M/S. SILVERWING INVESTMENT AND TRADING PVT. LTD, MUMBAI V. DY.CIT CENTRAL CIRCLE 1(2) , MUMBAI

ITA 1773/MUM/2022

AI Insights

The case involves M/s Silverwing Investment and Trading Pvt. Ltd., which was implicated in a series of transactions involving unsecured loans categorized as accommodation entries during a search and seizure operation under section 132 of the Income Tax Act, 1961, in the Ess Gee Group of cases. The primary legal contention was the addition of Rs. 50 lakhs to the assessee's income under section 68, which the assessee contested, arguing that the loan was genuine and the primary onus of proof was met. The Tribunal examined the procedural and substantive application of section 68, particularly focusing on the roles of the AO and the CIT(A) in handling the protective and substantive additions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123478 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-01-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 05-07-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAMOD KUMAR FARIDA
• Keywords: TDS
• Section: 68; 132; 143(3); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 1773/Mum/2022 (A.Y. 2013-14) M/s Silverwing Investment and Trading Pvt. Ltd. 17, 1 st Floor, Blitz Building, Cawasji Patel Street, Fort, Mumbai-400001. PAN: AAACS8628M ...... Appellant Vs. Dy.CIT, Central Circle-1(2), Room No. 906, Pratishtha Bhavan, M.K. Road, Mumbai-400020. ..... Respondent Appellant by : Sh. Pramod Kumar Farida & Ms. Kiran Vadher Respondent by : Sh. Solgy Jose, CIT-DR Date of hearing : 04/01/2023 Date of pronouncement : 21/03/2023 ORDER PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of Commissioner of Income Tax(Appeals)-47, Mumbai [for short ‘CIT(A)’] dated 09.05.2022 under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2013-14. The assessee has raised the following grounds of appeal: “i) Addition u/s. 68 50, 00,000/- 2 ITA No. 1773/Mum/2022 M/s Silverwing Investment and Trading Pvt. Ltd. The Id. CIT (A) erred in confirming the addition u/s. 68 without appreciating that the loan given by the Appellant was genuine with known and declared sources which is confirmed by the recipient and the interest earned there from was offered to tax with TDS and as the discharge of primary onus was made, therefore, the addition made is uncalled for and may be deleted. ii) The Id. CIT (A) ought to have appreciated that the search party statement u/s. 132(4) of the 3rd party had been retracted and as the statement thereby losses its colour and sanctity, the addition may on be deleted as equity is sacrificed to the prejudice of the Appellant. iii) Without prejudice above, addition u/s. 68 is prima facie made in the hands of the loan recipient and as the Appellant is the loan giver, the onus rests on the Revenue to justify that the presence of doubtful money, if any, belongs the Appellant; hence the addition may be deleted. 2. Levy of Penal Interests The Appellant, on merits, denies its liability to penal interest.” 2. Brief facts of the case are that a search and seizure action u/s. 132 of the Act was initiated in the case of Ess Gee Group of cases on 17.06.2015 by the Investigation Wing, Mumbai. During the search proceedings, one Shri Nemichand Ranka (accommodation entry provider) and Shri Suresh Gandhi (main promoter of the group) admitted on oath that group entities have taken accommodation entries in the nature of unsecured loans from various entities including the assessee company. 3. On perusal of the books of accounts of the Ess Gee Group it was found to be correct that these entities including the assessee company in the instant case has given unsecured loan entry. Hence, Department applied provisions of section 153C and notice u/s. 153C of the Act was issued to the assessee. 3 ITA No. 1773/Mum/2022 M/s Silverwing Investment and Trading Pvt. Ltd. 4. In response to the notice, assessee filed its return of income on 1.11.2017 declaring total income at NIL. The assessee is engaged in the business of importing and dealing in P. V. C. Leather cloth and upholstery fabrics. Assessee filed the necessary details during the course of assessment proceedings along with audited financial statements and annexure thereto. 5. As per the statement of Shri Nemichand Ranka vide question no. 9 & 11 given on page no. 5 of the assessment order, he took the name of assessee also. Statement of Shri Nemichand Ranka was further corroborated with the statements of Shri Vipul Patel and Shri Mariappan Ambalagam, employees of Ess Gee Group in Mumbai office. Main promoter Shri Suresh Gandhi has accepted on oath that he has obtained unsecured loan for his group entity M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. from assessee amounting to Rs.50 lacs. Assessee also confirmed that he has given unsecured loan to M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. on 14.02.2013 and 15.02.2013 amounting to Rs.30 lacs and 20 lacs respectively. 6. In view of above, an amount of Rs. 50 lacs were added to the income of the assessee as protective addition. Substantive addition was made in the hands of M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. 7. We have gone through the order of AO, order of Ld. CIT (A) and submissions of the assessee along with case laws relied upon by the assessee. We observed that while AO was making protective addition in the hands of assessee, there was no objective finding against the assessee w.r.t. its submission before him. It is further noted that this protective addition by the AO was made u/s. 68 of the Act, whereas, sec. 68 can be applied in the case of the person in whose 4 ITA No. 1773/Mum/2022 M/s Silverwing Investment and Trading Pvt. Ltd. books credit entry is being appeared. In this case, assessee is a so called entry provider and not entry taker. Hence, provisions of sec. 68 of the Act can be applied to the assessee. 8. It is further observed vide para 8 for the CIT(A) order that this entry of assessee in the books of M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. had been accepted as genuine transaction by Income Tax Settlement Commission (ITSC) on application by Ess Gee Group before ITSC. We have gone through the submissions and documents produced by the assessee before the AO and Ld. CIT (A). We observed that assessee has ample money of its own as well as had declared interest received from M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. 9. There was no allegation on assessee w.r.t. its creditworthiness, genuineness and of course identity. Further, assessee was note the category of person over which sec. 68 of the Act can be applied (may be on protective basis). Secondly, if Department was not satisfied with the credentials of the assessee as a time of assessment, the same should have been considered for the purpose of substantive addition and M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. should have been leave scot free. Making protective addition in the hands of the assessee initially and then treating the same under the category of substantive addition by the Ld. CIT (A) after a clean cheat to M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. by ITSC proves confusion in the mind of Revenue above the transaction and its treatment. 10. We found the order of Ld. CIT (A) as absurd in terms of declaring protective addition as substantive addition in the hands of assessee as the same has already 5 ITA No. 1773/Mum/2022 M/s Silverwing Investment and Trading Pvt. Ltd. been declared genuine by ITSC in the case of M/s. Sheetal Sagar Builders and Developers Pvt. Ltd. It is further noted that Ld. CIT (A) issued the direction to the AO to treat the protective addition as substantive addition which is no permissible in law. Ld. CIT (A) can hold a ratio over the grounds of appeal but no directions can be issued to the AO. 11. In view of the above facts, we found throughout the proceedings the AO as well as Ld. CIT (A) proceeded in violation of law. As AO can’t make addition u/s. 68 of the Act on alleged entry provider and that is to without any cogent evidence and justification. Thereafter, confirmation of the same by the Ld. CIT (A) and further directions to the AO to treat the same as substantive addition is beyond law. In the light of above appeal of the assessee is allowed and AO is directed to delete the addition made under protective/substantive basis amounting to Rs.50 lacs. 10. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21 st day of March, 2023. Sd/- Sd/- (VIKAS AWASTHY) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 21/03/2023 SK, Sr.PS 6 ITA No. 1773/Mum/2022 M/s Silverwing Investment and Trading Pvt. Ltd. Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकर आयुक्त CIT 4. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्ड फ इल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai