AXYKNO CAPITAL SERVICES LTD, Nagpur V. DCIT Circle 1, Nagpur

ITA 178/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2235 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 14-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Retrospective amendment; Tangible material; Accommodation entries; Reassessment proceedings; Set aside
• Section: 147; 68; 148; 133(6); 195; 13; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 178 & 179/NAG/2017 Assessment Year: 2009-10 M/s.AXYKNO Capital Services Ltd. Level 3, Leela Vista WHC Road, Bajaj Nagar Vs. The DCIT Circle-1 Nagpur- PAN No.:AACCC 7526 Q Appellant Respondent Assessee by: Shri Kapil Hirani, Adv Revenue by :Shri Vitthal M. Bhosale (JCIT-DR) Date of Hearing: 28/04/2022 Date of Pronouncement: 28 /06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. The impugned appeals are filed challenging the order of the first Appellate Authority (CIT- Appeals) dated 09-02-2017 for the assessment years 2009-10 and 2011-12 respectively confirming the orders of the Assessing Officer (“AO”) (Deputy Commissioner of Income Tax, Circle 1, Nagpur) who has made the additions treating unsecured loans as unexplained cash credits under section 68 of the Income Tax Act, 1961 (“Act”). The facts and grounds in both the appeals being similar in nature, the appeals are being disposed off by this common order for the sake of convenience. The grounds raised by the assessee in both the appeals are as under:- 2 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR ITA 178/NAG/ 2017 – A.Y. 2009-10 ‘’1. That on the facts and in the circumstances of the case reopening of assessment u/s 148 and consequent order passed u/s 147 of I.T. Act is bade in law. 2. That on the facts and in the circumstances of the case the ld. CIT(A) has erred in confirming addition of Rs.1.00 crore made by the AO u/s 68 of I.T. Act. The addition of Rs.1.00 crore u/s 68 of the Act is unjustified, arbitrary and deserves to be deleted. 3. That on the facts and in the circumstances of the case the assessment order passed u/s 147 of the Act is violative of principles natural justice as no opportunity was given to the assessee to cross examine Shri Praveen Kumar Jain whose statement was relied by revenue to make the addition u/s 68 of I.T. Act. ITA 179/NAG/ 2017 – A.Y. 2011-12 ‘’1. That on the facts and in the circumstances of the case reopening of assessment u/s 148 and consequent order passed u/s 147 of I.T. Act is bade in law. 2. That on the facts and in the circumstances of the case the ld. CIT(A) has erred in confirming addition of Rs.50 lacs made by the AO u/s 68 of I.T. Act. The addition of Rs.50 lacs u/s 68 of the Act is unjustified, arbitrary and deserves to be deleted. 3. That on the facts and in the circumstances of the case the assessment order passed u/s 147 of the Act is violative of principles natural justice as no opportunity was given to the assessee to cross examine Shri Praveen Kumar Jain whose statement was relied by revenue to make the addition u/s 68 of I.T. Act. 3 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR 1. The Ld. AR of the Appellant, during the course of hearing reiterated the facts of the case and filed a detailed synopsis which can be summarized as under: a. The Appellant is a limited company engaged in activity of consulting in sectors like Infrastructure, Energy and Natural Resources, Railways etc., rendering host of specialized services to Government, State Government, Public Sector Undertakings and Private Entities. b. The Appellant filed its return of income for AY 2009-10 on 30.09.2009 declaring income at Rs. 1,86,96,760/- and for AY 2011-12 on 29.09.2011 declaring income at Rs. 1,18,73,560/-. c. The Appellant has taken unsecured loans which forms the subject matter of impugned appeals as under: i. AY 2009-10 – Rs. 1,00,00,000/- from M/s Duke Business Pvt. Ltd. (Formerly known as JPK Trading India Pvt. Ltd.) ii. AY 2011-12 – Rs. 50,00,000/- from Nakshtra Business Pvt. Ltd. (Formerly known as M/s Hema Trading Co. Pvt. Ltd.) d. The assessments of the Appellant were reopened under section 147 of the Act primarily for the reason that income chargeable to tax had escaped assessment on the ground that the Appellant is a 4 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR beneficiary of accommodation entries provided by one Shri Praveen Kumar Jain. The basis for reopening of assessment is statement of Shri Praveen Kumar Jain recorded under section 132(4) of the Act at the time of search where he allegedly stated that he, along with bunch of companies were involved in providing accommodation entries in the form of share capital and unsecured loans to various persons. e. This statement as informed has however been retracted by filing affidavit on 15.05.2014. f. The Appellant filed its return in response to notice issued under section 148 of the Act declaring the same income as declared in the original return of income. g. It was submitted that the Appellant during the course of reassessment proceedings firstly objected to the reassessment as being illegal and further on merits by submitting various details including copy of income tax returns, details of repayment of loans, balance sheets etc. to justify the genuineness of the impugned unsecured loans so taken by the Appellant. h. It is the grievance of the Appellant that the AO ignoring the submissions of the Appellantand without giving the copy of the statement of Shri Praveen Kumar Jain and further without giving 5 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR any opportunity to the Appellant to cross examine Shri Praveen Kumar Jain, by solely relying on the statement of Shri Praveen Kumar Jain proceeded to complete the assessment by making an addition of Rs. 1,00,00,000 and Rs. 50,00,000 respectively under section 68 of the Act. i. The said additions were confirmed by the CIT (Appeals). The Ld. AR during the course of hearing strongly opposed the actions of the AO and challenged the reopening of the assessment under section 147 as bad in law and further challenged the additions made on merits as well. 2. The Ld. DR relied on the order of the AO as well as ld. CIT (Appeals) and also filed written submission in support of his arguments. 3. We have heard the rival contentions and perused the material available on record. It is an undisputed fact that the AO has reopened the assessment on the basis of information received from the investigation wing which suggested that the Appellant was a beneficiary of accommodation entries provided by the companies controlled by Shri Praveen Kumar Jain. The basis of reopening is the statement of Shri Praveen Kumar Jain albeit the said statement was retracted by him subsequently. In this background, we are of the view that the AO at the same time of issue of notice under section 148 of the Act was having fresh tangible material in the form of information supplied by investigation wing which 6 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR is sufficient to form a reasonable belief of escapement of income. The AO need not prove the escapement of income at the time of initiation of reassessment of proceedings and instead what is required is some tangible material which suggest escapement of income. The information received from investigating wing constitutes a fresh material which is sufficient to form a basis for escapement of income. Therefore, we are of the considered view that reopening as done by the AO is legally tenable and accordingly dismiss the ground taken by the Appellant challenging the reopening of the assessment as well as proceedings as completed under section 147 of the Act. 4. Coming to the merits of issue on hand, the Ld. AR of the Appellant at the outset invited our attention to the order in ITA No. 154/Nag/2007 dated 14.10.2018 passed in the case of Axykno Enterprises Pvt. Ltd. which is a sister concern of the Appellant and in which one of us was a party to the order wherein additions made on identical grounds were deleted on merits. 5. The Ld. AR further drew our attention to the fact that the applicable assessment year in the said appeal was AY 2011-12 where the dispute was relating to receipt of funds from M/s Nakshatra Business Pvt. Ltd. which is the same company from where funds have been received in impugned appeal for AY 2011-12. 7 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR 6. The Ld. AR then drew our attention to the judgment in the case of ACIT vs. Calvin Properties ITA Nos. 6561,6562 & 6564/Mum/2017 in which again one of us is a party to the order which also covers the case of the Appellant as the facts in the same are also identical. In the said appeal, funds were received from Duke Business Pvt. Ltd. and also from M/s Nakshtra Business Pvt. Ltd. both of which are subject matter of the dispute in impugned appeals. The Ld. AR pointed out that the additions made on identical facts have been deleted on merits in this case as well. 7. The Ld. AR placed strong reliance on these judgments and prayed that the additions made deserved to be deleted on merits. 8. On the other hand, the ld. DR relied on the orders of authorities below. 9. We have heard both the parties, perused the materials available on record and have gone through both the judgments relied by the Ld. AR and find that the facts therein are identical to the facts at hand. In the case of ACIT vs. Axykno Enterprises Ltd. (ITAT No. 154/Nag/2017) it has been held as under: 13. We have heard rival contentions and perused the material available on record. The Assessing Officer has made impugned addition under section 68 of the Act, on the ground that although the assessee proved identity of the subscribers, but failed to prove the genuineness of transaction and creditworthiness of the parties. The Assessing Officer has taken support from the statement of Shri Praveen Kumar Jain, which was given under section 132(4) of the Act at the time of search. Shri Praveen Kumar Jain, had also 8 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR admitted that he was involved in issuing accommodation entries. Except this, the Assessing Officer has not carried out any independent enquiries in order to verify the genuineness of transaction in respect of alleged share application moneyreceived from three companies. The statement given by Shri Praveen Kumar Jain, has been subsequently retracted by filing an affidavit before respective Income Tax Authorities. Under these facts, one has to examine whether the assessee has discharged its initial burden caste upon under section 68 of the Act to prove the identity, genuineness of transaction and creditworthiness of the parties. Under the provisions of section 68 of the Act, the assessee has to discharge initial burden by fling necessary documents to prove the identity of the creditors, the creditworthiness of the creditors and genuineness of transaction. Once the assessee has discharged initial burden by filing necessary evidences then the burden shifts on the Assessing Officer to prove that the impugned credit comes within the ambit of provisions of section 68 of the Act. In this case, the assessee has filed complete details of identity of the creditors including their PAN details, financial statement, bank statement and confirmation from the parties, The assessee also proved the genuineness of the transaction by filing the bank statement to prove that the money has been transacted through proper banking channel. The assessee also filed the financial statement of the creditors to prove their creditworthiness as per which the companies are having capacity to explain source of investment in share application money. Once the assessee has filled complete details of identity and their creditworthiness, then it is for the Assessing Officer to carry out necessary independent enquiries to disbelieve the documents filed by the assessee in order to make additions under section 68 of the Act towards share application money. In this case, ona perusal of the facts, we find that the Assessing Officer did not carryout any independent enquiry in order to ascertain the genuineness of transaction and creditworthiness of the parties. The Assessing Officer made additions merely on the basis of statement of ShriPraveen Kumar Jain, ignoring the fact that the said statement has been subsequently retracted by filing affidavit. In the absence of any independent enquiry by the Assessing Officer, the documents filed by the assessee to prove the transaction cannot be disbelieve to make additions under section 68 of the Act. 9 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR 14. Coming to the issue of share premium charged by the assessee, the Assessing Officer has doubted the genuineness of transactions on the basis of share premium charged by the assessee. According to the Assessing Officer, the assessee has not justified issue of share at a huge premium of Rs. 490 per share when there is no business activities and asset base. We do not find any merit in the finding of the Assessing Officer for the reason that the provisions to section 68 of theAct has been inserted by the Finance Act, 2012, w.e.f. 1st April 2013,to treat share capital and share premium within the ambit of provisions of section 68 of the Act. Prior to insertion of provisions of section 68 of the Act, the question of establishing the source of source in respect of share capital and share premium did not arise, This fact has been supported by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Gagandeep Infrastructures Pvt. Ltd., [2017] 394 ITR680 (Bom.). Prior to insertion of provisions, as per the decision of theHon'ble Supreme Court in Lovely Exports (supra), if the Assessing Officer regards the share premium as bogus, he has to assessee the shareholders but cannot assess the same as the unexplained cash credit of the company issuing share capital. 15. The assessee has relied upon plethora of decisions in support of its arguments. The case laws relied upon by the assessee are summarized below:- "10.4. The Appellant places reliance on ITO Vs. Wiz-Tech SolutionsPvt. Ltd. (TAT Kolkata) (ITA No. 1162/K0//2015)wherein the Hon'ble Tribunal has held in respect of addition madeon account of share premium that Creditworthiness of the subscriber cannot be disputed by the A0 of the assessee but by the A0 of the subscriber. If the assessee has discharged its onus to prove identity, creditworthiness & genuineness of the shar applicants, the onus shifts to AO to disprove the documents furnished by assessee. In absence of any investigation, much less 10 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance. 10.5. The Appellant further places reliance on DCIT Vs. Alcon Biosciences Pvt Ltd. (TAT Mumbai) (ITA No. 1946/Mum/2016)wherein the Hon'ble Tribunal has held that the fact that a privateIimited company issued shares at an exorbitant premium isirrelevant if the assessee has roved the genuineness of thetransaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individualassessments of the share applicants but it cannot be regarded asundisclosed income of the assessee U/s 68. 10.6. Reliance further placed on Umbrella Projects Put. Ltd. Vs.ITO (ITA No. 5955/Del/2014) wherein it has been held that if the assessee has discharged the initial onus regarding the identity,creditworthiness and genuineness, the onus shifts to the AD tobring material or evidence to discredit the same. Further theremust be material to implicate the assessee in a collusive arrangement with person who are Accommodation entry providers. 10.7. Reliance further placed on PCIT Vs. Paradise Inland Shipping Put. Ltd. (Bombay HC) (ITA No. 66 of 2016) wherein it has been held that Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assesse has produced documentary evidence to establish the existence of such companies, the 11 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. 10.8. Reliance further placed on CIT Vs. Laxman Industrial Resources Pvt. Ltd. (Delhi HC) (2017) 397 IT 106 wherein it has been held that the fact that the investigation wing's report alleged that the assessee was beneficiary to bogus transactions and that the identity of shareholders, genuineness etc was suspect is not sufficient. The A0 is bound to conduct scrutiny of documents produced by the assessee and cannot rest content by placing reliance on the report of the investigation wing. 10.9. Reliance further placed on CIT Vs. Gagandeep Infastructure Pvt Ltd. (2017) 394 ITR 680 (Bombay HC) wherein it has been held that the proviso to s. 68 (which creates an obligation on theissuing Co. to explain the source of share capital & premium) hasbeen introduced by the Finance Act 2012 with effect from01.04.2013 and does not have retrospective effect. Prior thereto, as per Lovely Exports 317 ITR 218 (SC), if the A0 regards the Share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit. 16. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the 12 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR assessee has proved the share application money received from three companies by necessary documents in respect of identity, genuineness of transactions and creditworthiness of the parties. Therefore, we are of the considered view that the Assessing Officer has erred in making additions towards share application money under section 68 of the Act. The learned Commissioner (Appeals) without appreciating the facts simply confirmed the additions made by the Assessing Officer. Consequently, we set aside the order passed by the learned Commissioner (Appeals) and direct the Assessing Officer to delete the additions made on account of share capital under section 68 of the Act. 1. Similarly in ACIT vs. Calvin Properties (ITA Nos. 6561, 6562 and 6564/Mum/ 2017) it has been held as under: “Ground No. 1 is raised against the addition made of Rs. 1,50,00,000 as unexplained cash credit under section 68 of Income Tax Act, 1961. The learned assessing officer has noticed that the appellant has during the year under consideration received unsecured loans of aggregated amount of Rs. 1,50,00,000 as under -- S. No. Name PAN Amount of sales to assessee in F.Y. 2010-11 (in Rs.) 1. Casper Enterprises (Oswal Trading P Ltd.) AAACO7955M 20,00,000 2. Duke Business P. Ltd. (JPK Trading I Pvt. Ltd.) AABCJ6245N 30,00,000 13 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR 3. Nakshatra Business P. Ltd. (Hema Trading P. Ltd.). AABCH4279G 1,00,00,000 TOTAL 1,50,00,000 During the appellate proceedings, the learned AR has filed detailed submissions and other relevant documents in a paper book. He has also referred to several case laws on which they rely in support of the ground of appeal. I have carefully considered the facts of the case and submissions of the learned AR. I have also gone through the decisions relied on by the assessing officer and learned AR. It is observed that during the assessment proceedings the appellant has filed relevant details required to prove the identity and creditworthiness of the investing companies and the genuineness of the transactions in the form of PAN, incorporation certificate, memorandum of associate, IT return copies, confirmations, bank statements audited accounts etc., as evident from the record. The learned AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of the investment cannot be doubted. Hence the AR argued that appellant has discharged its onus and the identity, genuineness and creditworthiness of the four companies were proved beyond doubt The excessive reliance on the statements given by the third-party, i.e., key persons of Pravin Kumar Jam group, whom the appellant does not know is considered to be not proper even without giving the appellant a chance to cross-examine the persons who had given such adverse statements. He further argued that addition was made without providing the appellant the corroborative evidence in the possession of the assessing officer to prove that the appellant has 14 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR paid the cash, as alleged, against the receipt of cheques On the other hand the learned assessing officer has believed the evidence (supporting documents) submitted before him was engineered to explain bogus investment saying that those were involved in accommodation entries in an organized way are meticulous in arranging the make-believe documents. He further believed that the said key-persons of Pravin Kumar Jain group have given categorical statements stating that they have involved only in bogus transactions by giving accommodation entries by giving cheques in exchange of cash through their group entities. The learned AR on the other hand argued that the assessing officer has ignored the fact that all the statements were retracted by Pravin Kumar Jam and all his associates. It is alleged that the assessing officer failed to collect further information and not made any efforts to disprove the genuineness of the transactions of unsecured loans received, it is also the contention of the learned AR that the assessing officer has failed to discuss the merits of the cases cited by the appellant firm during the course of assessment proceedings. 2.4.7 In the present case before me, as seen from the details filed before the assessing officer, as evident from the paper book, I do not find any inconsistency or incoherence in respect of the receipt of the unsecured loan received from the said three companies. Primarily, as regards the transaction, the same has routed through the banking channel and the source cannot be doubted. It was held in several cases that, whatever may be the strength of presumption it cannot substitute the evidence. Even though the transaction is from a tainted group, the assessing officer has not made any efforts 15 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR to show that the transaction with the appellant firm was sham, fictitious or artificial except believing the statements given by the accommodation entry providers. He has failed to gather any evidence to show that the unaccounted cash of the appellant hap, changed hands consequently replacing the cheque payments. Further he has not provided the corroborative evidence or document which he relied on to the appellant and also failed to prove how the details like PAN, IT returns, audited financials, incorporation certificates, bank statements etc can not be taken note of in this regard. The Hon'ble Mumbai ITAT in the case of Anant Shelters (P) Ltd. (2012) 20 Taxmann.com 153 (Mum) : 2012 TaxPub(DT) 2257 (Mum-Trib) has laid down certain principles with regard to section 68 which the assessing officer is bound to follow. It has observed as under :-- (i) Section 68 can be invoked when following three conditions are satisfied -- (a) when there is credit of amounts in the books maintained by the assessee (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found m the books or the explanation offered by the assesses, in the opinion of the assessing officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 16 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR (ii) The expression the assessee offers no explanation means the assessee offers. no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the assessing officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of maternal and other attending circumstances available on the record. The opinion of the assessing officer is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is unbelievable or false the assessing officer is not required to bring positive evidence on record to treat amount in question as income of the assesses 'Mule-considering the explanation of the assessee, the assessing officer has to act reasonably - application of mind is the sine qua non-for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits - should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by (he assessee cannot be brushed aside in a casual manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. 17 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt - such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under section 68. (v) Though confirmatory letters or account payee cheques do not prove that the amount in questions properly explained for the purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction, it is also true that money received through foreign remittance with RBI approval is a strong indicator of bona fide of the cash credit that has to be disapproved by the positive evidence. (vi) In matters regarding cash credits, the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of account of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money WOK received by an account payee cheque or by draft. 'Creditworthiness of the lender can be established by attending circumstances. 18 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR Once the assessee produces evidences about identity, genuineness and creditworthiness of the tender onus of proof shifts to the revenue.' 2.4.8 The Honble Apex Court in the case of Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC) held that the assessing officer is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. The assessing officer should have made efforts to assess the amounts in the hands of the investors at least on protective basis. Even in case, the creditworthiness of the investors is not proved it will not automatically give license to the assessing authority to make additions in the hands of the recipient under section 68 unless it is proved that it is the unexplained and unaccounted money of the appellant which has been introduced in its books of account in the name of bogus/non-existent entities. As it is observed that, in the instant case, the assessing officer has not made any dent on these lines. On the other hand the appellant has filed all the details and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these three unsecured loan parties. 2.4.9 As seen from the above, the appellant has furnished all the documents and details proving conclusively-the-three ingredients of identity, creditworthiness of the share-applicants and the genuineness of the transaction. The amounts were paid by investors from, their running bank accounts were duly accounted in the books 19 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR of the appellant as well as the investors as evident, from the audited financial statements filed. These three unsecured loan lender companies have confirmed the transaction. In view of the above discussion, I hold that the unsecured loan received from these two companies can not be doubted and addition made by the assessing officer under section 68 of the Act cannot survive the test of appeal. I therefore direct the assessing officer to withdraw the addition. This ground s allowed. 9. After having gone through the facts of the present case and hearing the parties at length, we find that learned DR relied upon the orders passed by assessing officer and submitted that learned Commissioner (Appeals) had wrongly deleted the addition made under section 68 of the Act without appreciating that as per the enquiry & investigation made by the assessing officer as well as Investigation Wing of the department, the parties from whom the assessee had received unsecured loan were mere accommodation entry providers, who provide accommodation entries as per the requirements of the beneficiary. It was also submitted that the said parties had no real worth/capability/credit from where they could lend such huge loan to the assessee. It was submitted that the assessee failed to discharge his onus to prove identity, creditworthiness and genuineness of the transactions, therefore in such circumstances, learned Commissioner (Appeals) ought to have upheld the additions. 10. On the other hand, learned AR relied upon the orders passed by learned Commissioner (Appeals) and reiterated the same arguments 20 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR as were raised by him before learned Commissioner (Appeals). Learned AR also drawn our attention to the written submissions mentioned at Para no. 2.3.1 of the order of learned Commissioner (Appeals). It was submitted that the assessee had taken and/or repaid unsecured loans to the parties during the normal course of business or furtherance of business. In this regard, learned AR had also drawn our attention to para no. 2.1 of the order of learned Commissioner (Appeals), wherein the detail in the shape of chart has been submitted. It was submitted that the assessing officer had made an erroneous observation that the creditworthiness of the parties was not established whereas during the assessment proceedings, the assessee had submitted the confirmation alongwith all supportive documents in respect of receiving and repaying unsecured loans from the parties. Assessee had also submitted documents in respect of confirmation in respect of unsecured loans from the lending parties. It was submitted that the parties had responded to the notices issued under section 133(6) of the Act to the lending parties and had submitted the requisite details. The said loans were advanced through proper banking channels and in this respect, proper identity of the lending parties was proved. Learned AR also relied upon the decision of Hon'ble High Court in the case of CIT v. Kapurchand Mangeshchand, wherein it was held that if unsecured loans were advanced and repaid through account payee cheques, PAN no. of lenders were furnished and lenders had sufficient funds in their bank accounts, no addition can be made under section 68 of the Act. Besides this, learned AR also relied upon the decision of Hon'ble Supreme Court in the case of CIT v. 21 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR Lovely Export Pvt. Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC). It was also submitted that since learned Commissioner (Appeals) has taken a balance view after appreciating in detail the documents and the legal position, therefore the present appeal may be dismissed. 11. After having heard the parties at length, we find that additions in this case were made on account of unexplained cash credit under section 68 of the Income Tax Act on the ground that during the year under consideration, the assessee had received unsecured loans of aggregated amount of Rs. 1,50,00,000. The details of which are as under -- S. No. Name PAN Amount of sales to assessee in F.Y. 2010-11 (in Rs.) 1. Casper Enterprises (Oswal Trading (P) Ltd.) AAACO7955M 20,00,000 2. Duke Business (P) Ltd. (JPK Trading (I) Pvt. Ltd.) AABCJ6245N 30,00,000 3. Nakshatra Business (P) Ltd. (Hema Trading (P) Ltd.). AABCH4279G 1,00,00,000 TOTAL 1,50,00,000 12. The assessee had filed all the required details to prove the identity and creditworthiness of the investing companies and the genuineness of the transactions in the form of PAN, incorporation certificate, memorandum of associate, IT return copies, 22 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR confirmations, bank statements, audited accounts etc. We have also noticed that the transaction had taken place through banking channels, therefore the genuineness of the investment cannot be doubted. The assessee had discharged its onus and the identity, genuineness and creditworthiness of the four companies were proved by submitting all the relevant documents sought for by the assessing officer Whereas the assessing officer while making the additions had excessively relied upon the statement given by the third-party, i.e., key persons of Pravin Kumar Jain group, whom the assessee does not know is considered to be not proper as the assessee was never given a chance to cross-examine the persons, who had given such adverse statements. Even the corroborative evidence with regard to payment of cash as against the receipt of cheques has also not been proved. The assessing officer had only believed the solitary statement of the key-persons of Pravin Kumar Jain group by holding that they were involved only in bogus transactions by giving accommodation entries by giving cheques in exchange of cash through their group entities. At the same time, it was ignored that all the statements were retracted by Pravin Kumar Jain and all his associates. In the present scenario, the assessing officer had failed to disprove the genuineness of the transactions of unsecured loans received. We have gone through the paper book filed by the assessee and noticed that the transactions were routed through the banking channels and thus the source cannot be doubted. It is a settled law that suspicious howsoever strong may be, but cannot take place of 23 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR prove. The assessing officer had not made any efforts to show that the transaction with the assessee were sham, fictitious or artificial. Simultaneously, the assessing officer failed to gather any evidence to show that the unaccounted cash of the assessee had changed hands consequently replacing the cheque payments. We have gone through the orders of the Coordinate Bench of ITAT in the case of Anant Shelters (P) Ltd. (2012) 20 Taxmann.com 153 (Mum) : 2012 TaxPub(DT) 2257 (Mum-Trib), wherein the principles with regard to section 68 of the Act has been laid down as under :-- '(i) Section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by the assessee (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found m the books or the explanation offered by the assesses, in the opinion of the assessing officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers. no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the assessing officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper 24 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR appreciation of maternal and other attending circumstances available on the record. The opinion of the assessing officer is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is unbelievable or false the assessing officer is not required to bring positive evidence on record to treat amount in question as income of the assesses 'Mule- considering the explanation of the assessee, the assessing officer has to act reasonably - application of mind is the sine qua non-for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt - such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under section 68. 25 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR (v) Though confirmatory letters or account payee cheques do not prove that the amount in questions properly explained for the purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction, it is also true that money received through foreign remittance with RBI approval is a strong indicator of bona fide of the cash credit that has to be disapproved by the positive evidence. (vi) In matters regarding cash credits, the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of account of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money WOK received by an account payee cheque or by draft. 'Creditworthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and creditworthiness of the tender onus of proof shifts to the revenue'.' 13. We have also considered the order of Coordinate Bench of Shree Sachdanand Developers v. ACIT, ITA No. 3292/Mum/15 : 2017 TaxPub(DT) 1751 (Mum-Trib), ITO v. Shree Dham Construction Pvt. Ltd., ITA No. 3754, 3755, 3756, 2948/Mum/17 : 2017 TaxPub(DT) 5155(Mum-Trib), wherein under the identical 26 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR circumstances, the additions made on account of statement given by Pravin Kumar Jain group were deleted. 14. In this case, there is an important undisputed fact that the unsecured loan had already been repaid and in this respect, documents were placed on record by the assessing officer We are also relying upon the judgment of Hon'ble Apex Court in the case of Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC), wherein it was held that the assessing officer is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. 15. In this case, the creditworthiness of the investors even if is not proved, even then it will not automatically give license to the assessing authority to make additions in the hands of the recipient under section 68, unless that is proved that it is the unexplained and unaccounted money of the assessee which has been introduced in its books of account in the name of bogus/non-existent entities. In the instant case, the assessing officer had not made any dent on these lines. On the other hand the appellant has filed all the details and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these three unsecured loan parties 16. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by learned Commissioner (Appeals). Therefore, 27 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR there are no reasons for us to interfere into or deviate from the findings recorded by the learned Commissioner (Appeals). Hence, we are of the considered view that the findings so recorded by the learned Commissioner (Appeals) are judicious and are well reasoned. Resultantly, these ground raised by the revenue stands dismissed. Ground No. (iv) & (v) 17. These grounds raised by the revenue are general in nature, thus requires no specific adjudication. 18. Consequently, the appeal filed by the revenue stands dismissed.” On a conspectus of the facts and judicial precedents relied upon by the AR and following the ratio of the decision laid down in ACIT vs. Axykno Enterprises Ltd. and ACIT vs. Calvin Properties, we are of the considered view that the Appellant has duly proved the genuineness of the transactions by submitting various details as also mentioned at Page 12 and 13 of ld. CIT (Appeals) order. Taking it into consideration entire facts and circumstances of the case and the ratio of the decision relied upon by the Ld. AR, we set aside the order passed by the Ld. CIT (Appeals) and direct the AO to delete the additions so made under section 68 of the Act in both the assessment years in the impugned appeals. 28 ITA 178/NAG/ 2017 AXYKNO CAPITAL SERVICES LTD VS DCIT, CIRCLE- 1,NAGPUR 10. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 28 /06 /2022 Sd/- Sd/- Sd/- (ARUN KHODPIA) ACCOUNTANT MEMBER Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Nagpur DATED: 28 /06 /2022 *Mishra Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Assistant Registrar ITAT, Nagpur