DCIT CC 7(2), MUMBAI V. MANBA FINANCE LTD, MUMBAI

ITA 1448/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Source of fund; Retrospective amendment; Question of law; Accommodation entries; Retraction; Revised return
• Section: 133A; 14A; 133(6); 131; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM I.T.A. NO S . 1448, 1449 & 1467/MUM/2017 ( ASSESSMENT YEAR S : 2013 - 14, 2011 - 12 & 2010 - 11 ) DY. CIT - CC - 7(2), ROOM NO. 655, AAYAKAR BHAVAN, MUMBAI - 4 00 020 VS. M/S. MANBA FINANCE LTD. 324, RUNWAL HEIGHT, OPP. NIRMAL LIFESTYLE, MULUND (W), MUMBAI - 400 080 PAN/GIR NO. AAACM 4681 Q ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI CHAUDHARY ARUNKUMAR SINGH RESPONDENT BY : DR. P. DANIEL DATE OF HEARIN G : 06.08.2018 DATE OF PRONOUNCEMENT : 05.10 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THE S E ARE A PPEAL S BY THE REVENUE AGAINST THE COMMON ORDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 49, MUMBAI (LD.CIT(A) FOR SHORT) DATED 29.12.2016 AND PERTAINS TO THE ASSESSMENT YEAR S (A.Y.) , 2010 - 11, 2011 - 12 & 2013 - 14. 2 ITA NOS.1448, 1449 & 1467/MUM /2017 2 . VARIOUS GROUNDS HAVE BEEN RAISED BY THE ASSESSEE BUT THE GROUNDS ARE COMMON IN ALL THE YEARS. FROM THE GROUNDS OF APPEAL FOLLOWING ISSUES ARE ADUMBRATED: FIRST COMMON ISSUE RAI SED RELATES TO THE DELETION OF ADDITION U/S. 68 BY THE LD. CIT(A) OF UNSECURED LOAN TAKEN BY THE ASSESSEE COMPANY . SECOND COMMON ISSUE RAISED PERTAINS TO DELETION OF ADDITION OF INTEREST EXPENSES ON THESE LOANS. THIRD COMMON ISSUE RAISED IS THAT THE LD . CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT RULE 14A. 3 . FIRST ISSUE RELATES TO THE DELETION OF THE ADDITION U/S. 68 FOR FOLLOWING UNSECURED LOANS: A.Y. 2013 - 14 RS.9,00,00,000/ - A.Y. 2011 - 12 RS.85,00,000/ - A.Y. 2010 - 11 RS.50,00,000/ - 4 . SINCE THE FACTS ARE IDENTICAL, WE ARE REFERRED TO FACTS AND FIGURES FROM A.Y. 2013 - 14, WHEREIN THE OTHER YEARS ARE ALSO REFERRED. 3 ITA NOS.1448, 1449 & 1467/MUM /2017 5 . THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF FINANCING TWO WHEELERS LOANS IN MUMBAI AND THREE WHEELER LOANS. 6. BRI EF FACTS OF THE CASE ARE AS UNDER: IN THIS CASE, A SURVEY ACTION U/S 133A OF THE IT ACT WAS CONDUCTED BY DDIT (INV), UNIT III (2), MUMBAI ON 25.03.2014 BASED ON THE INFORMATION THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES OF BOGUS UNSECURED LOANS AND SH ARE APPLIC ATION MONEY FROM VARIOUS DU MMY CONCERNS, WHO ENGAGED IN THE BUSINESS OF P ROVIDING ACCOMMODATION ENTRIES. DURING THE COURSE OF THE SURVEY ACTION, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE EXAMINED. THE ASSESSEE WAS ASKED TO FURNISH THE DE TAILS OF THE VARIOUS PARTIES FROM WHOM UNSECURED LOANS AND SHARE APPLICATION MONEY HAD BEEN TAKEN. THE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE REVEALED THAT THE ASSESSEE HAD RECEIVED UNSECURED LOANS AND SHARE APPLICATION MONEY FROM THE CONCERNS/CO MPANIES OPERATED AND CONTROLLED BY PRAVEEN KUMAR JAIN, WHO WAS ONE OF THE LEADING ENTRY OPERATOR, CONTROLLING AND OPERATING VARIOUS DUMMY CONCERNS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES OF PURCHASES, LOANS, SHARE CAPITAL ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN FROM THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME THAT THE ASSESSEE HAS SHOWN UNSECURED LOANS OF RS.28,96,00247 / - , ON PERUSAL OF THE DETAILS OF THE UNSECURED LOANS FILED, IT IS SEEN THAT THE ASSESSE E COMPANY HAS TAKEN UNSECURED LOANS FROM THE CONCERNS/COMPANIES CONTROLLED BY PRAVIN JAIN WHICH ARE AS UNDER: SR NO PARTICULARS AMOUNT OF LOAN 1 ATHARV BUSINESS PVT LTD 1,75,00,000 4 ITA NOS.1448, 1449 & 1467/MUM /2017 2 DUKE BUSINESS PVT LTD 1,50,00,000 3 NAKSHTRA BUSINESS PVT LTD 40,00, 000 4 OLIVE OVERSEAS PVT LTD 1,30,00,000 5 VIRAJ MERCANTILE PVT LTD 75,00,000 6 PRAGATI GEMS PVT LTD 1,15,00,000 7 SUMUKH COMMERCIAL PVT LTD 90,00,000 TOTAL 7,75,00,000/ - A SURVEY U/S 133A OF THE I.T. ACT WAS ALSO CONDUCTED IN THE CASE OF MR. RAKES H DOSHI PROP RAKESH DOSHI & ASSOCIATES ON 25.03.2014. SHRI RAKESH DOSHI WAS THE BROKER WHO HAD ARRANGED THE LOANS AND SHARE CAPITAL FROM THE CONCERNS/COMPANIES CONTROLLED BY PRAVIN JAIN. THE ASSESSEE HAD ALSO SUBMITTED DURING THE COURSE OF THE SURVEY THAT THE BOGUS ENTRIES OF SHARE CAPITAL AND LOANS HAD BEEN ARRANGED FROM THE DUMMY CONCERNS OF PRAVIN KUMAR JAIN BY MR. RAKESH DOSHI WHO WAS ONE OF THE BROKERS WHO ARR ANG ED FOR ACCOMMODATION ENTRIES. IN THE STATEMENT OF MR. RAKESH DOSHI RECORDED DURING THE COU RSE OF THE SURVEY, IT WAS ADMITTED BY HIM THAT HE WAS AN ACCOMMODATION ENTRY FACILITATOR. IT WAS ALSO FOUND THAT HE HAD ARRANGED ACCOMMODATION ENTRIES FROM VARIOUS OTHER COMPANIES WHICH WERE NOT A PART OF THE PRAVIN KUMAR JAIN CONTROLLED COMPANIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN UNSECURED LOANS FROM SUCH PARTIES ALSO AND THE DETAILS OF THE SAME WHICH ARE AS UNDER : SR NO PARTICULARS AMOUNT OF LOAN 1 AARYA GLOBAL SHARES & SECURITIES LTD 20,00,000 2 ELLORA ELECTRICALS LTD 25,0 0,000 3 PACHELI ENTERPRISES LTD 40,00,000 4 VENUS PORTFOLIO & FINANCE PVT LTD 40,00,000 TOTAL 1,25,00,000 5 ITA NOS.1448, 1449 & 1467/MUM /2017 IN VIEW OF THE ABOVE MENTIONED FACTS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THE UNSECURED LOAN S TAKEN FROM THE P ARTIES MENTIONED IN PARA 4 AND PARA 5 SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT AS THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS OF ADVANCING THE LOANS AND GENUINENESS OF THE TRANSACTIONS WERE NOT PROVED. WITH REGARD TO THE LOANS TAKEN FROM THE PRAVIN KUMAR JAIN CONTROLLED GROUP OF COMPANIES, THE ASSESSEE COMPANY HAS STATED THAT THEY HAVE SUBMITTED THE LOAN CONFIRMATIONS, COPIES OF THE ACKNOWLEDGMENT OF RETURNS OF INCOME FOR A.Y. 2013 - 14 FILED BY THE COMPAN IES ADVANCING THE LOANS, COPIES OF THEIR ANNUAL AUDITED ACCOUNTS FOR THE A.Y.2013 - 14 AND COPY OF BANK STATEMENTS HIGHLIGHTING THE LOANS ADVANCED BY THE COMPANIES TO THE ASSESSEE COMPANY. THE ASSESSEE HAS REQUESTED THAT CROSS EXAMINATION OF PRAVEEN JAIN MAY BE ALLOWED TO THEM AS THE STATEMENT OF PRAVIN JAIN HAS BEEN TAKEN BEHIND THEIR BACK. THE ASSESSEE HAS FURTHER SUBMITTED THAT SHRI PRAVIN KUMAR JAIN HAD RETRACTED HIS STATEMENT THAT HE WAS IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES OF LOANS, PURCHA SES AND SHARE CAPITAL AND AS SUCH THE REASON FOR DOUBTING THE GENUINENESS OF THE LOANS NO LONGER EXISTED. IT HAS ALSO BEEN STATED THAT ALL THE LOANS HAD BEEN REPAID IN THE F.Y. 2013 - 14. THE ASSESSEE HAS REQUESTED THAT NO ADDITION SHOULD BE MADE ON ACCOUNT OF THE UNSECURED LOANS A MOUNTING TO RS.7,75,00,000/ - . WITH REGARD TO THE OTHER LOANS TAK EN BY THE ASSESSEE THROUGH SHRI RAKESH DOSHI, BROKER, FROM COMPANIES WHICH WERE NOT A PART OF THE PRAVIN JAM CONTROLLED GROUP OF COMPANIES, THE ASSESSEE SUBMITTED THAT THEY HAD FILED LOAN CONFIRMATIONS, COPIES OF THE ACKNOWLEDGMENT OF RETURNS OF INCOME FOR A.Y. 2013 - 14 FILED BY THE COMPANIES 6 ITA NOS.1448, 1449 & 1467/MUM /2017 ADVANCING THE LOANS, COPIES OF THEIR ANNUAL AUDITED ACCOUNTS FOR THE A.Y.2013 - 14 AND COPY OF BANK STATEMENTS HIGHLIGHTING THE LOANS ADVANCED TO THE ASSESSEE COMPANY. IN ALL THE CASES INTEREST HAD BEEN PAID AND TAX ALSO DEDUCTED AT SOURCE. IT HAS ALSO BEEN STATED THAT THE BALANCE SHEET OF ALL THE FOUR COMPANIES SHOWED THAT THE COMPANIES HAD ENOUGH RESERVES AND SHARE CAPITAL AND AS SUCH THE COMPANIES HAD RESOURCES, ABILITY & FINANCIAL CAPACITY TO LEND THE MONEY/LOANS. THE ASSESSEE COMPANY HAS SUBMITTED THAT IN THE STATEMENT OF SHRI RAKESH DOSHI, NOWHERE IT HAD BEEN STATED THAT HE HAD ANY COMPANY UNDER HIS CONTROL AND ACCOMMODATION ENTRIES HAVE BEEN PROVIDED FROM THEM TO THE ASSESSEE COMPANY. THE ASSESSEE HAS REQUESTED THAT NO ADDITION SHOULD BE MADE ON ACCOUNT OF THE UNSECURED LOANS AMOUNTING TO RS.1,15,00,000/ - . 6.2 T HE ASSESSEE COMPANY HAS ALSO RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM (I) GUJARAT HIGH COURT IN THE CASE OF MURLIDHAR LAHORIMAL(280 ITR 512) (II) RAJAS THAN HIGH COURT IN THE CASE OF LABH CHAND BOHRA (219 CTR 571) (III) DELHI HIGH COURT IN THE CASE OF DWARKADISH INVESTMENT PVT. LTD. (330 ITR 298) (IV) DELHI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. (299 ITR 268) (V) SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT. LTD. (216 CTR 195) (VI) BOMBAY HIGH COURT IN THE CASE OF CREATI VE WORLD TELEFILM LTD. (333 ITR 100 (VII) ALLAHABAD HIGH COURT IN THE CASE OF VACMET PACKAGING (INDIA) P. LTD. DATED 11 - 02 - 2014 [2014 - TIOL - 297 - HC - ALL - IT] (VIII) DELHI HIGH COURT IN THE CASE OF VALUE CAPITAL SERVICES P. LTD. (307 ITR 334) (IX) MU MBAI ITAT IN THE CASE OF NETSCAPE SOFTWARE LTD. V. DCIT ITA/ 3852/M/2009 DT 19 - 10 - 2011 (X) I T A T DELHI BENCHES IN THE CASE OF DIVINE (INDIA) INFRASTRUCTURE PVT. LTD. ITA NO. 2082 /DEL/2011 DATED 08 - 12 - 2014 THE ASSESSEE COMPANY HAS REQUESTED THAT O N THE BASIS OF THEIR ABOVE SUBMI SSIONS THE ADDITION U/S 68 OF THE IT. ACT MAY NOT BE MADE. 7 ITA NOS.1448, 1449 & 1467/MUM /2017 5. THE A.O. CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. HOWEVER, HE REFERRED TO THE SURVEY ACTION CONDUCTED BY DDIT (INV), MUMBAI ON 25.03.2014 BASED ON THE INF ORMATION THAT THE ASSESSEE COMPANY HAD TAKEN ACCOMMODATION ENTRIES OF BOGUS UNSECURED LOANS AND SHARE APPLICATION MONEY FROM VARIOUS DUMMY CONCERNS, WHO WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. HE ALSO NOTED THAT THE STATEMENTS OF D IRECTOR OF THE ASSESSEE COMPANY WAS ALSO RECORDED DURING THE SURVEY IN WHICH HE HAS ACCEPTED THAT BOGUS TRANSACTION RELATING TO THE SHARE CAPITAL AND SHARE PREMIUM AND UNSECURED LOAN. THE A.O. FURTHER OBSERVED THAT FOR ASSESSMENT YEAR 2012 - 13, THE ASSESSEE HAS REVISED THE RETURN OF INCOME AND OFFERED THE SHARE CAPITAL AND SHARE PREMIUM FOR TAXATION. HOWEVER, THE ASSESSEE DID NOT OFFERED UNSECURED LOANS FOR TAXATION. THE A.O. OBSERVED THAT IN VIEW OF THE SURVEY ON PERSONS INCLUDING THE DIRECT O R OF THE ASSESS EE, THE ASSESSEE HAS TAKEN BOGUS UNSECURED LOANS. 6. THE A .O. OBSERVED THAT LOANS CONFIRMATION, COPY OF ANNUAL ACCOUNTS, ACKNOWLEDGEMENT OF RETURN OF INCOME AND THE BANK STATEMENTS OF THE PERSONS ADVANCING THE LOANS OF THE FOLLOWING PERSONS WERE EXAMINED FROM THESE FOLLOWING PARTIES : 1. ATHARV BUSINESS P. LTD. 2. DUKE BUSINESS P. LTD. 3. NAKSHTRA BUSINESS P. LTD. 4. OLIVE OVERSEAS P. LTD. 5. VIRAJ MERCANTILE P. LTD. 6. PRAGATI GEMS PVT. LTD. 7. SU MUKHA COMMERCIAL P. LTD. 7. THE A.O. OBSERVED THAT THESE COMPANIES HAVE RETURN ED LOSSES OR SHOWN INCOME OF RS.2000/ - . THAT THEY REVEALED THAT THE COMPANIES HAVE NEGATIVE RESERVES AND SURPLUS. 8 ITA NOS.1448, 1449 & 1467/MUM /2017 THAT BANK STATEMENT S CONTAIN ONLY RTGS/TRANSFER ENTRIES OF VARIOUS OTHER ENTITIES /CONCERNS CONTROLLED BY SHRI PRAVEEN KUMAR JAIN. HENCE, THE A .O. INFERRED THAT THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO PROVE THE CREDITWORTHINESS OF THE PERSONS ADVANCING THE LOANS. HE FURTHER NOTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE PARTIES IN SUPPORT OF HIS CLAIM. THAT THE ASSESSEE INSTEAD OF PRODUCING THE PARTIES HAS SOUGHT CROSS EXAMINATION OF SHRI PRAVEEN KUMAR JAIN. HE ALSO SUBMITTED THAT SHRI PRAVEEN KUMAR JAIN HAS FILED AN AFFIDAVIT WITHDRAWING THE STATEMENT THAT HE IS ENGAGED IN THE BUSINESS OF PROVIDING ACCO MMODATION ENTRIES AND AS SUCH THE LOANS TAKEN FROM THE PARTIES/CONCERNS CONTROLLED BY HIM ARE GENUINE. THEREAFTER, THE A.O. AGAIN REFERRED TO THE SEARCH ACTION U/S. 132 IN THE CASE OF SHRI PRAVEEN KUMAR JAIN ON 01.10.2013. HE NOTED THAT THE VARIOUS INCRIMI NATING MATERIALS WERE OBTAINED AND STATEMENTS OF VARIOUS PERSONS WERE RECORDED. HE REFERRED TO THEIR MODUS OPERANDI. HE REFERRED TO THE PERUSAL OF THE FINANCIALS OF ALL THE CONCERNS/ENTITIES CONTROLLED BY SH RI PRAVEEN KUMAR JAIN THAT SHOWED THAT PRACTICALL Y NO TAX IS PAID AND THERE ARE HUGE SUNDRY CREDITORS, SUNDRY DEBTORS AND LOANS AND ADVANCES IN RELATION TO PURCHASE AND SALE SHOWN IN THEIR RESPECTIVE BOOKS OF ACCOUNTS. THAT THIS CLEAR LY SHOW S THAT THE COMPANY IS INVOLVED IN THE ACTIVITY OF PROVIDING BOGU S ACCOMMODATION ENTRIES . HE OBSERVED THAT THE SAID CONCLUSION IS NOT BASED ON THE SWORN STATEMENTS OF SHRI PRAVEEN KUMAR JAIN AND HIS ASSOCIATES, BUT ALSO ON THE BASIS OF EVIDENCE GATHERED DURING THE SEARCH AND POST SEARCH ENQUIRIES. HE NOTED THAT RETRACTI ON STATEMENT OF SHRI PRAVEEN KUMAR JAIN HAVE BEEN COMMUNICATED TO THE INVESTIGATION WING OF THE DEPARTMENT DURING THE COURSE OF SEARCH ACTION. THEREAFTER, HE REFERRED TO SEVERAL CASE LAWS FOR THE 9 ITA NOS.1448, 1449 & 1467/MUM /2017 PROPOSITION THAT WHEN THE STATEMENT WAS VOLUNTARY, THE ONUS WAS ON THE ASSESSEE TO PROVE THAT THE SAID DECLARATION WAS MADE UNDER ANY MISCONCEPTION OF FACTS, ETC. 8. THE A.O. FURTHER NOTED THAT WITH REGARD TO THE LOAN ADVANCE BY THE PARTIES OTHER THAN THOSE CONTROLLED BY SHRI PRAVEEN KUMAR JAIN, IT WA S SEEN THAT THE ASSESSEE HAS TAKEN LOANS FROM THE FOLLOWING PARTIES: SR. NO. PARTICULARS AMOUNT OF LOAN 1 AARYA GLOBAL SHARES & SECURITIES LTD. 20,00,000 2 ELLORA ELECTRICALS LTD. 25,00,000 3 PACHELI ENTERPRISES LTD. 40,00,000 4 VENUS PORTFOLIO & FINANCE PVT. LTD . 40,00,000 TOTAL 1,25,00,000 9. THE A.O. NOTED THAT THE FACTS I N THIS REGARD ARE THAT THE SURVEY ACTION WAS TAKEN U/S 133A IN THE CASE OF SHRI RAKESH DOSHI BROKER, WHO HAD ARRANGED LOANS FOR THE ASSESSEE FROM THE ABOVE MENTIONED CONCERNS/ENTITLES. THE STATEMENT OF SHRI RAKESH DOSHI WAS RECORDED WHEREIN HE HAS SUBMITTED THAT HE IS A ACCOMMODATION ENTRY FACILITATOR. HE ALSO STATED THAT THESE COMPANIES ARE MERE SHELL COMPANIES. 10. THEREAFTER, THE A.O. NOTED THAT THE ASSESSEE HAS SUBMITTED BALANCE SHEET OF ALL THE FOUR COMPANIES WHICH SHOWED THAT THE COMPANIES HAD ENOUGH RESERVES AND SHARE CAPITAL AND AS SUCH HAD THE RESOURCES , ABILITY AND FINANCIAL CAPACITY TO LEND THE MONEY/LOANS. THE A.O. NOTED THAT MERE SUBMISSIONS AND CONFIRMATION IS NOT ENOUGH TO J USTIFY THE CREDITWORTHINESS OF THE COMPANIES ADVANCING THE LOAN. HE REFERRED TO THE STATEMENT OF SHRI RAKESH DOSHI. HE FURTHER OBSERVED THAT RESERVES AND SURPLUS SHOWN IN THE BALANCE SHEET OF THE FOUR COMPANIES PERTAINS TO SHARE PREMIUM, THE GENUINENESS OF WHICH HAS NOT 10 ITA NOS.1448, 1449 & 1467/MUM /2017 BEEN PROVED BY THE ASSESSEE. THE BANK STATEMENTS ALSO REVEAL THAT THE ONLY ENTRIES ARE ON ACCOUNT OF RTGS AND TRANSFER ENTRIES FROM VARIOUS OTHER PARTIES. THE A.O. NOTED THAT THE ASSESSEE WAS ASKED TO PRODUCE SHRI RAKESH DOSHI AND OTHER PERS ON ADVANCING THE LOANS. THE A.O. NOTED THAT THE ASSESSEE HAS FAILED TO DO SO. 11. FROM THE ABOVE DISCUSSION, THE A.O. OBSERVED THAT IT IS CLEAR THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE CREDITWORTHINESS OF THE CONCERNS ADVANCING THE LOANS AND GENU INENESS OF THE TRANSACTION. WITHOUT DEALING WITH THE CASE LAWS REFERRED BY THE ASSESSEE, HE HAS HELD THAT TH ESE WERE NOT APPLICABLE ON THE FACTS OF THE CASE. HE REFERRED TO THE DECISION S OF THE HONBLE APEX COURT IN THE CASE OF NAVODAYA CASTLE (P.) LTD. VS . CIT [2015] 230 TAXMAN 268 (SC) , SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC) AND THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRECISION FINANCE PVT. LTD. 208 ITR 465 (CAL). 12. IN THIS BACKGROUND , THE A.O. HELD THAT THE UNSECURED LOAN S WERE NOTHING BUT ACCOMMODATION ENTRIES LIABLE TO BE ADDED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. HE FURTHER DISALLOWED INTEREST PAID ON THESE GROUNDS AMOUNTING TO RS.22,11,631/ - . 13. HE FURTHER NOTED THAT THE ASSESSEE HAS SHOWN INVESTMENTS OF R S.5,00,000/ - BUT NO EXPENDITURE HAS BEEN DISALLOWED U/S. 14A OF THE ACT. HE NOTED THAT THE ASSESSEE WAS ASKED TO SUBMIT THE COMPUTATION OF THE DISALLOWANCE U/S.14A R/W RULE 8D AND THE SAME WAS COMPUTED AT RS.1,54,143/ - . THEREFORE, THE A.O. DISALLOWED THE SUM OF RS.1,54,143/ - AND ADDED THE SAME THAT TO THE INCOME OF THE ASSESSEE. 11 ITA NOS.1448, 1449 & 1467/MUM /2017 14. SIMILAR FACTS WERE NOTED BY THE A.O. FOR A.Y. 2011 - 12 WHICH WERE AS UNDER: ASSESSEE E - FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCOME AT RS.1,52,98,1507 - . THE ASSESSMENT WAS FINALIZED U/S.143{3) ON 12.12.2013 DETERMINING THE TOTAL INCOME AT RS.155,10,154/ - . A SURVEY ACTION U/S.133A OF THE IT ACT WAS CONDUCTED BY DDIT(LNV), UNIT LLL(2),MUMBAI ON 25.03.2014 BASED ON THE INFORMATION THAT THE ASSESSEE HAD TAKEN ACC OMMODATION ENTRIES OF BOGUS UNSECURED LOANS AND SHARE APPLICATION MONEY FROM VARIOUS DUMMY CONCERNS, WHO ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. ON PERUSAL OF THE DETAILS SUBMITTED REGARDING THE PARTIES FROM WHOM UNSECURED LOAN AND SHAR E APPLICATION MONEY HAD BEEN TAKEN, IT WAS REVEALED THAT THE ASSESSEE HAD RECEIVED UNSECURED LOANS AND SHARE APPLICATION MONEY FROM CONCERNS/COMPANIES OPERATED AND CONTROLLED BY PRAVIN KUMAR JAIN WHO WAS ONE OF THE LEADING ENTRY OPERATOR, CONTROLLING AND O PERATING VARIOUS DUMMY CONCERNS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES OF PURCHASES, LOANS, SHARES, CAPITAL ETC. THE ASSESSMENT PROCEEDING WAS REOPENED U/S.147 OF THE ACT AND NOTICE U/S.148 DATED 21.1.2015 WAS ISSUED AND SERVED. IN RESP ONSE TO NOTICE U/S.148, THE ASSESSEE COMPANY REQUESTED THAT THE RETURN OF INCOME FILED ON 30.9.2011 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148 OF THE ACT. DURING THE YEAR THE ASSESSEE HAS SHOWN UN SECURED LOANS OF RS.65,00,000/ - JROM M/S. KUVAM INTERNATIONAL FASHION LTD AND RS.20,00,000/ - FROM M/S. AARAYA EQUITY INDIA PVT LTD. THE A.O. FOUND THAT THE SAID AMOUNTS WERE ACCOMMODATION ENTRIES ARRANGED BY SHRI RAKESH DOSHI AND HAS TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT AS IN A.Y.2013 - 14. ACCORDINGLY, ADDITION OF RS.85,00,000/ - HAS BEEN MADE AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 15. SIMILARLY BRIEF FACTS FOR A.Y. 2010 - 11 WERE AS UNDER: ASSESSEE E - FILED ITS RETURN OF INCOME ON 26.09.2010 DECLARING TOTAL INCOME AT R S. 84,49,990/ - . A SURVEY ACTION U/S.133A OF THE IT ACT WAS CONDUCTED BY DDIT(LNV), UNIT III (2),MUMBAI ON 25.03.2014 BASED ON THE INFORMATION THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES OF BOGUS UNSECURED LOANS AND SHARE APPLICATION MONEY FROM VARIO US DUMMY CONCERNS, WHO ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. ON PERUSAL OF THE DETAILS SUBMITTED REGARDING THE PARTIES FROM WHOM UNSECURED LOAN AND SHARE APPLICATION MONEY HAD BEEN TAKEN, IT WAS REVEALED THAT THE ASSESSEE HAD RECEIVED UNSECURED LOANS AND SHARE APPLICATION MONEY FROM 12 ITA NOS.1448, 1449 & 1467/MUM /2017 CONCERNS/COMPANIES OPERATED AND CONTROLLED BY PRAVIN KUMAR JAIN WHO WAS ONE OF THE LEADING ENTRY OPERATOR, CONTROLLING AND OPERATING VARIOUS DUMMY CONCERNS ENGAGED IN THE BUSINESS OF PROVIDI NG ACCOMMODATION ENTRIES OF PURCHASES, LOANS, SHARES, CAPITAL ETC. THE ASSESSMENT PROCEEDING WAS REOPENED U/S.147 OF THE ACT AND NOTICE U/S.148 DATED 71.1.2015 WAS ISSUED AND SERVED. IN RESPONSE TO NOTICE U/S.148, THE ASSESSEE COMPANY REQUESTED THAT THE RETURN OF INCOME FILED ON 26.9.2010 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148 OF THE ACT. DURING THE YEAR THE ASSESSEE HAS SHOWN UNSECURED LOANS OF RS.50,00,000/ - FROM M/S. KUVAM INTERNATIONAL FASHION LTD. THE A.O. FOUND THAT THE SAID AMOUNT WAS ACCOMMODATION ENTRY ARRANGED BY SHRI RAKESH DOSHI AND HAS TREATED THE SAME AS UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT AS IN A.Y.2013 - 14. ACCORDINGLY, ADDITION OF RS.50,00,000/ - HAS BEEN MADE AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE A CT. 16. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 17. THE LD. CIT(A) REPRODUCED THE SUBMISSIONS OF THE ASSESSEE. T HE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS MADE DETAILED SUBMISSION TO CONT END THAT ALTHOUGH THE A.O. HAS REL IED UP ON THE STATEMENT OF SHRI PRAVIN KUMAR JAIN AND SHRI RAKESH DOSHI TO MAKE HUGE ADDITION , THE A.O. HAS NOT PROVIDED THE CROSS EXAMINATION OF THE SAID TWO PERSONS THEREBY VIOLATING OF PRINCIPLE OF NATURAL JUSTICE. IT WAS NOTED THAT THE STATEMENT OF THE SAID TWO PERSONS WERE RECORDED AT THE BACK OF THE ASSESSEE AND THE A.O. SHOULD HAVE PROVIDED THE COP IES OF THE IR STATEMENTS AND THE IR CROSS EXAMINATION TO REBUT THE INFERENCE THAT COULD NOT BE DRAWN FROM THE IR STATEMENTS. THE LD. CIT(A) NOTED THAT THE SEVE RAL CASE 13 ITA NOS.1448, 1449 & 1467/MUM /2017 LAWS HAVE BEEN REFERRED THAT THERE IS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. THE LD. CIT(A) FOUND CONSIDERABLE COGENCY IN THESE SUBMISSIONS. HE NOTED THAT A COPY OF THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN AS WELL HIS CROSS EXAMINATION WAS NOT PROVIDED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS , A LTHOUGH THE ASSESSEE HA D S PECIFICALLY ASKED FOR THE SAME VIDE THEIR SUBMISSION S DATED 2 6.02 .3016. THAT THE COPY OF THE STATEMENT OF SHRI RAKESH DOSHI HAS BEEN PROVIDED ON 01.03.201 6 TO WHICH THE ASSESSEE HAS SUBMITTED A REBUTTAL ON 04.03.2016. THAT THE A.O. HAD NOT PROVIDED CROSS EXAMINATION OF THE SHRI RAKESH DOSHI. HENCE, THE LD. CIT(A) HELD THAT IT WAS CLEAR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND IN THIS REGARD HE PLACED R ELIANCE ON SEVERAL CASE LAWS AS UNDER: THUS, THERE IS A CLEAR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE IN SO FAR AS THE RELIANCE HAS BEEN PLACED ON THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN AND OTHER MATERIAL EMANATING FROM SEARCH IN HIS CASE IN 2013 WITH OUT PROVIDING A COPY OF THE STATEMENT AND CROSS EXAMINATION TO THE APPELLANT. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISIONS CITED BY THE APPELLANT IN PARA 7 ABOVE, IN THE CASE OF SMT.JYOTI D. SHAH, ITO ITAT MUMBAI BENCH 'E' IN ITA NO.18 43/M/2012 DATED 18.12.2014, FIRST GLOBAL STOCK BROKING PVT. LTD. VS. ACIT, ITAT MUMBAI 'C 1 BENCH (2008) 4 DTR 172, ACIT VS. TRISTAR JEWELLERY EXPORTS PVT. LTD., ITAT MUMBAI BENCH 'E' ITA NO.7593/M/2011 DATED 31.07.2015, WHEREIN IT HAS BEEN HELD THAT WHERE ORAL EVIDENCE OF ANY PARTY IS SOUGHT TO BE USED AGAINST AN ASSESSEE, IT IS NECESSARY THAT INFORMATION RELATING TO SUCH STATEMENT OR THE COPY OF DEPOSITION SHOULD BE FURNISHED TO THE ASSESSEE WITH OPPORTUNITY TO CROSS EXAMINE THE DEPONENT, IF REQUIRED BY T HE ASSESSEE. IF IT IS NOT DONE, IT IS VIOLATION OF PRINCIPLE OF NATURAL JUSTIC E AND THE ORDER IS BAD IN LAW. 18. AS REGARDS THE MERITS OF THE ADDITION IN RESPECT OF UNSECURED LOAN FROM THE 7 COMPANIES CONTROLLED BY SHRI P. K. JAIN, THE LD. CIT(A) OBSERVE D T HAT THE ASSESSEE HAS FURNISHED LOAN CONFIRMATIONS FROM EACH OF THE PARTIES ALONG WITH COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FOR A.Y. 2013 - 14, COPY OF ANNUAL AUDITED 14 ITA NOS.1448, 1449 & 1467/MUM /2017 ACCOUNTS FOR A.Y. 2013 - 14 AND COPY OF BANK STATEMENT FOR THE RELEVANT PERIOD TO SH OW THAT THE LOAN TRANSACTIONS HAVE BEEN CARRIED OUT BY WAY OF CHEQUE/RTGS AND THERE IS NO IMMEDIATE DEPOSIT OF CASH BEFORE ADVANCING THE LOANS. THAT F URTHE R THE LOANS HAVE BEEN RETURNED BY CHEQUE, INTEREST HAS BEEN PAID ON SUCH LOANS ON WHICH T DS HAS BEEN MADE. TH AT TH E ABOVE SAID DOCUMENTS ESTABLISH THE IDENTITY, GENUINENESS OF TRANSACTION AND THE CREDIT WORTHINESS OF THE CREDITOR, IN SO FAR AS THE ONUS OF THE ASSESSEE IS CONCERNED AND THE SAME COULD HAVE BEEN REJECTED IF CREDIBLE EVIDENCE WAS BROUGHT ON R ECORD TO DISPROVE THE SAME. HE PLACED RELIANCE ON THE DECISION IN THE CASE OF ITO VS ANANT SHELTERS (P) LTD (SUPRA) ITAT MUMBAI. 19. THE LD. C IT(A) FURTHER NOTED THAT THE A.O. HAS RELIED UPON THE STATEMENT OF SHRI PRAVIN KUMAR JAIN AND SHRI RAKESH DOSHI A ND SHRI MANISH K. SHAH, DIRECTOR OF THE ASSESSEE COMPANY. AS REGARDS THE STATEMENT OF SHRI RAKESH DOSHI, HE NOTED THAT THE SAME HAS NOT BEEN PROVIDED TO THE ASSESSEE AND CROSS EXAMINATION HAS ALSO NOT BEEN PROVIDED. THAT EVEN IF T HE ENQUIRY IN HIS CASE IN THE COURSE OF SEARCH HAS ESTABLISHED THAT THE CONCERNS UNDER HIS CONTROL WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES, IT DOES NOT FOLLOW THAT THE UNSECURED LOANS PROVIDED BY THESE SEVEN COMPANIES TO THE ASSESSEE COMPANY ARE BOGUS TRANSACTIONS OR UNEXP LAINED UNLESS THERE IS SOME MATERIAL EVIDENCE TO CORROBORATE THE ALLEGATION THAT THE LOAN TRANSACTIONS REPRESENTS AN ACCOMMODATION ENTRY GIVEN AGAINST CASH PAID BY THE ASSESSEE COMPANY. 20. FURTHER, HE REFERRED TO THE STATEMENT OF SHRI RAKESH DOSHI, AND I T WA S NOTED THAT TH ERE WERE ORAL AVERMENTS AND NO DOCUMENTARY OR OTHER EVIDENCE REGARDING CASH 15 ITA NOS.1448, 1449 & 1467/MUM /2017 PAYMENTS MADE BY THE ASSESSEE COMPANY TO GET THE LOANS WAS BROUGHT ON RECORD BY THE A.O IN THE ASSESSMENT PROCEEDINGS. 21. FURTHER, A S REGARDS THE STA TEMENT O F SHRI MANISH K. SHAH, DIRECTOR OF THE ASSESSEE COMPANY IS CONCERNED, THE LD. CIT(A) NOTED THAT SO FAR AS THE ADMISSION REGARDING SHARE APPLICATION MONEY RECEIVED IN MANBA FINANCE LTD. AND OTHER GROUP COMPANIES WAS CONCERNED, IT WAS ADMITTED THAT THEY HAD TAKEN ACCOMMODATION ENTRY IN THE NATURE OF SHARE APPLICATION MONEY TO THE TUNE OF RS.7,50,00,000 / - FROM VARIOUS CONCERNS OF SHRI P K JAIN IN F.Y. 2011 - 12. THAT I T WAS ADMITTED THAT THE SAME WAS NOT GENUINE AND IN THE NATURE OF ACCOMMODATION ENTRY IN WHICH EQUAL AMOUNT OF UNACCOUNTED CASH WAS GIVEN AGAINST THE CHEQUE RECEIVED AND THEREFORE HE OFFERED THE SAME TO TAX IN F.Y. 2011 - 12. ACCORDINGLY, THE REVISED RETURN WAS FILED FOR A.Y.2012 - 13 TO INCLUDE THE ADDITIONAL INCOME OFFERED IN THE RESPECTIVE GROUP COMP ANIES. HOWEVER, THE ADMISSION REGARDING THE LOAN RECEIVED IN MANBA FINANCE LTD. AND OTHER GROUP ENTITIES FROM CONCERNS MANAGED AND OPERATED BY PRAVEEN JAIN WAS MADE FOR THE REASON THAT HE WAS UNABLE TO SUBSTANTIATE THE GENUINENESS OF THE SAME AS OF THEN AN D SO OFFERED THE SAME TO TAX AS PER THE PROVISIONS OF THE ACT. THE LD. CIT(A) FURTHER NOTED THAT T HE SAID UNSECURED LOANS HAVE BEEN RETURNED AND THE SAME WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF VARIOUS CONCERNS. THAT IN THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSEE HAS FILED CONFIRMATIONS AND OTHER DETAILS WITH RESPECT TO THESE LOAN TRANSACTIONS ON WHI CH INTEREST HAVE BEEN PAID AND T DS HAS BEEN DULY MADE. THE LD. CIT(A) FURTHER GAVE A FINDING THAT T HE ASSESSEE HAS NO W REVISED ITS RETURN OF INCO ME FILED ON 27.9.2013 AND HAS BEEN ABLE TO SHOW WITH VARIOUS DETAILS AND 16 ITA NOS.1448, 1449 & 1467/MUM /2017 CONFIRMATIONS THAT THE ADMISSION MADE IN THE COURSE OF SURVEY AS REGARDS THE UNSECURED LOAN WAS INCORRECT. IN THIS REGARD, HE REFERRED TO THE DECISION OF HON'BLE APEX COURT IN THE CAS E OF PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA , [1973] 91 ITR 18 (SC) FOR OBSERVATION THAT 'AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CAN NOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE ADMISSION TO S HOW THAT IT IS INCORRECT.' 22. IN VIEW OF ABOVE DISCUSSION, HE HELD THAT THE ADDITION OF RS.7 , 75,00,000 / - ON ACCOUNT OF UNSECURED LOAN RECEIVED FROM CONCERNS/COMPANIES CONTROLLED BY SHRI PRAVIN JAIN U7S.68 OF THE IT. ACT WAS NOT JUSTIFIED . AS REGARD THE A DDITION MADE, T HE A.O. HAS MADE AN ADDITION OF RS.125, 00,000/ - IN RES PECT OF UNSECURED LOANS FROM THE CONCERNS WHICH WERE NOT A PART OF THE PKJAIN CONTROLLED COMPANIES , THE LD. CIT(A) OBSERVED THAT HE FOUND THAT THE ASSESSEE HAS FURNISHED LOAN CONFIRMATION S FROM EACH OF THE PARTIES ALONG WITH COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME FOR A.Y. 2013 - 14, COPY OF ANNUAL AUDITED ACCOUNTS FOR A.Y. 2013 - 14 AND COPY OF BANK STATEMENT FOR THE RELEVANT PERIOD TO SHOW THAT THE LOAN TRANSACTIONS HAVE BEEN CARRIED OUT BY WAY OF CHEQUE/RTGS AND THERE IS NO IMMEDIATE DEPOSIT OF CASH BEFORE ADVANCING THE LOANS. FURTHER, THE LOANS HAVE BEEN RETURNED IN SUBSEQUENT YEAR BY CHEQUE, INTEREST HAS BEEN PAID ON SUCH LOANS ON WHICH T DS HAS BEEN MADE. IT IS ALSO OBSERVED THAT THE A BOVE SAID FOUR CONCERNS ARE HAVING BUSINESS OF INVESTMENT AND FINANCING AND THE LOANS HAVE BEEN ADVANCED TO THE APPELLANT IN THEIR NORMAL COURSE OF BUSINESS. THE CONCERNS HAD SUFFICIENT BANK BALANCE BEFORE ADVANCING THE LOAN WHICH HAS BEEN SUBSEQUENTLY REP AID IN F.Y.2013 - 14. 17 ITA NOS.1448, 1449 & 1467/MUM /2017 23. FOR OTHER COMPANIES, T HE LD. CIT(A) FURTHER NOTED THAT THE BASE ADDITION IN THIS CASE IS ONLY THE STATEM ENT GIVEN BY SHRI RAKESH DOSHI AND T HAT THE ASSESSEE DID NOT PRODUCE THE DIRECTORS OF THE ABOVE SAID COMPANIES TO VERIFY THE SAI D LOANS. HE NOTED THAT THE A.O. HAS OBSERVED THAT THE SURPLUS SHOWN IN THE BALANCE SHEET OF THE FOUR COMPANIES PERTAINS TO SHARE PREMIUM, THE GENUINENESS OF WHICH HAS NOT BEEN PROVED BY THE ASSESSEE. TH AT TH E A.O. HAS ALSO CITED AND RELIED UPON PROVISO TO SECTION 68 WHEREIN IT HAS BEEN PROVIDED THAT THE EXPLANATION OFFERED BY AN ASSESSEE COMPANY IN RESPECT OF CREDITS RECEIVED BY WAY OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM ETC SHALL BE DEEMED NOT TO BE SATISFACTORY UNLESS THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM, SO CREDITED. THEREAFTER, THE LD. CIT(A) REFERRED TO THE STATEMENT OF SHRI RAKESH DOSHI FROM IT HE NOTED THAT SH RI RAKESH DOSHI HAS ADMITTED TO HAVE ARRANGED ACCOMMODATION ENTRY THROUGH THE ABOVE SAID FOUR COMPANIES FOR MARATHON GROUP. BUT THE LD. CIT(A) GAVE A FINDING THAT THERE IS NO SUCH ADMISSION OF GIVING ACCOMMODATION ENTRY FROM ABOVE SAID COMPANIES TO THE ASS ESSEE COMPANY OR ITS GROUP COMPANIES . HE NOTED THAT T HEREFORE, THE ADDITION OF RS.125,00,000/ - , BASED ONLY ON THE STATEMENT GIVEN BY SHRI RAKESH DOSHI THAT THE ABOVE SAID COMPANIES WERE SHELL COMPANIES AND ACCOMMODATION ENTRIES OF UNSECURED LOAN HAVE BEEN ARRANGED BY THE APPELLANT THROUGH THEM IS FOUND TO BE NOT JUSTIFIED. TH AT TH E A.O. HAS OBSERVED THAT THE ASSESSEE COMPANY HAS NOT PRODUCED THE DIRECTORS OF THE SAID CONCERNS FOR EXAMINATION. THE LD. CIT(A) HELD THAT I N THIS REGARD, IT WAS OPEN TO THE A.O T O MAKE NECESSARY INQUIRIES BY ISSUING SUMMONS TO THOSE PARTIES. 18 ITA NOS.1448, 1449 & 1467/MUM /2017 24. HE FURTHER NOTED THAT I T HAS BEEN OBSERVED BY THE A.O. THAT RESERVES AND SURPLUS SHOWN IN THE BALANCE SHEET OF THE SAID FOUR COMPANIES PERTAIN TO SHARE PREMIUM, THE GENUINENESS OF WHICH HA S NOT BEEN PROVED BY THE ASSESSEE. HE OBSERVED THAT I N THIS REGARD, THE RELIANCE PLACED BY THE A.O. IN RESPECT OF PROVISO TO SECTION 68 OF THE I.T. ACT IS ALSO FOUND TO BE INCORRECT SINCE THE SAID PROVISO REQUIRES FOR EXPLANATION TO BE OFFERED BY THE CREDI TOR IN RESPECT OF THE SUMS CREDITED BY WAY OF SHARE CAPITAL, SHARE PREMIUM ETC AND NOT IN RESPECT OF UNSECURED LOAN. HENCE, HE HELD THAT HE AGREED WITH THE ASSESSEE 'S CONTENTION THAT IT WAS NOT REQUIRED TO PROVE SOURCE OF SOURCE IN THE CASE OF LOAN CREDITO RS AS HELD BY THE HON'BLE HIGH COURT OF GAUHATI IN THE CASE OF NEMICHAND KOTHARI VS CIT REPORTED IN 264 1TR 254. 25. THEREAFTER, THE LD. C IT(A) DISTINGUISHED THE DECISION RELIED BY THE ASSESSEE IN THE CASE OF NAVODAY CASTLE PVT. LTD. VS. CIT [2015] 230 T AXMANN 268 (SC), SUMATI DAYAL (SUPRA) AND THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRECISION FINANCE PVT. LTD. 208 ITR 465 HOLDING THEM TO BE NOT APPLICABLE ON THE FACTS OF THIS CASE. 26. IN THE BACKGROUND OF THIS DISCUSSION, THE LD. C IT(A) DELETED THE ADDITION IN THIS REGARD ALSO. FOR A.Y. 2011 - 12 AND 2010 - 11, THE LD. CIT(A) NOTED THAT THE UNSECURED LOANS IN THIS CASE WERE ADDED BY THE A.O. ON THE GROUND THAT THESE WERE ACCOMMODATION ENTRIES ARRANGED BY SHRI RAKESH DOSHI. ON THE SAME R EASONING AS ABOVE, HE DELETED THIS ADDITION ALSO. 19 ITA NOS.1448, 1449 & 1467/MUM /2017 27. AS REGARDS THE DISALLOWANCE OF INTEREST SINCE HE HA D DELETED THE DISALLOWANCE OF UNSECURED LOAN, HE DELETED THE DISALLOWANCE ON INTEREST ON THIS GROUND ALSO. 28. THE ADDITION WITH RESPECT TO DISALLO WANCE U/S. 14A WAS DELETED BY THE LD. CIT(A) ON THE GROUND THAT NO ADDITION U/S. 14A IS PERMISSIBLE WHEN NO EXEMPT INCOME IS SHOWN. FOR THIS PROPOSITION, HE REFERRED TO THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CHEMINVEST LTD VS CIT [2015] 378 I TR 33 (DEL). 29. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 30. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN THE GROUNDS OF APPEAL IN THIS REGARD THE REVENUE HAS URGED AS UNDER: 1. 1. ''IN THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.9,00,00,000/~, MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT WITHOUT CONSIDERING THE FACT THAT THE DIRECTOR / PROMOTER OF THE LENDING COMPANIES SHRI PRAUIN KU MAR JAIN / RAKESH DOSHI HAS ALREADY ADMITTED DURING THE SURVEY ACTION THAT THE LENDER COMPANIES CONTROLLED BY FLAVIN JAIN AND COMPANIES NOT CONTROLLED BY PRAVIN JAIN ARE BOGUS COMPANIES WHO ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS PURCHASE / SALES AND UNSECURED LOANS TO OTHER PARTIES.' 2. ' IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OFRS. 9,00,00,OOO/ - , ADDED BY THE AO AS UNEXPLAINED CASH CREDIT U/S68 OF THE ACT WITHOUT CONSID ERING THE FACT THAT THE DIRECTOR OF THE ASSESSEE COMPANY M/S. MANBA FINANCE LTD., SHRI MANISH SHAH HAS ADMITTED DURING THE SURVEY ACTION THAT THE UNSECURED LOANS TAKEN BY THE ASSESSEE FROM COMPANIES CONTROLLED BY PRAVIN JAIN AND COMPANIES NOT CONTROLLED BY PRAUIN JAIN WERE BOGUS IN NATURE AND HENCE NO OPPORTUNITY FOR CROSS EXAMINATION WAS PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS.' 3. ' IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST EXPENSE OF RS.22,11,631/ - GIVEN TO COMPANIES CONTROLLED BY PRAVIN JAIN AND COMPANIES NOT CONTROLLED BY PRAVIN JAIN., WITHOUT CONSIDERING THE FACT THAT THE UNSECURED LOANS OFRS. 9,OQ,00,000/ - PURPORTED TO BE TAKEN BY THE ASSESSEE COMPANY WERE NOT GENUINE AND HENCE THE INTEREST EXPENSE CLAIMED ON THE SAME CANNOT BE ALLOWED.' 20 ITA NOS.1448, 1449 & 1467/MUM /2017 4. ' IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OFRS.L, 54,143/ - ON ACCOUNT OF 14A OF THE ACT WITHOUT APPRECIATING THE FA CT THAT THE CIRCULAR NO.5 OF 2014 DATED 11 TH FEBRUARY 2014, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES CLEARLY PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME?' 31. FURTHER, THE LD. D EPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) RELIED UPON THE GROUNDS OF APPEAL AND THE ORDERS OF THE A.O. HE FURTHER MADE FOLLOWING WRITTEN ARGUMENTS: IN THE ABOVE CASE, THE DEPARTMENT HAS FILED THE APPEAL AGAINST THE ORDER OF THE LD. CIT(A) AS FILED IN THE GROUNDS OF APPEAL IN EACH YEARS. IN ADDITION TO THE ABOVE GROUNDS OF APPEAL AND THE ARGUMENT MADE BEFORE YOUR KIND HON'OUR AND THE WRITTEN SUBMISSION FILED BY THE ASSESSEE'S AR STATING THAT THE AQ HAS NOT ISSUED NOTICES U / S . 133(6) AND SUMMON U/S 131 A ND QUOTING - . THE HON BLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF CIT V/S GANGESHWARI METAL PVT. LTD. (2013) 96 DTR (DE L) 200 AND OTHER VARIOUS DECISIONS. IN THIS CONNECTION, YOUR HONOUR, THE DEPARTMENT IS ALSO RELYING ON THE RECENT ORDER OF THE HONB LE K ARNATAKA HIGH COURT IN THE CASE OF FIDELITY BUSINESS SERVICES INDIA PVT. LTD. ITA NO. 512/2017 DATED 23/07/2018 (A COPY OF THE HON BLE HIGH COURT KARNATAKA IS ENCLOSED) FOR KIND PERUSAL. IT IS SOME LACK OF INVESTIGATION BUT THE HON B LE ITAT IS COMPETENT TO SET ASIDE THESE THREE YEARS CASES. ON THE ABOVE DECISIONS TO DIRECTION FOR FRESH ENQUIRIES AND INVESTIGATION IN THE MATTERS INVOLVED. 32. PER CONTRA, THE LD LD. COUNSEL OF THE ASSESSEE SUBMITTED HIS SUBMISSIONS AS UNDER: THE BRIEF FACTS ARE THAT THE LEA RNED A.O. MADE ADDITION TO TOTAL INCOME WHICH IS OF UNSECURED LOANS, INTEREST ON UNSECURED LOANS AND DISALLOWANCE U/S. 14A OF THE I. T. ACT, 1961. THE ADDITIONS OUT OF UNSECURED LOANS AND INTEREST ON SUCH LOANS WERE MADE ON THE BASIS OF THIRD PARTY STATEME NTS. EVEN THOUGH SPECIFIC REQUESTS WERE MADE BY THE ASSESSEE FOR SUPPLY OF COPY OF STATEMENTS AND CROSS EXAMINATIONS OF THE DEPONENTS, THE SAME WERE NOT GRANTED TO THE ASSESSEE. BY NOT GRANTING CROSS EXAMINATION AND SUPPLY OF COPY OF STATEMENTS MADE BY THI RD PARTIES, THE PRINCIPLES OF NATURAL JUSTICE IS VIOLATED, AND HENCE THE ASSESSMENT IS VITIATED AND HENCE THE ASSESSMENT IS BAD IN LAW AND REQUIRES TO BE QUASHED IN VIEW OF THE FOLLOWING DECISIONS. 1. ANDAMAN TIMBER INDUSTRIES V. C.C.E. (2015) 281 CTR 241 (SC) WHEREIN IT IS HELD: 21 ITA NOS.1448, 1449 & 1467/MUM /2017 NOT ALLOWING THE ASSESSEE TO CROSS EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLIFY IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE ORDER WAS VACATED. 2. KISHINCHAND CHELLARAM V. C.I.T. (1980) 1251TR 0713 (SC) 3. PONKUNNAM TRADERS V. ADDL. I.T.O. & ANR. (1972)83ITR508(KE R) 4. ACIT V. TRISTAR JEWELLERY EXPORTS PVT. LTD. ITA/7593/MUM/2011 (MUMBAI ITAT) IN ALL THESE CASES THE ABOVE PRINCIPLE IS ENUNCIATED: ON MERITS OF THE ADDITIONS, IT IS TO BE SUBMITTED THAT THE ASSESSEE FILED BEFORE THE LEARNED A.O. THE FOLLOWING DETAILS: (I) CONFIRMATION OF THE PARTY WHO GAVE THE LOAN. (II) COPY OF RETURN OF INCOME FILED BY THEM ALONGWITH PAN NO. OF THE LOANEES. (III) COPY OF BALANCE SHEET, P/L ACCOUNT ALONGWITH ALL SCHEDULES, (IV) COPY OF CERTIFICATE OF INCORPORATION, ORI GINAL AND THE LATEST ONE. (V) COPY OF BANK STATEMENT OF THE LOANEE FROM WHICH THE LOAN HAVE BEEN GIVEN TO THE ASSESSEE, AS WELL AS REPAYMENT MADE IF ANY BY THE ASSESSEE. IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE MUST PROVE THREE THINGS IN A CASE U/S. 68. (I) THE IDENTITY OF THE CREDITOR, (II) GENUINENESS OF THE TRANSACTION, AND (III) CREDIT WORTHINESS OF THE CREDITOR. HOWEVER, THE ONUS OF THE ASSESSEE IS LIMITED TO THE EXTEND OF PROVING THE SOURCE FROM WHICH HE RECEIVED THE CASH CREDIT. THE CRED ITWORTHINESS OF THE CREDITOR HAS TO BE JUDGED VIS - A - VIS THE TRANSACTION WHICH HAD TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND IT IS NOT THE BURDEN OF THE ASSESSEE TO FIND OUT THE SOURCE OF CREDITWORTHY CAPACITY IN ORDER TO PROVE THE GENUINENESS O F THE TRANSACTION AS HELD BY THE GAUHATI HIGH COURT IN THE CASE OF CIT V. SMT. SANGAMITRA BHARALI (361) ITR 481. IT IS SUBMITTED THAT THE ADDITIONS WERE MADE OUT OF UNSECURED LOAN OF THE ASSESSEE WAS BECAUSE, THE CREDITORS WERE OF PRAVIN JAIN GROUP WHO WER E NAME LENDERS AND WERE GIVING ACCOMMODATION ENTRIES. THERE IS NO INDICATION THAT LOAN RELATED TO LOANS TAKEN BY THE ASSESSEE. BESIDES, IN THE CASE OF THE ASSESSEE, NO NOTICE U/S. 133(6) WAS ISSUED AND NO SUMMONS U/S. 131 ISSUED. EVEN THOUGH ALL THESE DETA ILS WERE SUBMITTED BEFORE THE LEARNED A.O. WHICH HE ACKNOWLEDGES IN THE ASSESSMENT ORDER AT P. 4 PARA 6.1, NO ENQUIRIES OF WHATSOEVER NATURE HAS BEEN CONDUCTED BY THE LEARNED A.O. THE LEARNED A.O. WAS ONLY GUIDED BY THE STATEMENTS GIVEN BY THE THIRD PARTY AT THE TIME OF SEARCH/ SURVEY IN THEIR PREMISES. 22 ITA NOS.1448, 1449 & 1467/MUM /2017 IT IS SUBMITTED THAT CONDUCTING NO ENQUIRY BY THE ASSESSING OFFICER U/S. 131, WHEN THE ASSESSEE HAS DISCHARGED HIS BURDEN OF PROVING THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE DEPOSITOR, NO ADDITION CAN BE MADE U/S. 68 AS HELD BY: THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. GANGESHWARI METAL PVT. LTD. (2013) 96 DTR (DEL) 299 WHEREIN IT WAS HELD THAT THERE WAS A CLEAR LACK OF ENQUIRY ON THE PART OF THE A.O. ONCE THE ASSESSEE HAD FUR NISHED ALL THE MATERIALS INCLUDING PAN, LOAN CONFIRMATIONS AND BANK STATEMENTS, IN SUCH AN EVENTUALITY, NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. THE A.O. MERELY STATED IN THE ASSESSMENT ORDER THAT THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE AND WE NT ON TO MAKE ADDITION OF THESE LOANS AND INTEREST PAID TO THE INCOME OF THE ASSESSEE. IN CIT V. VARINDER RAWLEY (2014) 366 ITR 232 (P&H), THE COURT HELD THAT 'WHERE THE ASSESSEE SHOWS THAT THE ENTRIES REGARDING CREDIT IN A THIRD PARTY'S ACCOUNT WERE IN FA CT RECEIVED FROM THIRD PARTY AND ARE GENUINE, HE DISCHARGES THE ONUS. IN THAT CASE, THE SUM CANNOT BE CHARGED AS THE ASSESSEE'S INCOME IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT IT BELONGS TO THE ASSESSEE', PARTICULARLY IN A CASE WHERE NO SUMMONS U/S. 131 IS ISSUED AGAINST THE THIRD PARTY. THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SACHITEL COMMUNICATIONS P. LTD. (2014) 227 TAXMAN 219 (MAG) HELD THAT: 'WHERE THE ASSESSEE PROVED THE IDENTITY OF THE CREDITOR AND CAPACITY TO PAY A ND THAT PAYMENT WAS MADE THROUGH THE BANKING CHANNEL, NO ADDITION COULD BE MADE AS UNEXPLAINED CASH CREDITS. THE HON'BLE GUJURAT HIGH COURT IN THE CASE OF C.I.T. V. PATEL RAMNIKLAL HIRJI (204) 222 TAXMAN 15 (MAG) HELD AS UNDER: THE ADDITION ON THE BASIS T HAT FOUR DEPOSITORS FURNISHED REQUISITE DETAILS TO PROVE THEIR IDENTITY AND SHOWED THE PLACE OF THEIR RESIDENCE. THE LOAN WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. COPIES OF BANK STATEMENTS WAS GIVEN AND THE DETAILS OF PAN WERE AVAILABLE. ALL THE MATERIA LS DULY PROVED THE GENUINENESS OF THE TRANSACTION OF LOAN AS WELL AS CREDITWORTHINESS OF THE DEPOSITORS. HENCE, THE ADDITION U/S. 68 CANNOT BE MADE' SIR, IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE'S CASE IS IDENTICAL TO THIS CASE AND ALL THE FACTS OF T HE ABOVE CASES ARE ALSO IDENTICAL. IN THE CASE OF C.I.T. V. JAIKUMAR BAKLIWAL (2014) 366 ITR 217 (RAJ), THE HON'BLE HIGH COURT HELD IN THE HEAD NOTES AS UNDER: (WHICH IS IDENTICAL TO THE FACTS OF ASSESSEE'S CASE) THREE THINGS ARE REQUIRED TO BE PROVED BY T HE RECIPIENT OF MONEY, LE. (1) IDENTITY OF THE CREDITOR; (2) CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (3) GENUINENESS OF THE TRANSACTION. HELD, DISMISSING THE APPEAL, THAT ALL CASH CREDITORS WERE ASSESSED TO INCOME - TAX AND THEY PROVED A CONFIRMATION AS WELL AS THEIR PERMANENT ACCOUNT NUMBER. THEY HAD THEIR OWN RESPECTIVE BANK ACCOUNTS WHICH THEY HAD BEEN OPERATING AND IT WAS NOT THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS 23 ITA NOS.1448, 1449 & 1467/MUM /2017 OPERATING THEIR BANK ACCOUNTS. MOST OF THE CASH CREDITORS APPEARED BEFORE THE ASSESSING OFFICER AND THEIR STATEMENTS UNDER SECTION 131 OF THE INCOME - TAX ACT, 1961, WERE ALSO RECORDED ON OATH. THERE WAS NO CLINCHING EVIDENCE NOR HAD THE ASSESSING OFFICER BEEN ABLE TO PROVE THAT THE MONEY ACTUALLY BELONGED TO NONE BUT THE A SSESSEE. THE ADDITION OF RS. 17,27,2507 - UNDER SECTION 68 WAS NOT JUSTIFIED. THE LEARNED A.O. DID NOT GIVE ANY VALID REASONS FOR NOT CONSIDERING THE EVIDENCES PRODUCED BUT ONLY EXTENSIVELY RELIED ON THE STATEMENT ALLEGED TO HAVE BEEN GIVEN BY SOME THIRD PA RTY WITHOUT PERMITTING CROSS EXAMINATION OF THEM TO REBUT THE DEPT. CONCLUSIONS. IT IS FURTHER SUBMITTED THAT THE ASSESSEE IS NOT TO PROVE THE SOURCES OF THE SOURCE AS HELD BY THE FOLLOWING COURTS, (1)NEMICHAND KOTHARI V. CIT (2003) 264 ITR 254 (GAUH.) (2) DY. CIT V. ROHINI BUILDERS 256 ITR 360 (GUJ) (3) CIT V. SMT. SANGHAMITRA BHARALI (2014) 361 ITR 481 (GAUHATI) IN THE CASE OF NEMI CHAND KOTHARI V. C.LT. (2003) 264 ITR 254 (GAUHATI) IT WAS HELD BY THE GAUHATI HIGH COURT AS UNDER: 'A PERSON MAY HAVE FUNDS F ROM ANY SOURCE AND AN ASSESSEE, ON SUCH INFORMATION RECEIVED, MAY TAKE A LOAN FROM SUCH A PERSON. IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT WHETHER THE SOURCE OR SOURCES FROM WHICH THE CREDITOR HAD AGREED TO ADVANCE THE AMOUNTS WERE GENUINE OR NOT . IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOA N AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP IT IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES.' 'HELD, (I) THAT THE ASSESS EE HAD ESTABLISHED THE IDENTIFY OF THE CREDITORS. THE ASSESSEE HAD ALSO SHOWN, IN ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS WHI CH WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTABLISHED THESE, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER, THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICE TO PROVE THE CONTRARY. THE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB - CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, COULD NOT, UNDER THE LAW BE TREATED AS THE INCOME FROM UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF ] WHEN THERE WA S NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WHERE OWNED BY, THE ASSESSEE. THE ASSESSING OFFICER FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF T HE SUB - CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB - CREDITORS FROM THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE 24 ITA NOS.1448, 1449 & 1467/MUM /2017 TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE ASSESSEE FROM UNDISCLOSED SOURCES.' (II) THAT NO ASSESSMENT COULD BE MADE CONTRARY TO THE PROVISIONS OF LAW. IN THE INSTANT CASE, THE VERY BASIS FOR MAKING THE ASSESSMENT WAS UNDER CHALLENGE. IF THE ASSESSMENT WAS BASED ON A COMPLETELY ERRONEOUS VIEW OF LAW, SUCH FINDINGS COULD NOT BE REGARDED AS MERE FINDINGS OF FACTS, BUT MUS T BE TREATED AS SUBSTANTIAL QUESTIONS OF LAW. THEREFORE, THE QUESTION RAISED IN THE APPEAL WAS A SUBSTANTIAL QUESTION OF LAW BECAUSE IT WENT TO THE VERY ROOT OF THE ASSESSMENT MADE. THE AFORESAID VIEW HAS BEEN ALSO CONSIDERED AND FORTIFIED AND FAVOURABLY R EFERRED TO BY THE ALLAHABAD HIGH COURT IN THE CASE OF C.I.T. V. SHALIMAR BUILDWELL PVT. LTD. (2014) 220 TAXMAN 138 (AH.) THE HON. RAJAS THAN HIGH COURT IN THE CASE OF C.I.T. V. A. LALPURIA CONSTRUCTION P. LTD. (2013) 215 TAXMAN 12 (MAG)(RAJ) HAVE HELD THAT IN THE CASE OF ACCOMMODATION ENTRY - WITHOUT GIVING AN OPPORTUNITY OF CROSS EXAMINATION MERELY ON THE BASIS OF ORAL STATEMENT ADDITIONS CANNOT BE MADE U/S. 68. IT IS FURTHER HELD THAT: 'THE ORAL STATEMENT OF A THIRD PARTY RECORDED BY SEARCH AUTHORITIES WH ICH WAS NEVER PLACED TO BE CONFRONTED BY ASSESSEE AND NO DOCUMENTARY EVIDENCE WAS SUPPLIED TO ASSESSEE, COULD NOT BE CONSIDERED IN MAKING ADDITION U/S. 68 ON ACCOUNT OF ALLEGED ACCOMMODATION ENTRIES.' BESIDES, ON IDENTICAL SITUATIONS ON IDENTICAL FACT CASE S, THE HON. ITAT, AND EVEN THE BOMBAY HIGH COURT HAVE DELETED THE ADDITIONS MADE BY THE A.O. AGROTECH P. LTD. V. I.T.O. (HYDERABAD) ITA/437/HYD/2016 IN THIS CASE, THE ISSUE WAS REGARDING LOAN GIVEN BY PRAVIN JAIN GROUP. ONE OF THE LOANEES OF ASSESSEE M/S. OLIVE OVERSEAS PVT. LTD. WAS ALSO A PARTY IN THIS CASE WHERE THE HON. ITAT DELETED THE TOTAL ADDITION. (2)RUSHABH ENTERPRISES V. A.C.I.T. W.P. NO. 167 OF 2015 IN THIS CASE, THE HON. BOMBAY HIGH COURT HELD THAT NO ADDITION IS WARRANTED. (3) RELIANCE CORPOR ATION V. I.T.O. ITA/1069 TO 1071/MUM/2017 (MUM ITAT) (4) ACIT V. SHRI. VASHU BHAGNANI ITA/5648/MUM/2016 (MUM ITAT) (5) JITENDRA M. KITAWAT ITA/7049 & 7050/MUM/2016 (MUM ITAT) IN ALL THE ABOVE CASES, THE LEARNED TRIBUNAL HAVE DELETED THE ADDITIONS. GROUND N O. 3 REGARDING DISALLOWANCES OF INTEREST ON UNSECURED LOANS, IT IS SUBMITTED THE ASSESSEE HAD DEDUCTED T.D.S. AND PAID THE SAME TO THE GOVERNMENT TREASURY AND FILED T.D.S. RETURNS. THE PAYMENT OF INTEREST THEREBY ACCOUNT PAYEE CHEQUES AND IT APPEARS IN THE BANK STATEMENT OF THE ASSESSEE AS WELL AS THE CONCERNED LOANEE. HENCE NO DISALLOWANCES IS REQUIRED FROM THIS INTEREST. GROUND NO. 4 OF THE APPEAL IS REGARDING THE DISALLOWANCE U/S. 14A OF THE I. T. ACT, 196. ON THIS ISSUE THE A.O. HAS MADE CERTAIN DISALLO WANCES. AS THE 25 ITA NOS.1448, 1449 & 1467/MUM /2017 ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THESE YEARS, IN VIEW OF THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. V. C.I.T. REPORTED IN (2015) 378 ITR 33 (DELHI). THE ASSESSEE ALSO RELIES ON THE FOLLOWING DECISION: 1) CHEMINVEST LTD. V. C.I.T. (2015) 378 ITR 33 (DELHI). 2) M/S. KRISHNA KNITWEAR TECHNOLOGIES LTD. V. D.C.I.T. ITA/2565/MUM/2012 3) MRS. AMITA VERMA V. A.C.I.T. (NEW DELHI) ITA/1145/DEL/2013 33. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED TH E RECORDS. WE FIND THAT THE FIRST ISSUE IN THIS CASE RELATES TO THE ADDITION OF UNSECURED LOAN TAKEN FROM CORPORATE ENTITIES U/S. 68 OF THE ACT. IN THIS REGARD, IT IS NOTED THAT IT IS THE CLAIM OF THE ASSESSEE WHICH HAS BEEN FOUND CORRECT BY THE LD. C IT(A) THAT THE ASSESSEE HAS DULY PAID INTEREST ON THESE LOANS, DEDUCTED TDS, FILED THE TDS RETURN. THE LD. CI T(A) HAS ALSO FOUND THAT THI S LOANS HAVE BEEN DULY REPAID. 34. THE ADDITION IN THIS CASE HAS BEEN MADE ON THE GROUND THAT SOME OF THE CORPORATE ENTITI ES WERE FOUND TO HAVE BEEN CONTROLLED AND OPERATED BY SHRI PRAVIN KUMAR JAIN, WHO WAS ONE OF THE LEADING ENTRY OPERATOR . FOR THE OTHER CORPORATE ENTITIES , IT WAS FOUND THAT THE ASSESSEE HAS OBTAINED LOAN FROM THESE COMPANIES WHICH WAS ARRANGED BY SHRI RAKE SH DOSHI , WHO ON SURVEY HAD ADMITTED TO BE ARRANGING BOGUS ACCOMMODATION ENTRIES. THESE FINDINGS HAVE COME OUT AS A RESULT OF SURVEY AGAINST THE ASSESSEES PREMISES. AS REGARDS SHRI PRAVIN KUMAR JAIN, IT WAS NOTED BY THE A.O. THAT IN THE REVENUES ACTION AGAINST SHRI PRAVIN KUMAR JAIN, HE HAS ADMITTED TO HAVE BEEN ARRANGED BOGUS ACCOMMODATION ENTRIES. THE A.O. HAS NOTED IN DETAIL HIS MODUS OPERANDI. AS REGARDS SHRI RAKESH DOSHI, IT WAS NOTED THAT SURVEY ACTION U/S. 133A WAS CONDUCTED IN HIS CASE AND HE WAS FOUND TO HAVE ARRANGED THE ACCOMMODATION ENTRIES. THE 26 ITA NOS.1448, 1449 & 1467/MUM /2017 ASSESSEE HAS CLAIMED SHRI PRAVIN KUMAR JAIN HAS DULY RETRACTED AND THE ASSESSEE HAD REQUESTED TO CROSS EXAMINE HIM THAT THE SAME HAS BEEN DENIED BY THE A.O. 35. AS REGARDS THE STATEMENT OF SHRI RAKES H DOSHI, THE ASSESSEES CLAIM WAS THAT THE ASSESSEE WAS NEVER PROVIDED WITH THE DETAIL OF STATEMENTS GIVEN BY SHRI RAKESH DOSHI DESPITE REQUEST. ON THIS ISSUE OF RETRACTION OF SHRI PRAVIN KUMAR JAINS AND REQUEST BY THE ASSESSEE FOR CROSS EXAMINATION OF SH RI PRAVIN KUMAR JAIN AND SHRI RAKESH DOSHI, THE LD. CIT(A) OBSERVED THAT THERE IS A CLEAR VIOLATION OF NATURAL JUSTICE. HE NOTED THAT THE COPY OF THE STATEMENT OF SHRI PRAVIN KUMAR JAIN AS WELL AS HIS CROSS EXAMINATION WAS NOT PROVIDED TO THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, ALTHOUGH THE ASSESSEE HAS SPECIFICALLY ASKED FOR THE SAME. HE NOTED THAT THE COPY OF STATEMENT OF SHRI RAKESH DOSHI WAS PROVIDED TO WHICH THE ASSESSEE HAS SUBMITTED ITS REBUTTAL. HE NOTED THAT THE A.O. HAS NOT PROVI DED CROSS EXAMINATION OF SHRI RAKESH DOSHI. THE LD. CIT(A) HAS PLACED RELIANCE UPON THE SEVERAL CASE LAWS IN THIS REGARD FOR THE PROPOSITION THAT WHERE ORAL EVIDENCE OF ANY PARTY IS SOUGHT TO BE USED AGAINST AN ASSESSEE, IT IS NECESSARY THAT INFORMATION RE LATING TO SUCH STATEMENT OR THE COPY OF DEPOSITION SHOULD BE FURNISHED TO THE ASSESSEE WITH OPPORTUNITY TO CROSS EXAMINE THE DEPONENT, IF REQUIRED BY THE ASSESSEE. I N THIS REGARD, WE NOTE THE SUBMISSION THAT THESE AMOUNT TO G ROSS VIOLATION OF NATURAL JUSTI CE AND THE ASSESSMENT IS VITIATED AS THE ASSESSMENT IS BAD IN LAW AND REQUIRES TO BE QUASHED IN VIEW OF THE FOLLOWING DECISIONS: 1. ANDAMAN TIMBER INDUSTRIES V. C.C.E. (2015) 281 CTR 241 (SC) WHEREIN IT IS HELD: NOT ALLOWING THE ASSESSEE TO CROSS EXAMINE T HE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE 27 ITA NOS.1448, 1449 & 1467/MUM /2017 IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLIFY IN AS MUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE ORDER WAS VACATED. 2. KISHINCHAND CHELLARAM V. C.I.T. (1980) 1251TR 0713 (SC) 3. PONKUNNAM TRADERS V. ADDL. I.T.O. & ANR. (1972)83ITR508(KER) 4. ACIT V. TRISTAR JEWELLERY EXPORTS PVT. LTD. ITA/7593/MUM/2011 ( MUMBAI ITAT) 36. AS REGARDS THE MERITS OF THE ADDITION, IT IS NOTED THAT THE ASSESSEE HAD SUPPLIED THE FOLLOWING IN THIS REGARD: (I) CONFIRMATION OF THE PARTY WHO GAVE THE LOAN. (II) COPY OF RETURN OF INCOME FILED BY THEM ALONGWITH PAN NO. OF TH E LOANEES. (III) COPY OF BALANCE SHEET, P/L ACCOUNT ALONGWITH ALL SCHEDULES, (IV) COPY OF CERTIFICATE OF INCORPORATION, ORIGINAL AND THE LATEST ONE. (V) COPY OF BANK STATEMENT OF THE LOANEE FROM WHICH THE LOAN HAVE BEEN GIVEN TO THE ASSESSEE, A S WELL AS REPAYMENT MADE IF ANY BY THE ASSESSEE. 37. THE A.O. HAS DISREGARDED THE EVIDENCES SUBMITTED BY THE ASSESSEE ON THE GROUND OF A STATEMENT OF SHRI PRAVIN KUMAR JAIN AND SHRI RAKESH DOSHI AND THE DIRECTOR OF THE ASSESSEE COMPANY. IN THIS REGARD, AS ALREADY REFERRED HEREIN ABOVE, THE LD. CIT(A) HAS ALREADY FOUND T HE ISSUES OF NON SUBMISSIONS OF THE DETAILS OBTAINED FROM SHRI PRAVIN KUMAR JAIN AND SHRI RAKESH DOSHI TO THE ASSESSEE, AND NOT GIV EN AN OP PORTUNITY TO CROSS EXAMINE THEM TO BE GROSS VIOLATIO N OF PRINCIPLES OF NATURAL JUSTICE. FURTHERMORE, THE A.O. HAS ALSO DRAWN ADVERSE INFERENCE ON THE STATEMENT FROM THE DIRECTOR OF THE ASSESSEE COMPANY OBTAINED DURING SURVEY. IN THIS REGARD, THE LD. CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAD DULY HONO RED THE ADMISSION ON SURVEY REGARDING THE SHARE CAPITAL AND SHARE PREMIUM AND THAT AS REGARDS THE UNSECURED LOAN, UPON REFERENCE TO THE MATERIALS, THE ASSESSEE HAS FOUND THAT THE SAME WAS IN ORDER AND, THEREFORE, THE ASSESSEE HAS FURNISHED THE NECESSARY MA TERIALS TO SUPPORT THE GENUINENESS OF THE LOAN. IN THIS REGARD, THE LD. CIT(A) HAS RIGHTLY REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE 28 ITA NOS.1448, 1449 & 1467/MUM /2017 OF PULLANGODE RUBBER PRODUCE CO. LTD. (SUPRA) THAT 'AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EV IDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE ADMISSION TO SHOW THAT IT IS INCORRECT.' SIMILAR OBSERVATIONS WERE MADE BY THE HONBLE APEX COURT IN THE CASE OF S. KADAR KHAN 352 ITR 480 (SC) THAT THE STATEMENTS OBTAIN ED IN THE COURSE OF SURVEY DE HORS CORROBORATIVE EVIDENCE CANNOT BE CONCLUSIVELY PRO OF FOR MAKING THE ADDITIONS. FURTHERMORE, THE LD. C IT(A) BY REFERRING TO THE STATEMENTS OF SHRI RAKESH DOSHI HAS GIVEN A FINDING THAT HIS ADMISSION WAS NOT WITH RELATION TO UNSECURED LOANS OBTAINED BY THE ASSESSEE FROM THE CONCERNED COMPANIES. IN THIS REGARD, WE ARE OF THE CONSIDERED OPINION THAT THESE CIRCUMSTANCES CAN GIVE RISE TO A SUSPICION BUT THEY ARE NOT CONCLUSIVE PROOF FOR ADDITION WITHOUT ANY PROPER ENQUIRY BY THE A.O. REBUTTING THE DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE. 38. THE A.O. IN THIS REGARD HAS DOUBTED THE CREDITWORTHINESS OF THE CORPORATE ENTITIES ON THE GROUND THAT THEY HAVE TAKEN LOANS AND SHARE CAPITAL AND SHARE PREMIUM FROM OTHER CORPORATE E NTITIES. IN THIS REGARD, IT IS ALSO NOTED THAT THE A.O. HAS REFERRED TO THE PROVISION OF SECTION 68 OF THE ACT. SECTION 68 AND PROVISO THERETO READS AS UNDER: CASH CREDITS. 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOO KS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARG ED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS 29 ITA NOS.1448, 1449 & 1467/MUM /2017 ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SU CH COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRS T PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB ) OF SECTION 10.] 3 9 . IN THIS REGARD, WE NOTE THAT BY GIVING THE CONFIRMATION, RETURN OF INCOME, THE DETAIL OF PAN, COPY OF BALANCE SHEET AND P & L ACCOUNT AND COPY OF ITS BANK STATEMENT, THE ASSESSEE HAS DULY DISCHARGED ITS ONUS. THE A.O. HAS NOT FOUND DEFAULT IN THESE DOCUMENTS. IT IS ALSO NOT THE CASE THAT CASH HAS BEEN DEPOSITED IN THE BANK STATEMENT BEFORE GRANTING OF LOANS BY THESE COMPANIES AS POINTED OUT BY THE LD. CIT(A). THE A.O.S GROUSE IS THAT THE ASSESSEE HAS NOT PRODUCED THE DIRECTORS OF THESE COMPANIES, AND THESE CORPORATE ENTITIES HAVE ACQUIRED RESOURCES BY GETTING S HARE CAPITAL AND SHARE PREMIUM FROM OTHER CORPORATE ENTITIES . FIRST OF ALL, WE NOTE THAT THIS IS A CASE OF UNSECURED LOAN AND NOT SHARE CAPITAL AND SHARE PREMIUM. FURTHER, WE FIND THAT THE ABOVE SAID PROVISO TO SECTION 68 WAS INSERTED BY FINANCE INCOME TAX ACT, 1961, 2012 W.E.F. 01.04.2013. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GAGANDEEP INFRASTRUCTURE (P.) LTD. [2017] 394 ITR 680 HAS HELD THAT THE SAID PROVISO IS PROSPECTIVE AND CANNOT BE APPLIED TO ASSESSMENT YEARS PRECEDING THE SAM E. WE MAY GAINFULLY REFER TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WHICH IS ALSO RELEVANT IN THIS CASE: DURING THE PREVIOUS RELEVANT TO THE SUBJECT ASSESSMENT YEAR THE ASSESSEE HAD INCREASED ITS SHARE CAPITAL FROM RS.2,50,000/TO RS.83.75 LAKHS . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE RESPONDENT HAD COLLECTED SHARE PREMIUM TO THE EXTENT OF RS.6.69 CRORES. CONSEQUENTLY HE CALLED UPON THE RESPONDENT TO JUSTIFY THE CHARGING OF SHARE PREMIUM AT RS.190/PER SHARE. 30 ITA NOS.1448, 1449 & 1467/MUM /2017 THE RESPONDENT FURNISHED THE LIST OF ITS SHAREHOLDERS, COPY OF THE SHARE APPLICATION FORM, COPY OF SHARE CERTIFICATE AND FORM NO.2 FILED WITH THE REGISTRAR OF COMPANIES. THE JUSTIFICATION FOR CHARGING SHARE PREMIUM WAS ON THE BASIS OF THE FUTURE PROSPECTS OF THE BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION/JUSTIFICATION OF THE RESPONDENT AND INVOKED SECTION 68 OF THE ACT TO TREAT THE AMOUNT OF RS.7.53 CRORES I.E. THE AGGREGATE OF THE ISSUE PRICE AND THE PREMIUM ON THE SHARES I SSUED AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT. THIS ADDITION WAS DELETED BY THE CIT(A) AND THE TRIBUNAL. BEFORE THE HIGH COURT, THE DEPARTMENT CONTENDED THAT THE PROVISO TO SECTION 68 OF THE ACT WHICH WAS INTRODUCED WITH EFFE CT FROM 1ST APRIL, 2013 WOULD APPLY IN THE FACTS OF THE PRESENT CASE EVEN FOR A.Y. 2008 - 09. THE BASIS OF THE ABOVE SUBMISSION WAS THAT THE DE HORS THE PROVISO ALSO THE REQUIREMENTS AS SET OUT THEREIN WOULD HAVE TO BE SATISFIED. HELD BY THE HIGH COURT DISMI SSING THE APPEAL: (I) WE FIND THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013 - 14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMEN T YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1ST APRIL, 2013 WAS ITS NOR MAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTRODUCED STATES THAT IT WAS INTRODUCED FOR REMOVAL OF DOUBTS OR THAT IT IS DECLARATORY. THEREFORE IT IS NOT OPEN TO GI VE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 OF THE ACT IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF T HE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMELY THE GENUINENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIB UNAL AND ON FACTS IT WAS FOUND SATISFIED. (II) FURTHER IT WAS A SUBMISSION ON BEHALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN CIT V/S. LOVELY EXPORTS (P)LTD. 317 ITR 218 IN THE CONTEXT TO THE PREAMENDED SECTION 68 OF THE ACT HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEES INCOME AS UNEXPLAINED CASH CREDIT. AS NOTED IN THE RATIO EMANATING FROM THE D ECISION OF HON'BLE JURISDICTIONAL HIGH COURT ABOVE, EVEN IF THE SOURCE OF FUNDS OF THIS CORPORATE ENTITIES WHO HAVE ADVANCED 31 ITA NOS.1448, 1449 & 1467/MUM /2017 LOAN TO THE COMPANY ARE CONSIDERED S USPICIOUS IN THE CONTEXT OF PRE - AMENDED SECTION 68, THE ADDITION CAN BE CONSIDERED IN THE HANDS OF THESE COMPANIES AND CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. EVEN OTHERWISE (AS THE PROVISO IS APPLICABLE FOR A.Y. 2013 - 14) AS RIGHTLY NOTED BY THE LD. CIT(A), THE SAID PROVISO PROVIDES FOR AN ADVERSE INFERENCE IF THE ASSESSEE COMPANY PROVIDING THOSE SUMS DOES NOT OFFER ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF SUMS. IN THIS REGARD, IT IS NOTED THAT THE A.O. HAS NOT MADE ANY ENQUIRY FROM THESE CORPORATE ENTITIES WHO HAVE PROVIDED THE LOAN, NOT EVEN NOTICE U/S. 133(6) HAS BEEN ISSUED. IN THESE CIRC UMSTANCES, WITHOUT MAKING ANY ENQUIRY, THE A.O. CANNOT PRESUME THAT THE FUNDS OBTAINED BY THESE CORPORATE ENTITIES ARE BOGUS OR THEY ARE ASSESSEES OWN FUNDS BEING CIRCULATED . IN THIS REGARD, WE NOTE THAT IN THE IDENTICAL SITUATION, THIS TRIBUNAL IN THE CA SE OF ASST. CIT VS. SHRI DILIP CHIMANLAL GANDHI (IN I.T.A. NO.7079/MUM/2016 VIDE ORDER DATED 01.08.2018) THE ITAT HAS HELD AS UNDER: 22. UPON CAREFUL CONSIDERATION WE NOTE THAT IN SUPPORT OF THE EXPLANATION OF THE UNSECURED LOANS, THE ASSESSEE HAS SUBMIT TED FOLLOWING DETAILS BEFORE THE ASSESSING OFFICER: I. PAN DETAILS OF CREDITORS II. CONSTITUTION AND ADDRESS OF THE CREDITORS III. PARTICULARS OF INCOME - TAX RETURNS FILED BY THE CREDITORS. THESE SHOW THAT THE CREDITORS ARE LEGITIMATE BUSINESS ENTITIES, HAVING THE ABILITY TO ADVANCE THE IMPUGNED LOANS TO THE APPELLANT,] IV. CONFIRMATORY LETTERS GIVEN BY THE CREDITORS V. AUDITED FINANCIAL ACCOUNTS (INCLUDING BALANCE SHEETS) OF THE CREDITORS [THESE SHOW THAT THE LOANS ARE DULY REFLECTED IN THE BOOKS OF ACC OUNT OF THE CREDITORS.] VI. RELEVANT BANK STATEMENTS OF THE CREDITORS [THESE SHOW THAT THE LOAN AMOUNTS WERE PAID THROUGH LEGITIMATE BANKING CHANNELS. FURTHER THESE BANK STATEMENTS DO NOT REFLECT ANY MOVEMENT OF CASH, ESSENTIAL TO HAWALA TRANSACTIONS.] 23. THE ASSESSING OFFICER HAS MADE NO ENQUIRY WITH REFERENCE TO THE ABOVE. HE DID NOT SEEK ANY FURTHER EXPLANATION OR DETAIL FROM THE ASSESSEE. HE SOLELY RELIED UPON THE INVESTIGATION WING ENQUIRY REGARDING THE BHANWARILAL GROUP. THE LD. COMMISSIONER OF IN COME TAX (APPEALS) IN THIS REGARD HAS CORRECTLY MADE THE 32 ITA NOS.1448, 1449 & 1467/MUM /2017 OBSERVATION THAT THE ASSESSEE HAVING GIVEN ALL THE NECESSARY DETAILS AND HAS DISCHARGED ITS ONUS, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO MAKE FURTHER ENQUIRY IF HE WAS NOT CONVINCED BY THE SUBMISSIONS OF THE ASSESSEE. WE FIND THAT ASSESSING OFFICER HAS DISPLAYED TOTAL LACK OF APPLICATION OF MIND BY NOT EVEN ISSUING A NOTICE TO THE LOAN CREDITORS. 24. WE FIND THAT IT IS SETTLED LAW THAT WHILE MAKING ANY DISALLOWANCE/ADDITION, THE ASSESSING O FFICER NEEDS TO MAKE DUE ENQUIRY. IN THIS CASE, THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY WHATSOEVER. AS NOTED HEREINABOVE, THE ASSESSEE HAS GIVEN ALL THE DOCUMENTARY EVIDENCES INCLUDING CONFIRMATORY LETTERS, BANK STATEMENTS AND FINANCIAL STATEMENTS O F THE CREDITORS. THE ASSESSING OFFICER HAS NOT FOUND ANY ERROR THEREIN. IT HAS BEEN HELD IN NUMBER OF CASES THAT WHEN THE ASSESSEE HAS GIVEN ALL THE NECESSARY DETAILS OF THE LOAN CREDITORS, INCLUDING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TR ANSACTION, THE ONUS UPON THE ASSESSEE IS DISCHARGED. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSEE HAS DISCHARGED ITS ONUS. THE ASSESSING OFFICER HAS NOT REBUTTED ANY OF THE SUBMISSION OF THE ASSESSEE AND THE DOCUMENTARY EVIDENCE IN THIS REGARD. HENCE, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE VARIOUS CASE LAWS REFERRED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ARE GERMANE AND DULY SUPPORTS THE CASE OF THE ASSES SEE. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 40 . THE ABOVE CASE LAW DULY SUPPORTS THE PROPOSITION THAT NO ADVERSE INFERENCE CAN BE DRAWN BY THE A.O. WITHOUT MAKING ANY ENQUIRY IN THIS REGARD. E VEN THE LD. DR HAS TACITLY ACKNOWLEDGED THIS PROPOSITION WHEN HE SUBMITS THAT THE LD. COUNSEL OF THE ASSESSEE HAS MENTIONED THAT THE A.O. HAS NOT ISSUED NOTICE U/S. 133(6) AND SUMMONS U/S. 131 AND HAS QU OTED THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CIT V/S GANGESHWARI METAL PVT. LTD. (2013) 96 DTR (DE L) 200 AND OTHER DECISIONS. IN THIS CONNECTION, THE LD. DR HAS RELIED UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF FIDELITY BUSINESS SERVICES IN DIA PVT. LTD. (IN IT A NO. 512/2017 DATED 23/07/2018) FOR THE PROPOSITION THAT IF THERE IS SOME LACK OF INVESTIGATION , THE ITAT IS COMPETENT TO SET ASIDE THE MATTERS. 33 ITA NOS.1448, 1449 & 1467/MUM /2017 4 1 . WE HAVE CAREFULLY CONSIDERED THIS PROPOSITION. WE NOTE THAT THE LD. COUNSEL OF THE AS SESSEE HAS REFERRED TO SEVERAL CASE LAWS IN THIS REGARD THAT WHEN THE ASSESSEE HAS SUPPLIED ALL THE DOCUMENTS THE ONUS IS DISCHARGED. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE SEVERAL CASE LAWS INCLUDING THAT FROM HON'BLE DELHI HIGH COURT IN THE CASE OF GANGESHWARI METAL PVT. LTD. ( SUPRA), CIT V. VARINDER RAWLEY (2014) 366 ITR 232 (P&H), HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V. SACHITEL COMMUNICATIONS P. LTD. (2014) 227 TAXMAN 219 (MAG) AND OTHERS. 4 2 . I N OUR CONSIDERED OPINION, THESE CASE LAWS DULY SUPPORT THE PROPOSITION CANVASSED BY THE ASSESSEE. IN OUR CONSIDERED OPINION, THE A.O. HAS NOT BROUGHT ON RECORD ANY COGENT, ADVERSE MATERIAL TO REBUT THE CREDIBILITY OF THE CORPORATE ENTITY FROM WHO M LOAN HAS BEEN TAKEN. AS ALREADY POINTED OUT BY US AS ABOVE, THAT THESE CORPORATE ENTITIES WERE FOUND BY THE A.O. TO HAVE ACQUIRED FUNDS BY BORROWALS AND ACCEPTANCE OF SHARE C APITAL AND SHARE PREMIUM . THIS BY ITSELF CANNOT LEAD TO PRESUMPTION THAT THE SE SOURCES ARE BOGUS WITHOUT ANY ENQUIRY. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE LD. DR'S REQUEST THAT THIS ISSUE BE AGAIN REMITTED TO THE FILE OF THE A.O. TO MAKE FURTHER NECESSARY ENQUIRIES CANNOT BE ENTERTAINED. THE DECISION OF THE HONBLE KARNATAKA H IGH COURT REFERRED BY THE LD. DR WAS ON A DIFFERENT SET OF FACTS, WHEREIN, THE HONBLE KARNATAKA HIGH COURT ON THE FACTS AND CIRCUMSTANCES OF THE CASE HAD UPHELD THE CERTAIN DIRECTION OF THE ITAT. IN THE PRESENT CASE, AS POINTED OUT HEREINABOVE, IN OUR CON SIDERED OPINION, THE ASSESSEE HAS DISCHARGED ITS ONUS. AS NOTED ABOVE, THE A.O. HAS NOT BROUGHT ON RE QU IR ED COGENT MATERIAL TO REBUT THE DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE NOR HE MADE 34 ITA NOS.1448, 1449 & 1467/MUM /2017 ANY ENQUIRY. AS NOTED ABOVE, THE ASSESSEE HAS GIVEN ALL THE NECESSARY EVIDENCE INCLUDING THE CONFIRMATION LETTERS, BANK STATEMENT, FINANCIAL STATEMENTS OF THE CORPORATE ENTITIES. HENCE, IN OUR CONSIDERED OPINION, THE IDENTITY, CREDITWORTHINESS, GENUINENESS OF THE TRANSACTION HAS BEEN PROVED BY THE ASSESSEE AND THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGE D . IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE FIND THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER SUPPORTED BY APPROPRIATE CASE LAWS DULY RE BUTT ING ALL THE FINDINGS OF THE A.O. HENCE WE UPHOLD THE ORDER OF THE LD. CIT(A). 4 3 . SINCE WE HAVE UPHELD THE ORDER OF THE LD. CIT(A) AS REGARDS THE DELETION OF THE ADDITION ON ACCOUNT OF UNSECURED LOAN, THE DISALLOWANCE OF INTEREST ON THAT ACCOUNT HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A). WE UPHOLD THE SAME ALSO. 4 4 . AS REGARDS THE DISALLOWANCE BY INVOKING THE PROVISION OF SECTION 14A, WE FIND THAT THE SAID ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CHEMINVEST LTD VS CIT [2015] 378 ITR 33 (DEL) AND THE DECISION OF HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. BALLARPUR INDUSTRIES LTD . (IN ITA NO. 51 OF 2016). IN THESE CASES, IT WAS EXPOUNDED THAT WHEN NO EXEMPT INCOME HAS BEEN EARNED, NO DISALLOWANCE U/S.14A IS PERMISSIBLE. 4 5 . IN THE RESULT, THE SE APPEALS BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBE R MUMBAI ; DATED : 05.10.2018 ROSHANI , SR. PS 35 ITA NOS.1448, 1449 & 1467/MUM /2017 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY O RDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI