The DCIT, Central Circle-1(2), Ahmedabad V. M/s. Volga International Ltd., Sarangpur

ITA 1538/AHD/2017

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1728 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-03-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 20-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEEPAK R SHAH
• Keywords: Wrong claim; Accommodation entries; Set aside; Capital Gains
• Section: 147; 68; 43

Judgement Text

आयकर अपील य अ धकरण, अहमदाबाद यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ D’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.1538/AHD/2017 नधा रण वष /Asstt. Year: 2010-2011 The D.C.I.T Central Circle-1(2), Ahmedabad Vs. M/s. Volga International Ltd., D/123, Ghanta Karna Mahavir Market, Nr. New Cloth Market, Sarangpur, Ahmedabad-380002. PAN: AACCV2325A (Applicant) (Respondent) Assessee by : Shri Deepak R Shah, AR Revenue by : Shri Atul Pandey, Sr.DR स ु नवाई क तार ख/Date of Hearing : 19/03/2024 घोषणा क तार ख /Date of Pronouncement: 10/06/2024 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeal)-11, Ahmedabad, arising in the matter of assessment order passed under s. 143 r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2010-11. ITA no.1538/AHD/2017 A.Y. 2010-11 2 2. The revenue has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition made u / s 68 of the Act of Rs.1,70,00,000/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 3. It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent. 3. At the outset we note that, the Bench in the order sheet entry bearing number 43 dated 6 September 2023 directed the revenue to enquire about the status of the assessment framed in the case of Shri Shrish C. Shah. But there was no progress by the revenue in collecting the requisite information even till the date when the matter came up for hearing dated 19 th of March 2024. The present appeal was instituted sometime in the year 2017 but the information as desired by the bench was not furnished in reasonable period. Almost 8 to 9 months have elapsed from the date of the direction given by the Bench. At the time of hearing the Ld. DR has also not appraised the Bench indicating some date for collecting the desired information. On the question to proceed with the hearing of the matter, the ld. DR consented to run the matter before the Bench. Accordingly, we decided to proceed with the matter. 4. The only issue raised by the revenue is that the learned CIT(A) erred in deleting the addition of Rs. 1.7 crores made under section 68 of the Act. 5. Briefly, the stated facts are that the assessee in the present case is a public limited company and filed the return of income at NIL. The assessee in the year consideration has received an unsecured loan of Rs. 1.7 crores from M/s Prraneta Industries Limited (Now known as Adhar Venture India Ltd). 6. The AO found that the M/s Prraneta Industries Ltd (hereinafter M/s PIL) is a company controlled and managed by the accommodation entry provider namely ITA no.1538/AHD/2017 A.Y. 2010-11 3 Shri Shrish Chandrakant Shah. The AO in alleging so referred to the statement of several person recorded during search and survey proceeding carried at the premises of Shri Shirish Chandrakant Shah, his key employees, and various other concerns which he allegedly controls and manages. One such statement referred to by the AO in this regard was of the managing director of M/s PIL namely Shri Om Prakash Anandilal Khandewal and declaration filed by the other directors of M/s PIL namely Smt. Jayoti Dhiresh Munevar and Shri Jils Raichand Madan. In the statement, it was admitted that PIL is engaged in providing accommodation entry. Further, because of search, it was found that Shri Shrish Chandrakant Shah in association with various intermediaries has been providing accommodation entries in the form of share capital & premium, unsecured loan, LTCG and STCL etc. and one such intermediaries was Shri Rajesh Jhaveri through whom accommodation entries were provided to Ahmedabad based client/parties. The name and reference of Shri Rajesh Jhaveri was found in several documents found during the course of search. An excel sheet was maintained in accounting form by Shri Chandrakant Shah in the name of Rajesh Jhaveri showing cash receipt from him and accommodation entry cheque against such cash to several parties were also found. In the impugned excel sheet name of the present assessee was also found as party to whom cheques were paid by M/s PIL against the cash receipt. The entry made in the impugned excel sheet matched with the receipts shown by the assessee in its books from M/s PIL. 6.1 In view of the above the AO rejected the explanation and details such PAN, confirmation, bank statement and financial statement of M/s PIL provided by the assessee in order to discharge the primary onus of establishing the identity & creditworthiness of creditor and the genuineness of transaction. Thus, the AO made the addition of Rs. 1.7 crore received from M/s PIL as unexplained cash credit under section 68 of the Act. ITA no.1538/AHD/2017 A.Y. 2010-11 4 7. On appeal by the assessee the learned CIT(A) deleted the addition made by the AO by observing as under: 7.4 The AO made additions on the basis of statement of shri Shirish C Shah and the material found in the premises of Shri Shirish Shah. However, these entries were not in the handwriting of the appellant nor were they indicative of any cash being paid by the appellant. They might have been found during search in the case of third party but entries in those books or digital data were not supposed to be explained by the appellant. The assessee cannot be called upon to explain source of income even if credited by the third party. The assessee, claimed that no such amount was invested or paid by him to the third party. The Apex court in the case of Kishan Chand Chelaram (supra) held "That question of presumption of possession is confined to the amount which was recovered from a particular person. Possession of another person cannot be presumed to be possession of the assessee if the ownership is disputed, burden of proving that the possession was not possession as owner and that ownership was of someone else, is on the assessee. if the department wants to assert that he assessee is the owner of the amount recovered from someone else, then the burden lies on the department to prove the ownership of the assessee." In view of the above legal and factual position the addition made by the AO was not justified. 7.5 Facts of the case, findings of the AO and submissions of the appellant have been gone through. It seems that the AO has stressed upon the nature of shell companies and modus operandi of their working. Addition in the case of the appellant was made on the basis of the statements of the directors of several companies claimed to be controlled by Shri Shirish C Shah and the statement of Shri Shirish C Shah himself. It is relevant to mention that the assessee furnished the required evidence u/s 68 of the Act to discharge his primary onus. Moreover, the AO was requested by the assessee to allow him to cross examine the persons on whose statements were used against him. The AO conclude that the assessee obtained funds from Prraneta Industries Ltd under the gamut of share capital / premium and treated them as unexplained income of the assessee u/s 68 of the Act. 8. The appellant relied on number of decisions to contend that the AO did not provide opportunity to cross examine the makers of the statements, therefore, his action was bad in law. It was also the contention of the appellant that the AO did not rebut the evidence furnished by the appellant in support of his claim and made addition in a summary manner. He received temporary loan from Prraneta Industries Ltd through account payee cheques and the same was repaid within a period of two months. Necessary evidence of the same were furnished before the AO in the assessment proceedings. He did not receive any subscription in the form of share capital and premium thereon or any accommodation entries in the form of bogus claim of capital gains. 9. After considering the facts of the case and the contention of the appellant, it was noticed in the assessment order that the assessee reiterated that he did not receive any subscription in the form of share capital and premium thereon or any accommodation entries in the form of bogus claim of capital gains. The necessary evidence required to fulfill the conditions laid down in section 68 of the Act were furnished by the assessee before the AO, this fact was mentioned in the show cause notice of the AO and in the assessment order also. So far as the issue of according an opportunity to cross examine the makers of statements is concerned, it was evident from the assessment order that no such opportunity was allowed by the AO to the assessee and the statements were utilized to draw adverse inference against the assessee. The position on the issue of giving ITA no.1538/AHD/2017 A.Y. 2010-11 5 opportunity to cross examine the third party before using the statements to draw adverse inference against the assessee has been clarified in the following cases:- Andaman Timber Industries (2015) 62 Taxmann.com (SC) LRs of late Laxmanbhai S Patel 327 ITR 290 (Guj) Indrajit Suri (2013) 215 Taxman 581(Guj) Farrah Marker ITA No 3801/Mum/2011 dated 27-04-2016 Pratik Suryakant Shah 77 taxman.com 260 (2017) (Ahd trib) Rameshkumar Jain (HUF) (2013) 36 Taxmann.com 524(Jodhpur Trib) The ratio of decision of the Apex court in the case of Andaman Timber Industries (supra) and that of the other decisions is squarely applicable to the facts of the case of the appellant as the AO did not allow the appellant an opportunity to cross examine the parties whose statements were used against the assessee. 10 It is also relevant to mention that the assessee received loan from Prreneta Industries and the same was returned within two months. These facts were not disputed by the AO. It was evident from the assessment order and the case records that the finding of the AO that the assessee received accommodation entries in the form of share capital, share premium or long term capital gains was factually not correct. Therefore, after having regard to the facts and circumstances of the case and position of law on issue, in my considered opinion the action of the AO is not sustainable. Accordingly, the ground of appeal is allowed. 8. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 9. Both the learned DR and the learned AR before us vehemently supported the order of the authorities below as favorable to them. 10. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee has shown receipt of advance of Rs. 1.7 crores from M/s PIL. Thus, the sum of Rs. 1.7 crore was found credited in the books of the assessee. Therefore, the assessee, in accordance with the provisions of section 68 of the Act, was required to explain the nature and source of such credit to the satisfaction of the AO. As such the assessee to establish identity & creditworthiness of the creditor and genuineness of transaction furnished necessary documents such PAN, copy of ITR, copy confirmation, bank statement and financial statement etc. However, all this primary documentary evidence were rejected by the AO in view of the finding ITA no.1538/AHD/2017 A.Y. 2010-11 6 of search carried out in case of Shri Chandrakant Shah briefly discussed in preceding paragraph. 10.1 Be that as may be, the undisputed fact is that the assessee company received the amount in dispute through banking channel from M/s PIL and same was repaid by the assessee company within 2 months to the impugned party through banking channel. It is trite law that once the amount received through banking channel and repayment of the same was also made through banking channel then the genuineness cannot be doubted. In this respect, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under: “The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.” 10.2 The above ratio was further followed by the Hon’ble Gujarat High Court in case of PCIT vs. Ojas Tarmake (P) Ltd reported in 156 taxmann.com 75. The relevant observation of the Hon’ble Court is extracted as under: What is evident is that the Tribunal found on facts that the amount of loan received by the assessee was returned to the loan party during the year itself and all transactions were carried out through banking channel. The Tribunal on the decision of Dy. CIT v. Rohini Builders [2003] 127 Taxman 523/[2002] 256 ITR 360 (Guj.), held in favour of the assessee. 10.3 In view of the above principle laid down by the Hon’ble Jurisdictional High Court, we hold that the genuineness of the transaction in the present case was proved by the fact that the loan amount was received through banking channel and repaid during the year through banking channel. Therefore, we do not find any reason to interfere in the finding of the learned CIT(A) and direct the AO to ITA no.1538/AHD/2017 A.Y. 2010-11 7 delete the addition made by him. Hence, the ground of appeal of the revenue is hereby dismissed. 11. In the result appeal of the revenue is hereby dismissed. Order pronounced in the Court on 10/06/2024 at Ahmedabad. Sd/- Sd/-d (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 10/06/2024 Manish आदेश क त ल प !े षत/Copy of the Order forwarded to : आदेशान ु सार/BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation: 27/05/2024(Dictated on dragon software by Hon’ble Member) 2. Date on which the typed draft is placed before the Dictating Member /05/2024 3. Date on which the approved draft comes to the Sr.P.S./P.S. - /05/2024 4. Date on which the fair order is placed before the Dictating Member for Pronouncement /05/2024 5. Date on which the file goes to the Bench Clerk .. : /05/2024 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order.......................... Date of Despatch of the Order.................. 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A) 5. !वभागीय $त$न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड& फाईल / Guard file.