MAHAN INDUSTRIES LTD, AHEMEDABAD V. DCIT CEN CIR 12, MUMBAI

ITA 146/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9996 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries; Onus to prove
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 146 /MUM/20 16 (ASSESSMENT YEAR 20 06 - 07 ) M/S. MAHAN INDUSTRIES LTD. 3 RD FLOOR, D.K. HOUSE MITHAKHALI UNDERBRIDGE AHMEDABAD PAN : AABCM 0370P V S . DCIT CIRCLE 12 MUMBAI. ( APPELLANT ) ( RESPONDENT ) A SSESSEE BY SHRI RAJIV KHANDELWAL & SHRI NEELKANTH KHANDELWAL DEPARTMENT BY S HRI SUMAN KUMAR DATE OF HEARING 5 . 0 2 . 201 8 DATE OF PRONOUNCEMENT 28 . 0 2 . 201 8 O R D E R PER B.R. BA SKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CH ALLENGING THE ORDER DATED 18 - 11 - 2015 PASSED BY LD CIT(A) - 48, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2006 - 07. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.100.00 LAKHS MADE BY THE AO U/S 68 OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND BUILDING MATERIALS. THE ORIGINAL ASSESSMENT IN THE HANDS OF THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT ON 19 - 12 - 2008 DETERMININ G TOTAL INCOME AT NIL AMOUNT. SUBSEQUENTLY, THE AO RECEIVED INFORMATION THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES IN THE FORM LOANS AND ADVANCES FROM M/S BASANT MARKETING P LTD. HENCE THE AO RE - OPENED THE ASSESSMENT BY ISSUING NOTICE ON 26 - 03 - 2013. ACCORDING TO THE ASSESSEE, THE NOTICE WAS SERVED ON IT ONLY ON 01 - 04 - 2013. THE ASSE S SEE SOUGHT THE REASONS FOR REOPENING, FILED ITS OBJECTIONS TO THE SAME AND THE AO ALSO DISPOSED OF THOSE OBJECTIONS. M/S. MAHAN INDUSTRIES LTD. 2 3. THE ASSESSEE HAD RECEIVED LOAN OF RS .100 LAKHS FROM M/S BASANT MARKETING P LTD DURING THE YEAR UNDER CONSIDERATION AND THE AO ASSESSED THE SAME U/S 68 OF THE ACT. THE REASONS GIVEN BY THE AO FOR ASSESSING THE SAME U/S 68 OF THE ACT HAS BEEN SUMMARIZED BELOW: - (A) THE CBI (ACB) CONDUCTED SE ARCH AT THE PREMISES OF S/SHRI ARUN DALMIA AND HARSH DALMIA. DURING THE COURSE OF SEARCH, EVIDENCES WERE UNEARTHED TO SHOW THAT THE LOANS AND ADVANCES GIVEN BY M/S BASANT MARKETING P LTD WERE NOTHING BUT ACCOMMODATION ENTRIES. THE ASSESSEE IS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES. (B) THE ASSESSEE WAS GIVEN OPPORTUNITY TO PROVE THE GENUINENESS OF LOANS, BUT THE ASSESSEE DID NOT FURNISH ANY MATERIAL. HENCE THE ASSESSEE HAS NOT DISCHARGED ITS ONUS. (C) THE ASSESSEE HAS FILED AN AFFI DAVIT OBTAINED FROM SHRI RISHAB DALMIA OF M/S BASANT MARKETING, BUT IT WAS A SELF SERVING DOCUMENT. 4. BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE LOAN TRANSACTIONS HAVE BEEN ACCEPTED IN THE HANDS OF M/S BASANT MARKETING UPTO AY 2009 - 10. THE A SSESSEE ALSO TOOK SUPPORT OF AFFIDAVIT GIVEN BY SHRI RISHAB DALMIA AND THE FINANCIAL STATEMENTS OF M/S BASANT MARKETING. THE LD CIT(A) TOOK THE VIEW THAT THE AFFIDAVIT DOES NOT MENTION ANYTHING ABOUT GENERATION OF FUNDS/INCOME AND THUS DOES NOT CLARIFY TH E SOURCES OF FUNDS. HE FURTHER OBSERVED THAT THE BANK ACCOUNT OF M/S BASANT MARKETING SHOWS THAT DEPOSITS AND WITHDRAWALS HAVE BEEN MADE BY WAY OF DEMAND DRAFTS. FURTHER SUCH DEPOSITS AND WITHDRAWALS HAVE BEEN MADE ON THE SAME DAY. HE ALSO OBSERVED THAT THE DETAILS OF PAYMENT OF INTEREST WERE NOT AVAILABLE AND IT IS NOT BELIEVABLE THAT A PRUDENT BUSINESSMAN WILL NOT CHARGE INTEREST FOR ABOUT SIX YEARS. HE ALSO OBSERVED THAT THE BANK TRANSACTIONS ALONE WILL NOT PROVE CREDIT WORTHINESS. ACCORDINGLY THE LD CIT(A) HELD THAT THE TRANSACTIONS DEFIES HUMAN PROBABILITIES AND ACCORDINGLY CONFIRMED THE ADDITION. THE LD CIT(A) TOOK SUPPORT OF DECISIONS RENDERED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540) AND OTHER DECISIONS IN SU PPORT OF THE ABOVE SAID PROPOSITION. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. M/S. MAHAN INDUSTRIES LTD. 3 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT AND MADE THE IMPUGNED ADDITION I N CONSEQUENCE TO THE SEARCH CONDUCTED IN THE HANDS OF SHRI ARUN DALMIA AND OTHERS. HE SUBMITTED THAT M/S BASANT MARKETING P LTD IS ASSESSED TO INCOME TAX AND THE ASSESSMENTS HAVE BEEN COMPLETED U/S 143(3) AFTER THE SEARCH PROCEEDINGS FOR AY 2009 - 10, WHERE IN ALL THE TRANSACTIONS OF M/S BASANT MARKETING HAVE BEEN ACCEPTED AS GENUINE BUSINESS TRANSACTIONS. HOWEVER, IT WAS DECLARED AS A FICTITIOUS ENTITY IN AY 2010 - 11 BY THE AO, WHICH WAS CHALLENGED BY M/S BASANT MARKETING P LTD BY FILING APPEAL BEFORE LD CIT (A), KOLKATTA. THE LD CIT(A), KOLKATTA HAS PASSED THE ORDER ON 04 - 02 - 2015 FOR AY 2010 - 11, WHEREIN HE HAS HELD THAT M/S BASANT MARKETING P LTD IS NOT A BOGUS ENTITY AND FURTHER THERE IS NO MATERIAL ON RECORD TO SUPPORT THE FINDING GIVEN BY AO. ACCORDINGLY THE LD CIT(A), KOLKATTA HAS HELD THE BUSINESS CARRIED ON BY M/S BASANT MARKETING CANNOT CONSIDERED TO BE BOGUS IN NATURE. 6. THE LD A.R FURTHER SUBMITTED THAT THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE AO AND THE AO HAS REPORTED THAT THOUGH THE LD CIT(A), KOLKATTA HAS HELD IT TO BE A GENUINE COMPANY, YET THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRANSACTIONS. THE LD A.R SUBMITTED THAT THE ORDER PASSED BY LD CIT(A), KOLKATTA IN THE HANDS OF M/S BASANT MARKETING P LTD HAS SINCE BEEN ACC EPTED BY THE DEPARTMENT BY NOT FILING APPEAL BEFORE ITAT. HE SUBMITTED THAT THE LETTER DATED 23 - 02 - 2016 IN NO.ITO, WD - 8(1)/KOL/BASANT MARKETING/15 - 16 WRITTEN BY THE ITO, WARD 8(1), KOLKATTA TO THE DEPUTY COMMISSIONER OF INCOME TAX - 3(3)(2), MUMBAI CLARIF IES THIS FACT. THE LD A.R SUBMITTED THAT THE WHOLE PREMISE OF THE AO IN MAKING THE IMPUGNED ADDITION IS THAT THE TRANSACTIONS OF M/S BASANT MARKETING ARE BOGUS, WHILE IT HAS BEEN ACCEPTED AS GENUINE IN ITS HANDS. 7. THE LD A.R FURTHER SUBMITTED THAT M/S BASANT MARKETING P LTD IS REGULAR IN FILING INCOME TAX RETURNS AND IS REGISTERED UNDER COMPANIES ACT. HENCE ITS IDENTITY IS PROVED. HE SUBMITTED THAT THE TRANSACTIONS HAVE BEEN ROUTED THROUGH BANKING CHANNELS AND HENCE GENUINENESS IS PROVED. HE SUBM ITTED M/S. MAHAN INDUSTRIES LTD. 4 THAT THE ASSESSEE HAS ALSO FURNISHED FINANCIAL STATEMENTS OF M/S BASANT MARKETING P LTD, WHICH SHOWS THAT IT IS CARRYING ON TRADING TRANSACTIONS AND WAS ALSO HOLDING INVENTORIES. IT HAS ALSO RECEIVED DIVIDENDS FROM COMPANIES. IT HAS ALSO OBTAINED U NSECURED LOANS FROM VARIOUS PARTIES, WHICH HAVE BEEN USED TO MAKE INVESTMENTS, TO HOLD INVENTORIES AND TO GIVE LOANS AND ADVANCES. HE SUBMITTED THAT THE BALANCE SHEET, WHICH HAS BEEN AUDITED, PROVES THE SOURCES OF THE FUNDS/CREDIT WORTHINESS. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS PLACED UPON IT U/S 68 OF THE ACT. ACCORDINGLY HE SUBMITTED THAT THIS ADDITION SHOULD BE DELETED. 8. THE LD D.R, ON THE CONTRARY, STRONGLY SUPPORTED THE ORDER PASSED BY LD CIT(A). HE SUB MITTED THAT THE SURROUNDING CIRCUMSTANCES IN THE INSTANT CASE PROVE THAT THE TRANSACTIONS ARE NOT GENUINE. HE FURTHER SUBMITTED THAT THE HONBLE DELHI HIGH COURT HAS HELD IN THE CASE OF PR. CIT VS. BIKRAM SINGH THAT THE MERE FACTS THAT THE IDENTITY OF THE LENDERS IS ESTABLISHED AND THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS BY THEMSELVES DO NOT MEAN THAT THE TRANSACTIONS ARE GENUINE. IT FURTHER HELD THAT IF THE LENDERS DO NOT HAVE FINANCIAL STRENGTH TO LEND SUCH HUGE SUMS AND IF THERE IS NO EXPL ANATION AS TO THEIR RELATIONSHIP WITH THE ASSESSEE, NO COLLATERAL SECURITY AND NO AGREEMENT, THE TRANSACTIONS HAVE TO BE TREATED AS BOGUS UNEXPLAINED CREDITS. 9. IN THE INSTANT CASE, WE NOTICE THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF SEARCH CONDUCTED BY CBI IN THE HANDS OF ARUN DALMIA, WHEREIN IT WAS STATED THAT THE TRANSACTIONS OF M/S BASANT MARKETING P LTD ARE NOT GENUINE. HOWEVER, IT IS NOTICED THAT, AFTER THE SEARCH ACTION, THE ASSESSMENTS OF M/S BASANT MARKETING P LTD HAVE BEEN COMPLETED FOR AY 2009 - 10 ACCEPTING THE TRANSACTIONS AS GENUINE. THOUGH THE AO OF M/S BASANT MARKETING P LTD HAS TAKEN A DIFFERENT VIEW AND HELD THE TRANSACTIONS TO BE BOGUS IN AY 2010 - 11, YET THE SAID VIEW OF THE AO HAS BEEN SET ASIDE BY LD CIT(A), KOLKATTA IN THE APPELLATE PROCEEDINGS BY OBSERVING THAT THE VIEW SO TAKEN BY THE AO IS NOT SUPPORTED BY EVIDENCES. IT IS PERTINENT TO NOTE THAT THE ORDER SO PASSED BY LD CIT(A) HAS BEEN ACCEPTED BY THE REVENUE AND THUS HAS M/S. MAHAN INDUSTRIES LTD. 5 ATTAINED FINALITY. HEN CE THE VERY BASIS, ON WHICH THE IMPUGNED ADDITION HAS BEEN MADE, HAS FAILED. 10. THE AO HAS ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS PLACED UPON IT U/S 68 OF THE ACT. FROM THE ARGUMENTS OF THE LD A.R, WE NOTICE THAT THE ASSE SSEE HAS DISCHARGED THE ONUS BY PROVING THE IDENTITY OF THE CREDITOR, GENUINENESS OF TRANSACTIONS AND CREDIT WORTHINESS OF THE CREDITOR. THE FINANCIAL STATEMENTS OF M/S BASANT MARKETING P LTD SHOW THAT IT WAS HAVING SUFFICIENT SOURCES TO LEND MONEY TO THE ASSESSEE. THE FINANCIAL STATEMENTS ALSO SHOW THAT M/S BASANT MARKETING P LTD WAS CARRYING ON CERTAIN TRADING ACTIVITIES AND IT HAS INVESTED FUNDS IN INVESTMENTS, INVENTORIES AND IN GIVING LOANS AND ADVANCES. ON THE CONTRARY, WE NOTICE THAT THE AO DID NO T DISPROVE THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE, I.E., THE AO HAS FAILED TO DISCHARGE THE BURDEN OF PROOF SHIFTED TO HIS SHOULDER. WHEN THE ASSESSEE IS PROVING THE TRANSACTIONS AND FURTHER WHEN THE TRANSACTIONS HAVE BEEN ACCEPTED AS GENUINE IN THE HANDS OF LENDER, IN OUR VIEW, THE THEORY OF HUMAN PROBABILITIES COULD NOT BE APPLIED HERE. 11. THE LD D.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF BIKRAM SINGH (SUPRA). HOWEVER, IN THE ABOVE SAID CASE , THE CREDIT WORTHINESS OF THE CREDITORS WAS NOT ESTABLISHED BY THE ASSESSEE, WHICH MAKES THIS CASE DISTINGUISHABLE. 12. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.100 LAKHS MADE U/S 68 OF THE ACT. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD CIT(A) PASSED ON THIS ISSUE AND DIRECT THE AO TO DELETE THE SAME. 13. THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT. WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE SAME AS WE HAVE DELETED THE ADDITION ON MERITS. M/S. MAHAN INDUSTRIES LTD. 6 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 28 . 0 2 .201 8 . SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN) JUDICIAL MEMB ER ACCOUNTANT MEMBER MUMBAI ; DATED : 28 / 0 2 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FI LE. BY ORDER, //TRUE COPY// SENIOR P RIVATE S ECRETARY PS ITAT, MUMBAI