DLH KAMLA DEVELOPERS, MUMBAI V. DCIT CC- 3(4), MUMBAI

ITA 1373/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4396 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 06-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Principle of natural justice; Validity of assessment; Accommodation entries; Retraction
• Section: 68; 132; 271(1)(c); 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI M. BALAGANESH, AM आयकरअपीलसं./ I.T.A. No. 1373 & 1374/Mum/2019 (ननधधारणवर्ा / Assessment Year: 2013-14 & 2014-15) DLH Kamla Developers Ground Floor, Shanti Vimal, P. M. Road, Vile Parle East, Mumbai-400 057 बनाम/ Vs. DCIT Cen. Cir. -3(4), 19 th floor, Air India Building, Nariman Point, Mumbai-400 021 स्थधयीलेखधसं./जीआइआरसं./PAN No. AAHFD0790K (अपीलधथी/Appellant) : (प्रत्यथी / Respondent) अपीलधथीकीओरसे/ Appellant by : None प्रत्यथीकीओरसे/Respondent by : Shri T. Shankar, Ld. DR सुनवधईकीतधरीख/ Date of Hearing : 22.08.2022 घोर्णधकीतधरीख / Date of Pronouncement : 22.08.2022 आदेश / O R D E R Per Amit Shukla, Judicial Member: The aforesaid appeals have been filed by the assessee against the separate impugned order of even date 24.12.2018, passed by Ld. CIT(A)-51, Mumbai for the quantum of assessment passed u/s 143(3)/153A for AY 2013-14 and section 143(3) for AY 2014-15. 2 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 2. In both assessment years, the issues relates to addition of Rs. 1 crore in each of the years on unsecured loan u/s 68 and addition of Rs. 2 lakhs on account of notional commission. On merits, assessee has challenged the validity of assessment u/s 153A on the ground that there was no incriminating evidence found during the course of search or there was any valid proof u/s 153A and also there was violation of principle of natural justice. Thus, the issue is common arising out of identical set of fact, therefore the same were heard together and disposed of by way of this consolidated order. 3. Despite various opportunities and service of notice, none appeared on behalf of the assessee on various dates, which was fixed for hearing and on none of the occasion assessee has responded to the notices sent through RPAD on the address mentioned in Form-36. Therefore, the appeal of the assessee is being decided ex-parte with the help of Ld. DR. 4. The facts in brief as culled out from the impugned order are that assessee is engaged in the business as Builder, Property Developer and Contractor. A search u/s. 132 of the Act was carried out in the Kamla Landmarc Group (Assessee’s Group) on 3 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 10.12.2013 of which the assessee is one of the entities. During the course of search action, statement on oath of Shri Jitendra Jain (Director of the assessee company and main person of Assessee Group) was recorded u/s 132(4) on 13.12.2013 and subsequently u/s 131 on 30.12.2013. In the said statements recorded on oath, Shri Jitendra Jain admitted, that during the years relevant to AYs 2007-08 to 2014-15, the entities of Assessee Group have availed of accommodation entries in the form of unsecured loans / advances from concerns controlled by various entry operators including Shri Pravin Jain, Shri Yogendra Raj Singhvi, Shri Nemichand Kawadia, Shri Ashok Kothari, Shri Deepak Agarwal and Shri Abhijit Jain. Moreover, the search action revealed that the basic documents in respect of the said unsecured loans/advances including formal agreements specifying the amount, rate of interest, period, terms of repayment, security provided by the assessee, etc. were absent. In course of the statement on oath recorded on 13.12.2013, Shri Jitendra Jain on being confronted with the statements of the entry operators and also the absence of the basic documents in respect of the said unsecured loans/advances, identified 28 concerns from whom the entities of Assessee Group had availed of accommodation 4 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers entries of unsecured loans/advances namely, (i) A-2 Jewels, (ii) Adinath Diamond, (iii) Amit Diamond, (iv) Bhavana Gems, (v) Chintamani Exports, (vi) Faststone Trading Co P Ltd., (vii) Garima Exports, (viii) Impex Gems, (ix) K G R Impex, (x) Kushal Exports, (xi) Laxmi Trading, (xii) Lunkar Kothari, (xiii) Manav Trading (I) P Ltd., (xiv) Mangalam Export, (xv) Maniprabha Exports, (xvi) Meridian Gems, (xvii) Minal Gems, (xviii) Mauli Gems, (xix) New Planet Trading Co P Ltd., (xx) Priya Gems, (xxi) Rose Impex, (xxii) Sambhav Impex, (xxiii) Sanskar Export, (xxiv) Shikha Diamonds P Ltd., (xxv) Subhdil Gems, (xxvi) Surya Diam, (xvii) Vaishali Gems and (xxviii) Yogi Diam. Subsequently, in the statement on oath recorded u/s 131 on 30.12.2013, Shri Jitendra Jain identified 3 more concerns namely (i) Kush Gems P Ltd., (ii) Paradise Gems P Ltd and (iii) Dishita Gems P Ltd. from whom also the assessee had availed of accommodation entries in the form of unsecured loans /advances. However, in respect of 5 other concerns of entry operators, namely, (i) Suprabh Exports, (ii) Dolsun Jewels, (iii) Uttam Gems P Ltd., (iv) Gily Gems P Ltd and (v) Yashica Jewels P Ltd, Shri Jitendra Jain informed that, the entities of the Assessee Group have not entered into any transactions with them. In this statement on oath recorded 5 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers u/s 131, Shri Jitendra Jain explained that the unaccounted funds generated on account of "on-money receipts" have been introduced in the hands of the entities of Assessee Group in the guise of accommodation entries of unsecured loans /advances. The aggregate accommodation entries of unsecured loans/advances availed by the entities of the Assessee Group from the concerns of entry operators was of Rs 103.27 crores. Subsequently, in the post search proceedings, the assessee filed a letter of peak working of Rs 51,26,36,444/- in respect of the said accommodation entries of unsecured loans/advances availed by the various entities of the Assessee Group. 5. In response to the notice issued u/s 153A, assessee declared the total income at Rs. NIL. The AO noted that during the AY 2013- 14 & 2014-15, assessee has taken loan from M/s Kush Gems Pvt. Ltd. at Rs. 1 crore in both the years. In response to the show cause, assessee has accepted about obtaining of accommodation entries from 20 parties in his statement on oath on 13.12.2013. The relevant extracts have also been incorporated in the assessment order. 6 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 6. Thereafter, AO has summarized the modus operandi and chronology arrangement of transactions in the following manner:- 1. Receipt of 'On-Money' from the customers on sale of flats/ shops; 2. The On-Money received in Cash is utilized for either Cash Purchases or routed back into the books as per point no. 3 below; 3. Obtaining Unsecured Loans from entry providers through banking channels after paying the cash received as per point no. 1; 4. The said unsecured loan is utilized for business operations and also for payment to the bogus sundry creditors in order to allegedly prove that the transaction of loan as well as sundry creditors is genuine; 5. The assessee pays interest through banking channels on the bogus unsecured loans taken to prove the genuineness of the lender as well as the loan transaction. The said interest is a bogus expenditure claimed by the assessee and subsequently received back in cash from the lender; 6. The assessee repays the unsecured loans as and when income is earned through proper banking channel or by obtaining another bogus unsecured loan and against the said repayment receives equivalent amount of Cash as was originally paid to the lender to do the bogus unsecured loan transaction; 7 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 7. The Cash received back is re-routed in the similar manner as mentioned above and thus at any given point in time the assessee is not found in possession of unaccounted cash received as 'On Money' as the said Cash is parked in the books of account either as Cash Creditor as inflated purchases leading to bogus creditors. 7. Apart from that, AO has also noted further facts that from the perusal of the income tax returns of those parties from whom unsecured loans or advances were received that these concerns have very low or almost nil capital in their books; amount of creditors and debtors almost matches; the books of these concerns show high amount of sales with negligible profits; these concerns have given loans and advances to many concerns in turn; and lastly, these concerns have received huge funds through RTGS in their bank accounts from various diamond traders and immediately same have been transferred to the bank accounts of real estate developers. 8. AO also issued show cause notice and provided various opportunities to the assessee as to why an ex-parte assessment u/s 144 should not be made to which assessee did not responded. Thereafter, Ld. AO had made additions after observing as under:- 8 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 8. However, till date the assessee has not provided any detail with regard to the said unsecured loan. Vide order sheet noting dated 25-02-2016 the assessee's authorized representative Sh S.V Doshi was provided a copy of the statement of Shri Jitendra Jain, Director of Kamla Landmarc Group concerns recorded u/s 132(4) on 13-12-2013 and u/s 131 on 30-12-2013 with a request to give submissions if any on the same and any further submissions which the assessee desires to make on or before 01-03-2016. The assessee chose not to file details/explanation in this regard. The assessee has thus failed to prove the genuineness of the transaction as well as the identity and the creditworthiness of the lender. It has been categorically accepted in the statement taken on oath of Sh Jitendra Jain (Director of Kamla landmark group entities) that the loans taken and interest paid thereon are bogus and mere accommodation entries. 9. After taking into account all facts as narrated above and all relevant material gathered and inspite of the fact that the assessee has been given adequate opportunities to explain and prove its case, the assessee could not substantiate the credit as appearing in its books of account and therefore the said credit on account of bogus unsecured loan is liable to be added under section 68 of the Act. Accordingly an amount of Rs. 1,00,00,000/- is hereby added back to the income of the assessee under Section 68 of the Act. Penalty proceedings u/s 271(1)(c) of the Act is hereby initiated for 9 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers furnishing inaccurate particulars of income thereby leading to concealment of income. 10. Further it is stated that the assessee must have incurred some commission expense on the said accommodation entries w.r.t. unsecured loan taken which has not been accounted for in the assessee's books of accounts. Such expenditure incurred has been meted out from unaccounted income generated from the business of the assessee. In this regard, in the statement recorded on oath u/s 132(4) on 13-12-2013, Sh. Jitendra Jain has also admitted in his reply to Q 21 that such loans have been taken through finance broker to whom brokerage of 0.25% of the loan amount per annum has been paid. However, in another case of M/s Sahaj Ankur Developers, also covered under search action, Sh. Sunil C. Shah (Partner of the entity) in his statement recorded u/s 131 on 11-12- 2013 accepted the fact that broker Sh. Vijay Betki through whom accommodation entities on unsecured loans have been arranged was paid in cash, commission @ 3% of unsecured loans so arranged. 11. Thus as per prevailing market rate of commission charged on such accommodation entries; commission @ 2% on bogus unsecured loan is hereby adopted and an amount of Rs. 2,00,000/- [2%(Rs.1,00,00,000/-)] is hereby disallowed and added back to the income of the assessee. Penalty u/s 271(1)(c) of the Act is initiated/for furnishing inaccurate particulars of income leading to concealment of income. 10 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 9. Ld. CIT(A) has noted in para no. 4 of the appellate order that various opportunities were given to the assessee and no compliance was made before the first appellate authority. Thus, Ld. CIT(A) was constrained to pass the order on the material available on record. On merits, Ld. CIT(A) took note all the submission of the assessee as well as observations and findings of the AO which are as summarized as under:- (i) The AO has made the addition on the basis of the statement on oath recorded of its director, Shri Jitendra Jain and also the statements of the entry operators who had confessed that they are solely in the business of providing accommodation entries and the concerns listed by them included the said 8 concerns from whom the assessee had claimed to have received unsecured loans/advances during the relevant year. The original statement on oath made by Shri Jitendra Jain on 13.12.2013 was under stressful and taxing conditions and was made solely to buy peace and hasten the closure of search. The said statement recorded at the time of search action was made available to the assessee only on 25.02.2016 and thereafter a retraction statement Was: submitted to the AO. vide letter dated 18.03.2016. In view of the said retraction statement, the original statement of Shri Jitendra Jain does not have any evidentiary value and therefore should not have been relied upon by the AO to make the said addition. 11 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers (ii) It had duly discharged its onus by furnishing the confirmations, financial statements, acknowledgement of return of income, bank statements for the relevant period, etc. of the said lenders. (iii) No excess cash was found at the time of the search action and the AO has not proved that the unaccounted funds in respect of the alleged bogus unsecured loans emanated from the offers of the assessee 10. On the issue of retraction made by Shri Jitendra Jain, Ld. CIT(A) has given detail findings that there was prolonged delay in filing the retraction of the statement and also on 2 occasions, Mr. Jitendra Jain has given statement admitting the accommodation entries not only at the time of search on 13.12.13 but also on 30.12.13 u/s 131. According to the assessee, it has filed confirmation with PAN, financial statement, bank statement, etc. of the alleged lenders, therefore it has discharged onus of creditworthiness of the said transactions. Ld. CIT(A) after observing and relying on the decision of Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd (supra) and also taking note of the fact that AO was in possession of incriminating statements of Shri Jitendra Jain during the course of search action, wherein he 12 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers has admitted that the entities of the assessee group have availed accommodation entries of unsecured loans from the entry operators including Shri Pravin Kumar Jain and others. Thus he held that there was a direct link established between the assessee and the said alleged lenders which were not carrying out any genuine business but solely engaged in providing accommodation entries and therefore, the onus cast upon the assessee was of a higher degree which cannot be said to have been discharged by only submitting name, address. PAN, Annual Report, bank statement etc. The onus could have been discharged by producing before the AO, the lenders as its witness along with their books of accounts and supporting evidences, etc. and in case the lenders were not heeding its request to come before the AO then request the AO to issue summons u/s 131 to ensure their attendance or obtain the retraction affidavits from the said entry operators, which has not been done by the assessee. He further noted that the submissions dated 18.03.2016 which has been alleged not to have been considered by the AO wherein confirmations, etc were enclosed, were submitted at the fag end of the assessment proceedings. Thus, the onus cannot be said to have been discharged by the assessee 13 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers solely by furnishing the name, address, PAN, Annual Report, bank statement for the relevant year etc. considering the adverse findings of the search action. Finally, Ld. CIT(A) confirmed the action of AO after making said additions of Rs. 1 crores for both the AY 13-14 & 14-15 u/s 68 of the Act. Apart from that Ld. CIT(A) also confirmed Rs. 2 Lakhs as commission income for the accommodation entries @ 2%. 11. After hearing Ld. DR and on perusal of relevant order and looking to the fact that there is no representation of the assessee, we have nothing on record to digress from the findings of Ld. CIT(A). Here in this case, assessee or its representative at no point of time had substantiated the genuineness of the loans received in both the years except for filing confirmation with PAN and other documents. These documents have already been analyzed by the AO who have given categorical findings in the following manner:- i) These concerns have very low or almost nil capital in their books. ii) The amount of creditors and debtors almost matches. iii) The books of these concerns show high amount of sales with negligible profits. 14 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers iv) These concerns have, in turn, given loans and advances to many concerns. v) The ratio of creditors to purchases is very high. vi) Most of the concerns are claiming refunds in various years. vii) Perusal of bank accounts of these concerns shows that these concerns have received huge funds through RTGS in their bank accounts from various diamond traders and immediately same have been transferred to the bank accounts of real estate developers. 12. The aforesaid findings coupled with the fact that during the course of search, specifically the director of the company himself admitted that these group concerns were taking accommodation entries from the various entry operators. Once the AO was in possession of the material that dislodges the documents filed by the assessee coupled with the fact that director himself has admitted the fact that these are in the nature of accommodation entries, we do not find any reason to treat the unsecured loans as genuine. Accordingly, findings of Ld. CIT(A) are confirmed and addition of Rs. 1 crores each for AY 2013-14 and 2014-15 is confirmed. 13. In so far as addition on account of notional commission @ 2% on the loan, the same is purely raised on presumption without any material available on record, therefore it is directed to be deleted. 15 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers 14. In so far as the legal ground that there is no incriminating material, nothing has been submitted before us that the addition which have been made are not based on incriminating material. On the contrary, there are detail discussion, which had led to incriminating material alongwith the statement that assessee had taken accommodation entry and also admitted during the search, therefore sans any rebuttal to these findings, this ground is rejected. Accordingly, findings of Ld. CIT(A) is confirmed. 15. In the net result, the appeal filed by the assessee stands Partly allowed. Orders pronounced in the open court on 22 nd August, 2022. Sd/- Sd/- (M. Balaganesh) (Amit Shukla) Accountant Member Judicial Member मुंबई Mumbai;नदनधंक Dated : 22/08/2022 Sr.PS. Dhananjay 16 I.T.A. No. 1373 & 1374/Mum/2019 DLH Kamla Developers आदेशकीप्रतितितिअग्रेतिि/Copy of the Order forwarded to : 1. अपीलधथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. नवभधगीयप्रनतनननध, आयकरअपीलीयअनधकरण, मुंबई/ DR, ITAT, Mumbai 6. गधर्ाफधईल / Guard File आदेशानुसार/ BY ORDER, .उि/सहायकिंजीकार (Dy./Asstt.Registrar) आयकरअिीिीयअतिकरण, मुंबई/ ITAT, Mumbai