ARRANGEMENTS. THE DEPONENT HAS FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED, INTEREST RECEIVE D, REPAYMENTS DURING THE YEAR UNDER CONSIDERATION WHIC H ARE GIVEN IN THE NOTE (**) BELOW. SAFFRON SURGICAL SYSTEMS PVT. LTD., MUMBAI (AAACS9165R) -DO- NAHESHRI MARKETING LTD., MUMBAI (AAACN2080Q) -DO- (**) NAME OF COMPANY DETAILS OF LOANS OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 INDIAGATE SOFTECH LTD 2261157 2500000 322628 2011157 3072628 SAFFRON SURGICAL SYSTEMS PVT. LTD. 502805 1100000 106791 2805 1706791 NAHESHRI MARKETING LIMITED 4050740 4750000 699430 550740 8949430 4.6 NAME OF COMPANY DETAILS OF FILING OF RETURNS NAMRA EXPORTS PVT. LTD., 96, KAZI SAYYAD STREET, MASJID, MUMBAI (AAACN2079F) IN COMPLIANCE TO THE SUMMON ISSUED SHRI AMRUT N. KH OSE, EMPLOYEE DULY AUTHORISED BY THE DIRECTOR OF THE COM PANY ATTENDED. HIS STATEMENT WAS RECORDED U/S.131 OF TH E I.T. ACT, 1961. THE DEPONENT CONFIRMED THAT LOAN AMOUNT AS MENTIONED IN PARA 2 ABOVE WAS ADVANCED TO THE BGTL AND ALSO CONFIRMED RECEIPT OF INTEREST. IN SUPPORT OF THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS, MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFICATE OF INCORPORATIO N, COPIES OF BANK ACCOUNTS RELATING TO ADVANCING THE LOAN, REPAY MENT ETC WERE SUBMITTED DURING THE PROCEEDINGS. THE COMPANY HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND THE LAST RETUR N FILED BY THE COMPANY WAS OF A.Y. 2000-01. IN THIS REGARD, I T IS DEPOSED THAT CONSEQUENT TO SEARCH ACTION U/S.132 IN THEIR GROUP OF CASES (KANDHAR GROUP) CONDUCTED IN THE YEA R 1992 AT MUMBAI, THE GROUP OFFERED TO TAX AN AMOUNT OF RS .2.10 CRORES IN 108 ENTITIES WHICH WAS ACCEPTED BY THE HO NBLE HIGH COURT OF BOMBAY. AFTER THE SEARCH, THE ENTIRE FINANCIAL AFFAIRS OF THE COMPANIES/ENTITIES OF THE GROUP WERE IN THE TOTAL MESS, AS A RESULT OF WHICH NONE OF THE COMPAN IES OF THE GROUP HAVE FILED THEIR INCOME TAX RETURNS SUBSEQUEN TLY. FURTHER, IT WAS ALSO DEPOSED THAT THERE WAS A FIRE IN THE OFFICE AT MASJID BANDAR, MUMBAI ON 02-11-2001 WHICH 23 DAMAGED ALL THE BOOKS OF ACCOUNTS. IN SUPPORT OF T HIS CLAIM, COPY OF THE FIRE REPORT IS ALSO SUBMITTED. HENCE, AFTER THAT INCIDENT, NONE OF THE GROUP COMPANIES HAVE FINALISE D THEIR ACCOUNTS/NOT FILED THEIR IT RETURNS. ON A QUERY IN RESPECT OF THE CREDITS SEEN IN THE BANK ACCOUNTS PRIOR TO ADVA NCING LOANS, IT IS DEPOSED THAT THE SAME ARE THROUGH INTE RNAL FUND ARRANGEMENTS. THE DEPONENT HAS FURTHER FURNISHED INFORMATION OF THE LOANS ADVANCED, INTEREST RECEIVE D, REPAYMENTS DURING THE YEAR UNDER CONSIDERATION WHIC H ARE GIVEN IN THE NOTE (**) BELOW. (**) NAME OF COMPANY DETAILS OF LOANS OPENING ADDITION INTEREST (NET) REPAYMENT TOTAL AS ON 31/3/2007 NAMRATA EXPORTS PVT. LTD., 500510 1400000 163424 510 2063424 IN RESPECT OF ALL THE DEPOSITION AS ABOVE, SHRI RAV INDRA KUMAR JAIN, PRESIDENT (COMMERCIAL) OF BGTL WHO WAS PRESENT CONVEYED THAT NO CORSS EXAMINATION OF THE DEPONENTS IS REQUIRED. 5. IN RESPECT OF THE THREE TRADE CREDITORS LISTED A T SR.NO.22, 23 & 24 OF PARA 2 ABOVE, IT IS SUBMITTED THAT COMPLIANCE TO TH E SUMMONS ISSUED WAS MADE ONLY BY M/S. RAJA TRADERS, PROP. SHRI RAJOMAL A. DHODEJA (HUF). SHRI VISHNU R. DHODEJA, MEMBER OF HUF ATTENDED. HIS STA TEMENT WAS RECORDED U/S.131 OF THE I.T. ACT, 1961. THE DEPONENT CONFIR MED THE TRANSACTION, I.E. SALES MADE BY THE M/S. RAJA TRADERS TO BGTL DURING THE YEAR UNDER CONSIDERATION. BOOKS OF ACCOUNTS OF THE RELEVANT P ERIOD WERE PRODUCED AND LEDGER ACCOUNT, VAT AUDIT REPORT, AUDITED FINANCIAL STATEMENTS, COPY OF INCOME TAX RETURNS AND COPIES OF ALL THE SALE BILLS ALONG WITH THE MATERIAL RECEIPT NOTE OF BTGL, WEIGH BRIDGE SLIPS ETC. WERE PRODUCED IN SUPPORT OF THE TRANSACTIONS. 5.1 IN RESPECT OF THE TRADE CREDITORS M/S. AJAY ENT ERPRISES AND M/S. AMIT TRADERS, BOTH OF MUMBAI, ADJOURNMENT LETTERS WERE R ECEIVED FROM THE ABOVE CONCERNS DULY SIGNED BY THE PROPRIETORS SHRI GYANCH AND R. VERMA AND SMT. MAYAVATI G. VERMA, RESPECTIVELY. IN THE SAID LETTE RS BOTH RECEIVED ON 07/03/20011, WHILE REQUESTING FOR ADJOURNMENT ON 08 /03/2011 DUE TO UNAVOIDABLE REASONS, THE PROPRIETORS HAVE REQUESTED FOR DATE AFTER 21/04/2011. SHRI RAVINDRA KUMAR JAIN OF BGTL WAS S HOWN THE ABOVE MENTIONED ADJOURNMENT LETTERS AND IN THE MATTER OF THE TRANSACTIONS WITH THE SAID CONCERNS, HIS STATEMENT WAS RECORDED ON 08/03' /2011. IN SUPPORT OF THE IMPUGNED TRANSACTIONS, SHRI RAVINDRA KUMAR JAIN FUR NISHED COPIES OF CONFIRMATION OF THE ACCOUNTS OF THE SAID PARTIES, C OPY OF INCOME TAX RETURN OF THE SAID PERSONS OBTAINED BY HIM FROM THEM FOR THE PURPOSE OF THE SUBMITTING THE SAME TO THE CIT(A)-II, NASHIK. COPIE S OF PURCHASE BILLS ALONG WITH DEBIT/ CREDIT (DEDUCTION ADVICES, MATERIAL REC EIPT NOTE OF BGTL AND COPIES OF WEIGHMENT SLIPS OF EACH CONSIGNMENT. 'AFTER EXAMINATION OF THE LOAN CREDITORS AS DISCUSS ED IN DETAIL IN PARA 2, 3 & 4 ABOVE, IT IS SUBMITTED THAT THE IDENTITY OF ALL THE 21 CREDITORS STANDS FULLY ESTABLISHED, AS NECESSARY EVIDENCE WITH REGARD TO T HE SAME HAVE BEEN FURNISHED BY THE CREDITORS DURING THE PROCEEDINGS. WITH REGARD TO THE GENUINENESS OF THE TRANSACTIONS AND CREDIT WORTHINE SS OF THE LOAN CREDITORS AS REGARD THE CREDITORS IN PARAS 4.1 TO 4.3, THE BOOKS OF ACCOUNTS PRODUCED AND COPIES OF I.T RETURNS/BALANCE SHEET, ETC,, SUBMITTE D DURING THE COURSE OF THE PROCEEDINGS, SUBSTANTIATE THE ABOVE PARAMETERS. HOW EVER, THE LOAN CREDITS DISCUSSED IN PARA 4.4 TO 4.6 PERTAINING TO THE KHAN DAR GROUP OF CASES OF MUMBAI, THE ABOVE PARAMETERS ARE NOT SUPPORTED BY B OOKS OF ACCOUNTS/IT RETURNS ETC., FOR THE REASONS GIVEN BY THE DEPONENT S DISCUSSED IN THE PARAS ABOVE. THE DIRECTORS OF THE GROUP HAVE DEPOSED THAT THE SOURCES OF FUND UTILISED FOR ADVANCING THE LOANS ARE INTERNAL FUNDS TRANSFERRED, FROM GROUP 24 COMPANIES/CONCERNS WHICH ARE AS PER THE COPIES OF T HE BANK ACCOUNTS FILED BY THE DEPONENTS DURING THE COURSE OF THE PROCEEDINGS.' 6.1 AS REGARDS THE THREE TRADE, CREDITORS, IT IS SU BMITTED THAT THE PURCHASES FROM M/S RAJA TRADERS OF RS.1,18,16,453/- HAS BEEN CONFIRMED BY SHRI VISHNO R. DHODEJA, WHO HAS ATTENDED THE PROCEEDINGS. EVID ENCE IN THE FORM OF BOOKS OF ACCOUNTS, VAT AUDIT REPORT, AUDITED FINANCIAL ST ATEMENTS, COPIES OF SALE BILLS ETC WERE PRODUCED/SUBMITTED DURING THE PROCEEDINGS IN SUPPORT OF THE IMPUGNED PURCHASES. THE OTHER TWO TRADE, CREDITORS I.E. M/S AJAY ENTERPRISES AND M/S. AMIT TRADERS DID NOT ATTEND THE PROCEEDING S AS DISCUSSED IN PARA 5.1 ABOVE. HOWEVER, COMPLETE DETAILS/EVIDENCE IN SUPPO RT OF THE PURCHASES EFFECT FROM THE SAID CONCERNS AT RS 27,13,144/- AND RS 48 ,36,75L/- RESPECTIVELY, WERE FURNISHED BY SHRI RAVINDRA KUMAR JAIN OF BGTL AS DISCUSSED IN DETAILS IN PARA NO. 5.1 ABOVE. 19.2 DURING THE ASSESSMENT PROCEEDINGS ALTHOUGH THE ASSESSEE HAS PROVED IDENTITY OF ALL THESE COMPANIES BELONGIN G TO THE KHANDAR GROUP, HOWEVER, THE ASSESSEE HAS NOT PROVED THE CREDIT WORTHINESS OF THE LOAN CREDITORS AND GENUINENESS OF THE LOAN TRANSACTION. WE FIND FROM THE SUBMISSION OF THE AS SESSEE AS WELL AS THE REMAND REPORT OF THE AO THAT ALL THESE COMPA NIES HAVE NOT FILED THEIR RETURN OF INCOME AFTER A.Y. 2000-01. I T IS ALSO AN ADMITTED FACT THAT IN THE STATEMENT RECORDED DURING THE COURSE OF REMAND PROCEEDINGS THE AUTHORISED PERSONS OF THESE COMPANIES HAVE CONFIRMED THAT THE FINANCIAL AFFAIRS OF THE COMPANIES/ENTITIES OF THE GROUP WERE IN TOTAL MESS FOR WHICH THESE COMPANIES HAVE NOT FILED THEIR RETURN OF INCO ME. THEREFORE, IN OUR OPINION, IN ABSENCE OF ANY FINANC IAL STATEMENTS AND AUDITED BOOKS OF ACCOUNT, IT IS NOT POSSIBLE TO FIND OUT THE ASSETS AND LIABILITIES OF THE CREDITOR COMPANIES. SINCE THE LOAN CREDITORS ARE PRIVATE LIMITED COMPANIES AND SINCE T HEY HAVE NEITHER MAINTAINED BOOKS OF ACCOUNTS NOR GOT IT AUD ITED AND SINCE THEY HAVE NOT FILED THEIR RETURNS OF INCOME, THEREF ORE, IT IS IMPOSSIBLE TO FIND OUT THE CAPACITY OF THOSE LOAN C REDITORS. 25 19.3 IT IS THE SETTLED PROPOSITION OF LAW THAT FOR ACCEPTING ANY CASH CREDIT AS GENUINE THE ONUS IS ALWAYS ON THE AS SESSEE. THE ASSESSEE HAS TO PROVE TO THE SATISFACTION OF THE AO REGARDING THE IDENTITY AND CAPACITY OF THE LOAN CREDITOR AND THE GENUINENESS OF THE TRANSACTION. ALTHOUGH IN THE INSTANT CASE BY P RODUCING VARIOUS DOCUMENTS SUCH AS ROC INCORPORATION CERTIFI CATE, PAN NO., BANK STATEMENT OF THE LENDER COMPANY AND PRODU CING THE DIRECTORS OF THE RESPECTIVE COMPANIES, THE ASSESSEE HAS DISCHARGED THE ONUS SO FAR AS IDENTITY OF THESE COM PANIES ARE CONCERNED, HOWEVER, THE CAPACITY OF THE LOAN CREDIT ORS AND GENUINENESS OF THE TRANSACTIONS REMAIN UNPROVED ESP ECIALLY WHEN THESE COMPANIES HAVE NOT FILED THEIR RETURN OF INCO ME AFTER A.Y. 2000-01, A FACT ADMITTED BY THE LD. COUNSEL FOR THE ASSESSEE HIMSELF. THE FACT THAT DUE TO THE COMPLETE MESS OF THE FINANCIAL AFFAIRS OF THE ASSESSEE COMPANIES, THE ACCOUNTS COU LD NOT BE PREPARED RAISES SUSPICION IN MIND SO AS TO EXPLAIN THE CAPACITY OF THESE COMPANIES TO EXTEND SUCH HUGE LOANS TO THE AS SESSEE COMPANY. MERELY BECAUSE THEY WERE SEARCHED IN THE PAST AND HAD DECLARED HUGE AMOUNT DURING LONG BACK THE SAME CANNOT BE A GROUND TO EXPLAIN THE CAPACITY OF THE CREDITOR COMP ANIES ESPECIALLY IN ABSENCE OF MAINTENANCE OF BOOKS OF AC COUNTS AND FILING OF INCOME-TAX RETURNS. THEREFORE, WE CONCUR WITH THE FINDING OF THE LD.CIT(A) THAT THE ASSESSEE HAS FAIL ED TO ESTABLISH THE GENUINENESS OF THE LOANS RECEIVED FROM THE COMP ANIES AND THE CAPACITY OF THOSE LOAN CREDITORS. 26 19.4 IT IS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF THE SOURCE IN VIEW OF THE DECISION OF THE PUNE BENCH OF THE TRIBU NAL IN THE CASE OF JAI BAJRANG GINNING AND PRESSING PVT. LTD. (SUPRA). WE HAVE GONE THROUGH THE SAID DECISION AND FIND THAT T HE FACTS OF THAT CASE ARE DIFFERENT FROM THE FACTS OF THE PRESENT CA SE. IN THAT CASE, THE CREDITORS WERE MAINLY AGRICULTURISTS FROM WHOM THE ASSESSEE HAS TAKEN LOAN. THE TRIBUNAL HAS GIVEN A CATEGORIC AL FINDING THAT ASSESSEE HAD RECEIVED LOANS OF RS.56,75,000/- FROM 24 INDIVIDUALS WHO WERE MAINLY AGRICULTURISTS. THE AO IN THAT CASE WAS NOT SATISFIED ABOUT THAT THE FINANCIAL CAPACITY OF THE LENDERS PRIMARILY ON THE GROUND THAT BEFORE ADVANCING OF LO ANS BY ACCOUNT PAYEE CHEQUES THE LENDERS HAVE DEPOSITED CA SH IN THEIR BANK ACCOUNTS. FURTHER, THE AO HAD OBSERVED THAT D URING THE COURSE OF EXAMINATION SOME OF THE LENDERS COULD NOT EXPLAIN AS TO WHO HAD FILLED UP PAY IN SLIPS OF THE CASH DEPOSITE D IN THE BANK ACCOUNT APART FROM OTHER THINGS. THE TRIBUNAL WHIL E ALLOWING THE CLAIM OF THE ASSESSEE HAS OBSERVED AS UNDER : 9. IN THE PRESENT CASE, IN SO FAR AS 16 PERSONS ARE CO NCERNED, THEIR EXISTENCE IS NOT IN DISPUTE. IT IS ALSO CLEAR THAT SUCH PERSONS APPEARED AND ADMITTED ADVANCING OF LOANS TO THE ASSESSEE . IT IS ALSO CLEAR THAT SUCH PERSONS EXPLAINED THEIR SOURCES OF INCOME. APART FROM BLANDLY DIS-BELIEVING THEIR CAPACITY, TH E ASSESSING OFFICER HAS NOT LED ANY EVIDENCE TO PROVE THAT FUNDS FOR THE IMPUGNED CREDIT COULD BE TRACED TO THE ASSESSEE ITSELF. IT WILL ALSO NOT BE OUT OF PLACE TO MENTION HERE THAT ALL THE LE NDERS ARE AGRICULTURISTS, WHO HAVE SOLD THEIR COTTON PRODUCE TO THE ASSESSEE COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF GINNI NG AND PRESSING OF COTTON. IT IS ALSO A STATED POSITION THAT THE LENDERS ARE NOT STRANGERS TO THE ASSESSEE COMPANY, INASMUCH AS THEY ARE ITS SHAREHOLDERS. MOREOVER, IT IS ALSO FOUND BY THE COMM ISSIONER OF INCOME-TAX (APPEALS) THAT ALL THE CREDITORS HAVE B EEN REPAID SUBSEQUENTLY THROUGH ACCOUNT PAYEE CHEQUE. CONSIDERING THE ENTIRETY OF THE AFORESAID CIRCUMSTANCES, IN OUR VIEW, THE ASSESSEE HAD DULY DISCHARGED ITS BURDEN CAST UNDER SECTION 68 O F THE ACT SO AS TO PROVE THE THREE INGREDIENTS, NAMELY, IDENTITY , CREDIT- WORTHINESS OF THE LENDERS AS WELL AS GENUINENESS OF THE 27 TRANSACTIONS. THE ASSESSING OFFICER HAVING REGARD TO THE MATERIAL ON RECORD AND IN LAW PROCEEDED ON MERE PRESUMPTIONS A ND SURMISES TO DISBELIEVE THE EXPLANATION FURNISHED BY THE ASSESSEE. 19.5 HOWEVER, IN THE INSTANT CASE, ALTHOUGH THE LOA N CREDITORS ARE PRIVATE LIMITED COMPANIES NEITHER THEY HAVE MAI NTAINED ACCOUNTS NOR FILED THEIR RETURN OF INCOME ON THE GR OUND THAT THE ENTIRE FINANCIAL AFFAIRS OF THE COMPANIES/ENTITIES OF THE GROUP WERE IN THE TOTAL MESS, THEREFORE, THE GENUINENESS OF THE TRANSACTIONS AND CAPACITY OF THE LOAN CREDITORS ARE DOUBTFUL. THEREFORE, THE VARIOUS CASE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE INCLUDING THE DECISION OF THE PUNE BENCH CITED (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE O N THIS ISSUE ARE DISMISSED. 20. NOW COMING TO THE GROUNDS RAISED BY THE REVENUE WE FIND THE AO HAD DISALLOWED THE PURCHASES TO THE TUNE OF RS.1,93,66,348/- BEING PURCHASES MADE FROM RAJA TRA DERS AT RS.1,18,16,453/-, FROM AMIT TRADERS AT RS.27,13,144 /- AND FROM AJAY ENTERPRISES AT RS.48,36,751/- ON THE GROUND TH AT THE ASSESSEE COULD NOT PRODUCE THE BANK ACCOUNT OF THOS E PARTIES. WE FIND BEFORE CIT(A) THE ASSESSEE FURNISHED VARIOUS D ETAILS ON THE BASIS OF WHICH THE LD.CIT(A) CALLED FOR A REMAND RE PORT FROM THE AO. ON THE BASIS OF THE APPEARANCE OF THE PROPRIET OR OF M/S. RAJA TRADERS BEFORE THE AO AND THE DOCUMENTS IN RES PECT OF THE OTHER 2 PARTIES HAVING BEEN FILED BEFORE THE AO, TH E LD.CIT(A) DELETED THE ADDITION IN RESPECT OF THE 3 PARTIES FR OM WHOM THE 28 ASSESSEE HAD MADE PURCHASES AND WHICH WAS DOUBTED B Y THE AO. WE FIND ALTHOUGH REVENUE HAS NOT CHALLENGED THE DEL ETION OF RS.1,18,16,453/- BEING PURCHASES FROM M/S. RAJA TRA DERS WE FIND THE REVENUE IS AGGRIEVED WITH THE ORDER OF THE CIT( A) IN DELETING THE PURCHASES MADE FROM M/S.AMIT TRADERS AMOUNTING TO RS.27,13,144/- AND M/S. AJAY ENTERPRISES AMOUNTING TO RS.48,36,751/-. WE FIND FROM THE ASSESSMENT ORDER THAT THE MAIN GRIEVANCE OF THE AO IN THE ASSESSMENT ORDER THAT AL THOUGH THE ASSESSEE HAD MADE THE PAYMENTS TO THE ABOVE PARTIES BY ACCOUNT PAYEE CHEQUE, HOWEVER, SINCE THE ASSESSEE COULD NOT PRODUCE THE BANK ACCOUNT OF THOSE SUPPLIERS, THEREFORE, IT IS N OT CLEAR AS TO WHETHER CASH HAS BEEN WITHDRAWN AFTER THE CHEQUES W ERE DEPOSITED. WE FIND THE AO IN THE REMAND REPORT HAS MENTIONED THAT COMPLETE DETAILS/EVIDENCES IN RESPECT OF THE PURCHASES EFFECTED FROM THE SAID 2 CONCERNS WERE FURNISHED. H E HAS NOT RAISED ANY SUCH DOUBT NOW. COPY OF THE REMAND REPO RT HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS . THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) IN DELETING THE ADDITIONS MADE ON ACCOUNT OF PURCHASES FROM THE ABOVE 2 PARTIES. 21. SO FAR AS THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE PARTIES DID NOT APPEAR BEFO RE THE AO IS CONCERNED, WE FIND THIS WAS NOT THE CASE OF THE AO. IT WAS THE DOUBT OF THE AO THAT THE ASSESSEE MIGHT HAVE WITHDR AWN CASH FROM THOSE BANK ACCOUNTS AFTER MAKING PAYMENT THROU GH ACCOUNT PAYEE CHEQUES SINCE 133(6) NOTICES WERE RETURNED UN SERVED. HE 29 HAS NO OTHER DOUBTS. SINCE THE AO IN THE REMAND RE PORT HAS SPECIFICALLY MENTIONED THAT THE ASSESSEE HAS FILED THE COMPLETE DETAILS/EVIDENCE IN RESPECT OF THE PURCHASES EFFECT ED FROM THE SAID 2 CONCERNS, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). WE ALSO CONCUR WITH THE FINDING OF THE LD.CIT(A) THAT IN ABSENCE OF THE IMPUGNED PURCHASES IT WOULD NOT HAVE BEEN POSSIBLE TO ATTAIN THE SALES MADE AND THE INVENTORY MAINTAINED. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAI LED REASONING GIVEN BY THE LD.CIT(A) AND IN ABSENCE OF ANY DISTIN GUISHABLE FEATURES BROUGHT ON RECORD BY THE LD. DEPARTMENTAL REPRESENTATIVE AGAINST THE ORDER OF THE LD.CIT(A) O N THIS ISSUE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). ACCORD INGLY, WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29-05-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 29 TH MAY, 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, NASHIK 4. THE CIT-II, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE