ACIT 21(1), MUMBAI V. H.K. PUJARA BUILDERS, MUMBAI

ITA 2491/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3896 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2016
• Appeal Filed By: Department
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Onus to prove; Reason to believe
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & PAWAN SINGH (JM) I.T.A. NO. 2034 /MUM/ 2014 (ASSESSMENT YEAR 2009 - 10 ) M/S. H.K. PUJARA BUILDERS 2 ND FLOOR PENNISULA HEIGHTS C.D. BARFIWALA ROAD ANDHERI WEST MUMBAI - 400 058. VS. ADD. CIT, RANGE21(1) PRATYAKSHKAR BHAVAN, BKC BANDRA EAST MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 2491/MUM/2014 (ASSESSMENT YEAR 2009 - 10) ACIT RANGE - 25(2) PRATYAKSHKAR BHAVAN, BKC BANDRA EAST MUMBAI - 400 051. VS. M/S. H.K . PUJARA BUILDERS 301, KRISHNA KUNJ V.L. MEHTA ROAD VILE PARLE (WEST) MUMBAI - 400 056. ( APPELLANT ) ( RESPONDENT ) PAN NO. AAAFH7230H ASSESSEE BY SHRI PRAKASH K. JOTWANI DEPARTMENT BY SHRI VACHASPATI TRIPATHI DATE OF HEARING 4.2 . 201 6 DATE OF PR ONOUNCEMENT 9 . 5 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 05 - 02 - 2014 PASSED BY LD CIT(A) - 32, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2009 - 10. THE ADDITIONS MADE BY THE AO U/S 68 OF TH E ACT, HAVING BEEN PARTIALLY DELETED BY THE LD CIT(A), BOTH THE PARTIES HAVE FILED THESE APPEALS. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DECLARED UNSECURED M/S. H.K. PUJARA BUILDERS 2 LOANS TO THE TUNE OF RS.57.20 CRORES. THE AO NOTICED THAT THE ASSESSEE HAS AVAILED LOANS FROM THE FOLLOWING PARTIES LOCATED IN KOLKATTA. (A) M/S ALBRIGHT CONSULTAN T PVT LTD (ACPL) - RS.9.85 CRORES (B) M/S NATARAJ VINIMAY PVT LTD (NVPL) - RS.1.30 CRORES (C) M/S SPECTRUM VINTRADE PVT LTD (SVPL) - RS.0.25 CRORE ------------------------- RS.11.40 CRORES ========== = THE AO CHOSE TO VERIFY THE ABOVE SAID LOANS AND ACCORDINGLY REQUESTED THE ADIT (INV), KOLKATTA TO VERIFY THESE PARTIES. THE ADIT (INV) DEPUTED AN INSPECTOR, WHO REPORTED THAT THESE COMPANIES ARE NOT AVAILABLE AT THE ADDRESSES GIVEN BY THEM. ACCORDINGLY , THE ADIT (INV) REPORTED THAT THE IDENTITY OF THE CREDITORS COULD NOT BE ESTABLISHED AND FURTHER INVESTIGATION COULD NOT BE CARRIED OUT. IN THE MEAN TIME, THE ASSESSEE FILED DOCUMENTS LIKE PAN CARD, INCOME TAX RETURN COPIES, COPY OF BALANCE SHEET & PROFI T AND LOSS ACCOUNT AS ON 31.3.2009, DETAILS OF MODE OF PAYMENT, COPY OF BANK STATEMENTS SHOWING THE TRANSACTIONS, LEDGER ACCOUNT OF ASSESSEES ETC. TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. THE AO NOT ICED THAT THESE COMPANIES HAVE DECLARED VERY MEAGER AMOUNT AS THEIR RESPECTIVE INCOME. FURTHER THE AO ALSO TOOK THE VIEW THAT THE IDENTITY OF THESE COMPANIES, GENUINENESS OF TRANSACTIONS AND CREDIT WORTHINESS OF THESE PARTIES HAVE NOT BEEN PROVED. FURTHE R THE AO NOTICED THAT THESE CREDITORS HAVE NOT CHARGED ANY INTEREST FROM THE ASSESSEE. ACCORDINGLY HE ASSESSED THE ABOVE SAID AMOUNT OF RS.11.40 CRORES AS INCOME OF THE ASSESSEE. 3. BEFORE THE LD CIT(A), THE ASSESSEE FURNISHED CONFIRMATION LETTERS O BTAINED FROM THESE CREDITORS ALONG WITH THE COPIES OF LETTERS ADDRESSED BY THESE PARTIES TO ADIT (INV) CONFIRMING THEIR EXISTENCE IN THE ADDRESS GIVEN BY THEM. FURTHER THE ASSESSEE ALSO FURNISHED VARIOUS DOCUMENTS TO PROVE THE IDENTITY AND CREDIT WORTHINE SS OF THE PARTIES AND ALSO THE GENUINENESS OF THE TRANSACTIONS. HENCE THE LD CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THE LD CIT(A) ALSO REQUESTED THE INVESTIGATION WING OF KOLKATTA TO CONDUCT CERTAIN ENQUIRIES. THE DDIT (INV) REPOR TED THAT THESE COMPANIES WERE REPRESENTED BY AN AUTHORISED REPRESENTATIVE NAMED SHRI S.K. PUROHIT. HE FURTHER REPORTED THAT THESE COMPANIES HAVE RECEIVED FUNDS FROM OTHER M/S. H.K. PUJARA BUILDERS 3 GROUP COMPANIES AND IT HAS BEEN USED TO GIVE UNSECURED LOANS TO THE ASSESSEE COMPANY . ALL THE COMPANIES HAVE COMMON ADDRESS, COMMON CHAMBERS AND COMMON DIRECTORS. THE SOURCES WERE REPORTED TO BE THE SALE PROCEEDS OF SHARES OF CERTAIN PRIVATE LIMITED COMPANIES, WHICH IN TURN WERE RELATED TO THE SAME GROUP. ALL THE OTHER COMPANIES WERE A LSO REPRESENTED BY SHRI S.K. PUROHIT ONLY. IN VIEW OF THESE FACTS, THE DDIT EXPRESSED THE VIEW THAT THERE IS REASON TO BELIEVE THAT THE LOANS / ADVANCES TAKEN BY THE ASSESSEE FROM THE THREE KOLKATTA BASED COMPANIES MAY BE VIEWED AS WELL PLANNED ACCOMMODAT ION ENTRIES. THE LD CIT(A) ALSO FORWARDED A COPY OF THE REPORT GIVEN BY THE DDIT TO THE AO. 4. THE AO HAS ALSO CONFRONTED THE REPORT OF THE DDIT WITH THE ASSESSEE IN THE SCRUTINY ASSESSMENT PROCEEDINGS FOR AY 2010 - 11. IN REPLY THE ASSESSEE SUBMITTE D THAT IT HAS DISCHARGED THE PRIMARY ONUS PLACED UPON IT BY SEC. 68 OF THE ACT BY ESTABLISHING THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS. HOWEVER, THE AO EXPRESSED THE VIEW THAT THESE COMPANIES HAVE REPORT ED VERY LOW INCOME AND IT WILL NOT BE POSSIBLE FOR THEM TO GIVE SUCH HUGE SUMS AS LOAN. THE AO ENDORSED THE VIEW TAKEN BY DDIT AND OPINED THAT THE ASSESSEE HAS ROUTED ITS UNACCOUNTED MONEY THROUGH THESE LOANS AND THEY HAVE PROVIDED ONLY ACCOMMODATION ENTR IES. 5. THE LD CIT(A) FURNISHED COPY OF THE REMAND REPORT AND THE REPORT OF THE DDIT, KOLKATTA TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE IDENTITY OF THESE COMPANIES HAVE BEEN PROVED THROUGH VARIOUS DOCUMENTS. SINCE THE LOAN AMOUNTS WERE RECEIV ED THROUGH BANKING CHANNELS, THE GENUINENESS OF THE TRANSACTIONS ALSO STAND PROVED. WITH REGARD TO THE CREDIT WORTHINESS, THE ASSESSEE PLACED RELIANCE ON THE BALANCE SHEETS OF THESE COMPANIES AND SUBMITTED THE SOURCES OF LOANS STAND ESTABLISHED. THE ASSE SSEE ALSO EXPLAINED AS TO HOW THESE COMPANIES HAVE GENERATED FUNDS. ACCORDINGLY THE ASSESSEE CONTENDED THAT IT HAS DISCHARGED THE PRIMARY ONUS PLACED UPON IT U/S 68 OF THE ACT AND ALSO PROVED SOURCE OR SOURCE ALSO. THE ASSESSEE ALSO PLACED RELIANCE ON A HOST OF CASE LAWS IN THIS REGARD. WITH REGARD TO THE OBSERVATION OF THE AO THAT THESE COMPANIES HAVE REPORTED LOW INCOME, THE ASSESSEE SUBMITTED THAT THE WEALTH POSITION M/S. H.K. PUJARA BUILDERS 4 OF THESE COMPANIES HAVE TO BE LOOKED INTO AND NOT THE INCOME RETURNED BY THESE COMPAN IES. THE ASSESSEE SUBMITTED THAT THESE COMPANIES ARE HAVING FOLLOWING AMOUNT OF OWN FUNDS: - ACPL - RS.20.00 CRORES NVPL - RS.19.35 CRORES SVPL - RS.19.64 CRORES ACCORDINGLY THE ASSESSEE SUBMITTE D THAT THE OWN FUNDS HAVE BEEN USED TO GIVE LOANS TO IT. 6. THE LD CIT(A) HELD THAT THE FUNDS POSITION OF THESE THREE COMPANIES CLEARLY ESTABLISH THE CREDIT WORTHINESS OF THESE COMPANIES (PARA X IN PAGE 24). HE FURTHER HELD THAT THE IDENTITY OF THESE COMPANIES CANNOT BE DISPUTED (PARA XII IN PAGE 25 ). EVEN THOUGH THE ASSESSEE CONTENDED THAT THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DISPUTED, SINCE THEY HAVE BEEN ROUTED THROUGH BANKING CHANNELS (PARA XIII IN PAGE 25), YET THE LD CIT(A) EXPRESSED DOUBT ABOUT THE SAME FOR THE REASONS DISCUSSED INFR A. 7. HAVING OBSERVED SO, THE LD CIT(A) WENT ON FURTHER TO ANALYSE EACH CREDITORS SEPARATELY. HE NOTICED THAT THE ASSESSEE HAS REPAID THE LOANS TAKEN FROM M/S ACPL ON VARIOUS DATES IN MARCH 2012 TOGETHER WITH A LUMP SUM COMPENSATION OF RS.1.00 CRORE. HENCE THE LD CIT(A) TOOK THE VIEW THAT THE LOAN TRANSACTIONS OF M/S ACPL STANDS SUBSTANTIATED AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION OF LOAN AMOUNT OF RS.9.85 CRORES TAKEN FROM M/S ACPL. THE REVENUE IS AGGRIEVED BY THIS DECISION OF LD CI T(A). 8. IN RESPECT OF LOAN TAKEN FROM M/S NVPL, THE LD CIT(A) NOTICED THAT IT WAS A NBFC AND THE ASSESSEE HAS REPAID THE LOAN AMOUNT TO M/S NVPL WITHOUT INTEREST. SINCE IT WAS A NBFC, THE LD CIT(A) TOOK THE VIEW THAT IT WAS BEYOND ORDINARY COMMERCIA L PRUDENCE THAT A NBFC WOULD ADVANCE LOAN INTEREST FREE. HE ALSO EXPRESSED THAT THE ABOVE SAID COMPANY HAS NOT DEPLOYED ITS FUNDS FOR THE STATED OBJECTIVES AND ACCORDINGLY HELD THAT THE GENUINENESS OF THE TRANSACTIONS CANNOT BE SAID TO HAVE BEEN PROVED. FURTHER THE NON - CHARGING OF INTEREST DEFIES THE LOGIC. ACCORDINGLY HE HELD THAT M/S. H.K. PUJARA BUILDERS 5 THE LOAN TAKEN FROM M/S NVPL COULD BE ONLY ACCOMMODATION ENTRY AND ACCORDINGLY CONFIRMED THE ADDITION MADE U/S 68 OF THE ACT. 9. IN RESPECT OF LOAN TAKEN FROM M/S SVPL A LSO, THE LD CIT(A) NOTICED THAT IT WAS A NBFC AND IT DID NOT CHARGE INTEREST ON THE LOAN GIVEN TO THE ASSESSEE COMPANY. ACCORDINGLY, FOR IDENTICAL REASONS, HE CONFIRMED THE ADDITION OF THE LOAN RECEIVED FROM M/S SVPL ALSO. 10. THE ASSESSEE IS AGGRIE VED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF LOANS TAKEN FROM M/S NVPL AND M/S SVPL. 11. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE DISPUTE BEFORE US RELATES TO THE ADDITION MADE U/S 68 OF THE ACT. IT IS A WELL SET TLED PROPOSITION THAT THE PRIMARY ONUS IS PLACED UPON THE ASSESSEE U/S 68 OF THE ACT TO PROVE THE CASH CREDITS. IN ORDER TO DISCHARGE THE PRIMARY ONUS, THE ASSESSEE HAS TO PROVE THE IDENTITY OF THE CREDITOR, CREDIT WORTHINESS OF THE CREDITOR AND THE GENUI NENESS OF THE TRANSACTIONS. IF THE ASSESSEE DISCHARGES THE INITIAL ONUS, THEN THE BURDEN SHIFTS TO THE SHOULDER OF THE AO TO DISPROVE THE CLAIM MADE BY THE ASSESSEE. WITH THESE SETTLED LEGAL PROPOSITIONS, WE SHALL NOW EXAMINE THE FACTS PREVAILING IN THE INSTANT CASE. 12. WE HAVE NOTICED THAT THE AO DID NOT CONSIDER VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO DISCHARGE THE INITIAL ONUS PLACED UPON HIM U/S 68 OF THE ACT. THE AO GAVE IMPORTANCE TO THE REPORT OF THE INSPECTOR BELONGING TO THE INVESTIGATION WING, WHO HAD STATED THAT THE LOAN CREDITORS DID NOT EXIST AT THE ADDRESS GIVEN BY THEM. HOWEVER, IT IS PERTINENT TO NOTE THAT THE SAID REPORT OF THE INSPECTOR WAS PROVED TO BE FALSE DURING THE C OURSE OF SUBSEQUENT ENQUIRIES. 13. THE LD CIT(A) ALSO REQUESTED THE DDIT, KOLKATTA TO CARRY OUT CERTAIN INVESTIGATION. EVEN THOUGH ALL THE COMPANIES WERE REPRESENTED BY A SINGLE AUTHORISED REPRESENTATIVE, YET THE FACT REMAINS THAT ALL THESE COMPANIES HAVE FURNISHED NECESSARY DETAILS. FURTHER THE ASSESSEE HEREIN ALSO FURNISHED NECESSARY DOCUMENTS TO PROVE THE M/S. H.K. PUJARA BUILDERS 6 IDENTITY OF THE CREDITORS AND CREDIT WORTHINESS OF THE CREDITORS. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE FUNDS HAVE BEEN ROUTED T HROUGH BANKING CHANNELS. HENCE THE LD CIT(A) HIMSELF HAS OBSERVED THAT THE IDENTITY OF THE CREDITORS AND CREDIT WORTHINESS OF THE CREDITORS HAVE BEEN ESTABLISHED BY THE ASSESSEE. 14. THE LD CIT(A) HAS ACCEPTED THE GENUINENESS OF THE TRANSACTIONS IN RESPECT OF LOAN OBTAINED FROM M/S ACPL. HOWEVER WITH REGARD TO THE OTHER TWO LOANS, THE LD CIT(A) HAS GONE A STEP FURTHER AND EXPRESSED DOUBT AS TO HOW THESE COMPANIES, BEING NBFC, COULD HAVE GIVEN LOAN INTEREST FREE, AS THE SAME IS NOT IN ACCORDANCE WITH THEIR OBJECTIVES. 15. WE HAVE EARLIER NOTICED THAT THE PROVISIONS OF SEC. 68 PLACES INITIAL BURDEN OF PROOF UPON THE ASSESSEE. IN THE INSTANT CASES, THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE IDENTITY OF THE LOAN CREDITORS HAS BEEN ESTABLISHED . EVEN THOUGH THE ASSESSING OFFICER HAS EXPRESSED DOUBT ABOUT THE CREDIT WORTHINESS OF THE CREDITORS ON THE BASIS OF LOW INCOME REPORTED BY THEM, YET THE LD CIT(A) HAS RIGHTLY APPRECIATED THE FACT THAT THESE COMPANIES HAVE USED THEIR OWN CAPITAL FUNDS FOR ADVANCING LOAN TO THE ASSESSEE COMPANY. THE QUANTUM OF OWN FUNDS HELD BY THESE COMPANIES HAS ALSO BEEN DISCUSSED BY LD CIT(A). IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE INCOME DECLARED BY THESE LOAN COMPANIES ARE NOT THE CRITERIA, BUT THE SOURCE FOR GIVING THE LOANS TO THE ASSESSEE COMPANY IS THE DETERMINATIVE OF THE CREDIT WORTHINESS. THUS, THE LD CIT(A) HAS RIGHTLY HELD THAT THE CREDIT WORTHINESS OF THE LOAN CREDITORS HAS ALSO BEEN ESTABLISHED. 16. IT IS A WELL SETTLED PROPOSIT ION THAT THE GENUINENESS OF THE TRANSACTIONS SHALL STAND ESTABLISHED IF THE TRANSACTIONS ARE ROUTED THROUGH BANKING CHANNELS. IN THE INSTANT CASE, THE LOAN TRANSACTIONS HAVE BEEN ROUTED THROUGH THE BANKING CHANNELS. HENCE THE GENUINENESS OF THE TRANSACTI ONS ALSO STAND ESTABLISHED. HOWEVER, THE LD CIT(A) HAS EXPRESSED DOUBT ABOUT THE GENUINENESS IN RESPECT OF LOAN TAKEN FROM M/S NVPL AND M/S SVPL, SINCE HE WAS OF THE VIEW THAT A NBFC COMPANY SHALL NOT GIVE INTEREST FREE ADVANCES TO UNRELATED PARTIES. IN OUR VIEW, THE DOUBT SO EXPRESSED BY THE M/S. H.K. PUJARA BUILDERS 7 LD CIT(A) IS BEYOND THE SCOPE OF THE PROVISIONS OF SEC. 68 OF THE ACT. SINCE THE PROVISION OF SEC. 68 IS A DEEMING PROVISION, THE SAME IS REQUIRED TO BE INTERPRETED STRICTLY. THE COURTS HAVE HELD THAT THE ASSESSEE IS REQUIRED TO DISCHARGE THE INITIAL BURDEN OF PROOF PLACED ON HIS SHOULDERS. IN THE INSTANT CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS PLACED UPON IT. HENCE THE BURDEN OF PROOF GETS SHIFTED TO THE ASSESSING OFFICER. 17. FROM THE FOREGOING DISCUSSIONS, WE NOTICE THAT THE TAX AUTHORITIES HAVE NOT DISCHARGED THE BURDEN OF PROOF SHIFTED UPON THEIR SHOULDERS BY BRINGING ANY MATERIAL ON RECORD TO DISPROVE THE CLAIM OF THE ASSESSEE. ON THE CONTRARY, THE TAX AUTHORITIES HAVE MERELY SUSPECTED THE GENUINENESS BY MAKING CERTAIN ADVERSE INFERENCES. IT IS PERTINENT TO NOTE THAT THEY HAVE NOT DISPUTED THE GENUINENESS OF VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND GENU INENESS OF THE TRANSACTIONS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE TAX AUTHORITIES HAVE NOT DISCHARGED THE BURDEN OF PROOF PLACED UPON THEM. 18. WE HAVE NOTICED EARLIER THAT THE LD CIT(A) HAS DELETED THE ADDITION PERTAINING TO M/S ACPL, BUT CONFI RMED THE ADDITION PERTAINING TO M/S NVPL AND M/S SVPL. SINCE WE HAVE HELD THAT THE TAX AUTHORITIES HAVE FAILED TO DISCHARGE THE BURDEN OF PROOF SHIFTED UPON THEM, WE ARE OF THE VIEW THAT THEY ARE NOT JUSTIFIED IN MAKING THE ADDITION IN RESPECT OF ALL THE THREE LOANS. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) IN GRANTING RELIEF IN RESPECT OF LOAN TAKEN FROM M/S ACPL . ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) IN RESPECT OF LOAN TAKEN FROM M/S NVPL AND M/S SVPL AND DIRECT THE AO TO DELET E THE ADDITIONS RELATING TO THEM. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED . ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 9 .5 .2016 . SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN ) JU DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 9 / 5 /20 1 6 M/S. H.K. PUJARA BUILDERS 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 FILE. BY ORDER, //TRUE COPY // ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS