DCIT 13(1)(2), MUMBAI V. PRABHAT TELECOM INDIA LTD, MUMBAI

ITA 2491/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3198 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S ABI RAMA KARTHIKEYAN
• Keywords: Unexplained cash credit; Accommodation entries; Retraction
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD , JM ITA NO. 2491 /MUM/ 2017 (ASSESSMENT YEAR: 2012 - 13) DY. CIT, CIRCLE - 13(1)(2) 2 ND FLOOR, ROOM NO. 218, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 VS. M/S. PRABHAT TELECOMS (INDIA) LTD. 402, WESTERN EDGE - 1, WESTERN EXPRESS HIGHWAY, BORIVALI (E), MUMBAI - 400 066 PAN/GIR NO. AAECP 2288 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI S. ABI RAMA KARTHIKEYAN RESPONDENT BY : NONE DATE OF HEARING : 27.12.2018 DATE OF PRONOUNCEMENT : 26.02 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI (LD.CIT(A) FOR SHORT) DATED 24.01.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. W HETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) AS ERRED IN ADMITTING FRESH EVIDENCE IN VIOLATION OF RULE 46A OF I.T. ACT, 1961. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 85,00,000/ - MADE U/S 68 OF I.T. ACT,,1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE PRIMARY ON US CAST UPON IT U/S 68 DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE FACTS COULD NOT BE INVESTIGATED IN APPELLATE PROCEEDINGS. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT{A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO CALLED FOR THE DETAILS OF LOANS RECEIVED DURING THE YEAR. FROM THE DETAILS FILED, IT WAS NOTICED THAT LOAN TAKEN FROM 2 ITA NO. 2491/MUM/2017 NAKSHATRA BUSINESS PVT. LTD. WAS RS.3,65,00,000/ - AND THE BALANCE AT THE END OF THE YEAR WAS RS.100,00,000/ - . SIMILARLY, ANOTHER LOAN WAS RECEIVED OF RS.50,00,000/ - ONE M/S HEMA TRADING CO. THIS LOAN WAS REPAID DURING THE SAME YEAR. BOTH THESE ENTITIES WERE FORMING PART OF THE GROUP OF COM PANIES OPERATED BY SHRI PRAVEEN KUMAR JAIN ALLEGED TO BE HAWALA OPERATOR PROVIDING ACCOMMODATION ENTRIES TO THE BENEFICIARIES. THE AO HAS NARRATED AT LENGTH THE DETAILS OF SEARCH ACTION CARRIED OUT IN THE CASE OF SHRI PRAVEEN KUMAR JAIN AND ITS A SSOCIATES AND THE FINDINGS OF THE SEARCH ACTION IN THE PRAVEEN KUMAR JAIN GROUP. IN PARA 7 ON PAGE 11 OF THE ASSESSMENT ORDER, THE AO HAS ALSO NARRATED WHY THE AFFIDAVITS OF RETRACTION FILED BY SHRI PRAVEEN KUMAR JAIN AND ITS ASSOCIATES IS NOT ACCEPTABLE. IN PARA 8 ON PAGE 23 OF THE ASSESSMENT ORDER THE AO HAS DRAWN CONCLUSIONS FROM THE P.K. JAIN GROUP SEARCH ACTION FOR TREATING SUCH ENTITIES AS HAWALA ENTRY OPERATOR. BEFORE THE AO THE ASSESSEE CONTENDED THAT THE UN SECURED LOANS OF RS.4,15,00,000/ - WERE RAI SED ONLY THROUGH BANKING CHANNEL. HOWEVER, THIS WAS NOT ACCEPTED AS SUFFICIENT FOR TREATING THE TRANSACTION AS GENUINE. ACCORDINGLY THE AO HELD THAT THE UNSECURED LOANS FROM NAKSHATRA BUSINESS PVT.LTD. AND HEMA TRADING CO. WAS UNEXPLAINED AND WAS COVERED U /S 68 OF THE INCOME TAX ACT. 4. THE AO ALSO NOTICED THAT THE ASSESSEE HAD SHOWN LOAN OF RS.50,00,000/ - AS RECEIVED FROM M/S KESHAVA ENTERPRISES. IN REGARD TO THIS LOAN ALSO THE ASSESEE WAS ASKED TO SUBSTANTIATE THE CREDIT WORTHINESS OF THE PARTY AND THE G ENUINENESS OF THE TRANSACTION. AS PER THE AO THIS WAS ALSO NOT PROVED AND THEREFORE AN ADDITION OF RS.50,00,000/ - WAS MADE U/S 68 OF THE INCOME TAX ACT. 5. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) GRANTED PART RELIEF BY HOLDING AS UNDER: 3 ITA NO. 2491/MUM/2017 4.6. I HAVE CONSIDERED THE SUBMISSIONS AND FACTS CAREFULLY. IT IS SEEN THAT RS.50,00,000/ - IS SHOWN TO BE RECEIVED THROUGH RTGS FROM M/S HEMA TRADING CO. AND ON THE SAME DATE THE SAME IS SHOWN TO BE TRANSFERRED TO M/S AAROHI COMMODITIES PVT.LTD. IT IS NOT CLEAR AS TO WHETHER THIS AMOUNT HAS BEEN REPAID ULTIMATELY. THERE IS NO EXPLANATION AS TO HOW AND WHY THE AMOUNT IS TRANSFERRED FROM THE ACCOUNT OF M/S HEMA TRADING CO. TO M/S AARHOHI COMMODITIES PVT. LTD. AS REGARDS THE TRANSACTION WITH NAKSHATRA BUSINESS PVT.LTD., A S PER THE LEDGER, THE AMOUNT OF RS.3,65,00,000/ - WERE RECEIVED FROM APRIL 2011 TO AUGUST 2011. AT THE SAME TIME AN AMOUNT OF RS.2,65,00,000/ - WAS REPAID BETWEEN MAY 2011 TO MARCH 2012. IN THE CASE OF M/S KESHAVA ENTERPRISES, AN AMOUNT OF RS.50,00,000/ - WAS RECEIVED IN FEBRUARY, 2012, WHICH REMAINED OUTSTANDING TILL THE END OF THE YEAR. IT IS FURTHER SEEN THAT M/S NAKSHATRA BUSINESS PVT. LTD. THE SHARE CAPITAL HAD BEEN COMPLETELY ERODED AND IT HAD A NEGATIVE SHARE CAPITAL AND SURPLUS OF RS.4.79 CRORES AS ON 31.03.2012. IT HAS SHOWN LOSS OF RS.7,00,59,000/ - DURING THE YEAR. THUS ITS CREDIT WORTHINESS IS NOT PROVED. IT IS ALSO NOTED THAT SHRI P.K. JAIN AND SHRI NILESH PARMAR WERE DIRECTORS IN THIS COMPANY. NO EVIDENCE OF SOURCE AND CREDIT WORTHINESS HAS BEEN FI LED IN RESPECT OF THE OTHER TWO PARTIES. 4.7 IT I S SEEN THAT REPLY WAS RECEIVED FROM KESHAVA ENTERPRISES IN THE R EMAND PROCEEDINGS. THE ASSESSING OFFICER DID NOT FOLLOW IT UP TO FIND ANY BASIS FOR HOLDING IT TO BE UNEXPLAINED CASH CREDIT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT NOT EVEN CONFIRMATION WAS FILED IN RESPECT OF THIS PARTY. NOW SINCE THE TRANSACTION HAS BEEN CONFIRMED MS SHUBHANGI MANJAREKAR, PROPRIETOR OF M/S KESHAVA ENTERPRISES, THE ADDITION OF RS 50,00,000/ - IS DELETED. A S REGARDS THE AMOUNT OF RS 50,00,000/ - IN THE CASE OF M/S HEMA TRADING CO., THERE ARE NO EVIDENCES OF CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. FURTHER, IN THE CASE OF NAKSHATRA BUSINESS PVT.LTD. WAS RS.3,65,00,000/ - , AS NOTED THE CREDIT WORTHINESS IS NOT THERE. FURTHER, BOTH THESE PARTIES DID NOT APPEAR BEFORE THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS. THUS THE LOAN SHOWN FROM THESE TWO PARTIES ARE CORRECTLY COVERED AS UNEXPLAINED CASH CREDIT U/S 68. HOWEVER, IT IS NOTED THAT IN THE CASE OF NA KSHATRA BUSINESS PVT.LTD. RS 330,00,000 WAS RECEIVED TILL MAY 9, 2011 AFTER WHICH REPAYMENTS STARTED AND RS 130 LAKHS WAS REPAID IN MAY 2011. ANOTHER RS 35 LAKHS WAS RECEIVED FROM THIS PARTY DURING THE YEAR AND RS 125 LAKHS REPAID TO IT DURING THE YEAR. HE NCE, THE ADDITION U/S 68 IS RESTRICTED TO RS 330 LAKHS IN THE CASE OF NAKSHATRA BUSINESS PVT.LTD. THUS, THE ADDITION U/S 68 IS RESTRICTED TO RS 380 LAKHS INSTEAD OF RS 415 LAKHS IN THE CASE OF PRAVIN JAIN ENTITIES. THE ADDITION IN RESPECT OF KESHAVA ENTERP RISES IS DELETED. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE DESPITE NOTICE SENT. THE NOTICE SENT HAS RETURNED UNSERVED. HENCE, WE PROCEEDED TO ADJUDICATE THE ISSUE BY HEARING THE L D. DEPARTMENTAL REPRESENT ATIVE AND PERUSING THE RECORDS. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT THERE WERE FOLLOWING ADDITIONS MADE BY THE A.O. REGARDING THE UNEXPLAINED CREDITS FOR LOAN TRANSACTION S : 4 ITA NO. 2491/MUM/2017 NAKSHATRA BUSINESS PRIVATE LIMITED RS.3,65,00,000/ - HEMA TRADING COMPANY RS.50,00,000/ - KESHAVA ENTERPRISES RS.50, 00, 000/ - THE LD. CIT(A) HAS DELETED ONLY THE FOLLOWING : NAKSHATRA BUSINESS PRIVATE LIMITED RS.3 5,00,000/ - KESHAVA ENTERPRISES RS.50,00,000/ - BEFORE DELETING THESE ADDITIONS THE LD. CIT(A) HAS OBSERVED THAT THE LD. COUNSEL OF THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS SUBSTANTIATING THE CREDITWORTHINESS AND GENUINENESS OF THE LOAN TRANSACTION . THAT HE WAS ALSO ASKED TO FILE A COPY OF THE ASSE SSMENT ORDER IN THE CASE OF THE LENDERS. HE ALSO NOTED THAT THE A.O. WAS DIRECTED TO FURNISH SPECIFIC INCRIMINATING EVIDENCE AGAINST THE ASSESSEE AND TO ALLOW AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSON TO HIS STATEMENT TO BE RELIED UPON. TH E LD. CIT(A) NOTED THAT THE A.O. REPORTED THAT IN CASE OF KESHAVA ENTERPRISES O NLY CONFIRMATION WAS RECEIVED BUT PARTY NEVER APPEARED AND SOUGHT CONDONATION OF NON APPEARANCE. 9. IN THESE CIRCUMSTANCES, THE LD. C IT(A) DELETED THE ADDITION BY OBSERVING TH AT THE A.O. DID NOT FOLLOW UP AND HAS N O T BROUGHT ON ANY BASIS FOR TREATING IT TO BE UNEXPLAINED CASH CREDIT. HENCE, MERELY UPON THE LENDER FILING THE CONFIRM ATION REPORT, THE LD. C IT(A) DELETED THE ADDITION. THERE IS NO MENTION AS TO WHAT WAS THE FATE OF THE LD. CIT(A)S OWN FINDING THAT THE LENDER S CREDITWORTHINESS NEED TO BE EXAMINED AND BY REFERENCE T O THE FINANCIAL STATEMENT WHICH HE DIRECTED FOR PRODUCTION. IN THESE CIRCUMSTANCES, WE FIND THAT THE LD. C IT(A) HAS CONTRADICTED HIMSELF BY DELETING THE ADDITION. WE NOTE THAT NOTHING IS ON RECORD THA T THE DETAILS FOR ESTABLISHING THE CREDITWORTHINESS OF THE LENDER WERE PROVIDED. 5 ITA NO. 2491/MUM/2017 10. SAME IS THE POSITION F OR NAKSHATRA BUSINESS PVT. LTD. IN THIS CASE ALSO DESPITE NON FURNISHING OF DETAILS BY THE PARTY, TH E LD. CIT(A) HAS RESTRICTED THE ADDITION BY GRANTING RELIEF OF RS.35 LACS. TH IS DELETION APPARENTLY HA S NO BASIS WHATSOEVER , AS EVIDENT FROM PARA 4.7 OF THE LD. CIT(A)S ORDER REPRODUCED IN PARA 5 OF OUR ORDER ABOVE . IN THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND CONFIRM THE ADDITION. 11. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 . 0 2 . 2 0 1 9 S D / - S D / - ( RAVISH SOOD ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 6 . 0 2 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI