ASST CIT 19(1), MUMBAI V. ASHOK N. MEHTA, MUMBAI

ITA 2554/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8638 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY; D G PANSARI SR
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Bogus purchase; Unexplained expenditure; Search and seizure; Peak credit; Corroborative evidences; Accommodation entries; Onus to prove
• Section: 69C; 133(6); 131; 68; 263

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI SANDEEP GOSAI N, JM ITA NO.2100/MUM/2016 : ASST.YEAR 2011-2012 ITA NO.1645/MUM/2017 : ASST.YEAR 2012-2013 SHRI ASHOK NAGRAJ MEHTA 28/30 C.P.TANK ROAD, 1 ST FLOOR MUMBAI 400 004. PAN : AADPM8885E. / VS. THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 19(1) MUMBAI. ( / APPELLANT) ( / RESPONDENT) ITA NO.2775/MUM/2016 : ASST.YEAR 2011-2012 ITA NO.2554/MUM/2017 : ASST.YEAR 2012-2013 THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 19(1) MUMBAI. / VS. SHRI ASHOK NAGRAJ MEHTA 28/30 C.P.TANK ROAD, 1 ST FLOOR MUMBAI 400 004. ( / APPELLANT) ( / RESPONDENT) REVENUE BY : S/SHRI R.MANJUNATHA SWAMY, CIT-DR & D. G.PANSARI, SR.AR ASSESSEE BY : SHRI SANJIV M.SHAH / DATE OF HEARING : 14.11.2018 / DATE OF PRONOUNCEMENT : 14.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER S PASSED BY LD CIT(A)-30, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2011-12 AND 2012-13. SINCE COMMON ISSUES ARE URGED IN THESE AP PEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER, FOR THE SAKE OF CONVENIENCE. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 2 2. IN BOTH THE YEARS, THE LD CIT(A) HAS GRANTED P ARTIAL RELIEF TO THE ASSESSEE IN RESPECT OF ADDITION RELATING TO BOGUS PURCHASES. THE REVENUE IS AGGRIEVED BY THE RELIEF GRANTED, WHILE THE ASSESSEE IS SEEKIN G FURTHER RELIEF. IN AY 2012-13, THE REVENUE IS ALSO AGGRIEVED BY THE DECIS ION OF LD CIT(A) IN DELETING THE ADDITION MADE U/S 68 OF THE ACT. 3. WE SHALL FIRST TAKE UP THE ISSUE OF ADDITION RELATING TO BOGUS PURCHASES. THE FACTS AS DISCUSSED BY THE AO IN AY 2011-12 ARE DISCUSSED HERE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN F ERROUS AND NON-FERROUS METALS THROUGH HIS PROPRIETARY CONCERN NAMED M/S M. M. METALS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED NOT ICES U/S 133(6) OF THE ACT TO THE SUPPLIERS OF MATERIALS TO THE ASSESSEE, IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES. THE NOTICES WERE RETURNE D BACK UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARK NOT KNOWN, LEFT ETC. THE AO ALSO NOTICED THAT SIX OF THE SUPPLIERS WERE IDENTIFIED A S HAWALA PARTIES BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA, I.E., THEY WERE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS. ACCORDINGLY, THE AO PROPOSED TO DISALLOW THE PURCHA SES. 4. THE ASSESSEE FURNISHED FOLLOWING DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF PURCHASES:- (A) LEDGER ACCOUNT OF PURCHASE PARTIES (B) COPIES OF PURCHASE BILLS AND DELIVERY CHALLAN S (C) COPIES OF BANK STATEMENTS EVIDENCING PAYMENTS MADE THROUGH PROPER BANKING CHANNELS BY ISSUING ACCOUNT PAYEE CH EQUES. (D) STATEMENT SHOWING QUANTITATIVE DETAILS OF PURC HASE FROM THE ABOVE PARTIES AND THEIR CORRESPONDING SALES, I.E., STOCK RECORDS. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 3 THE ASSESSEE SUBMITTED THAT HE IS ALSO NOT AWARE OF THE PRESENT ADDRESS OF THE SUPPLIERS. HE SUBMITTED THAT THE SALES TAX DEP ARTMENT WEBSITE STILL SHOWS THAT THESE SUPPLIERS AS ACTIVE DEALERS. THE ASSESSE E ALSO SUBMITTED THAT IT COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING IT AND ACCORDINGLY IT WAS CONTENDED THAT THE AO WAS NOT RIGHT IN PROPOSING TO DISALLOW THE ENTIRE AMOUNT OF PURCHASES. THE ASSESSEE REITERATED ITS C ONTENTIONS THAT THE PURCHASES ARE GENUINE AND MERELY BECAUSE THE NOTICE S WERE RETURNED UNSERVED, THEY CANNOT BE CONSIDERED AS NON-GENUINE. WITHOUT PREJUDICE TO THE ABOVE SAID CONTENTIONS, THE ASSESSEE SUBMITTED THAT THE AO CAN ASSESS ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, SINCE THE ASSESSEE HAS RECONCILED THE PURCHASES WITH SALES AND FURTHER ENT IRE SALES AMOUNT HAS BEEN OFFERED TO TAX. 5. THE AO WAS NOT CONVINCED WITH THE CONTENTION S OF THE ASSESSEE. HE TOOK THE VIEW THAT THE PEAK AMOUNT OF PURCHASES SHO ULD BE ASSESSED TO TAX, SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLI ERS FOR EXAMINATION NOR COULD HE FURNISH THEIR CORRECT ADDRESS. FURTHER TH E ASSESSEE HAS ALSO FAILED TO FURNISH COPIES OF LORRY RECEIPTS/TRANSPORT DETAI LS. THE AO ACCORDINGLY TOOK THE VIEW THAT THE ENTIRE PURCHASES ARE BOGUS AND AC CORDINGLY REJECTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE FOR ASSESSIN G THE PROFIT ELEMENT EMBEDDED IN PURCHASES. THE AO ALSO TOOK SUPPORT OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF KACHWALA GE MS VS. JCIT (288 ITR 10)(SC) TO OBSERVE THAT THE QUESTION WHETHER THERE WERE BOGUS PURCHASES OR NOT IS A FINDING OF FACT. HE ALSO TOOK SUPPORT OF THE DECISION RENDERED IN THE CASE OF ATTAR SINGH GURMUKH SINGH (1991)(191 ITR 66 7)(SC), WHEREIN IT WAS HELD THAT THE PURCHASES WOULD ALSO COVERED BY THE W ORD EXPENDITURE. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 4 ACCORDINGLY HE HELD THAT THE ENTIRE BOGUS PURCHASES ARE UNEXPLAINED EXPENDITURE IN TERMS OF SEC.69C OF THE ACT. HOWEVE R, THE AO ASSESSED THE PEAK CREDIT OF PURCHASES AMOUNTING TO RS.3165.79 LA KHS AS INCOME OF THE ASSESSEE. 6. BEFORE LD CIT(A), THE ASSESSEE REITERATED TH E CONTENTIONS URGED BEFORE THE AO. IT WAS ALSO SUBMITTED THAT THE SUPPLIERS H AVE BEEN CLASSIFIED AS SUSPICIOUS DEALERS ONLY FOR THE REASON THAT THEY HA VE FAILED TO DEPOSIT THE VAT TAX COLLECTED BY THEM. IT WAS CONTENDED THAT T HE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING IT. IT WAS FURTHER SUBMITTED THAT THE AO HAS MADE ADDITION OF PEAK CREDIT OF PURCHASES U/ S 69C PRESUMING THAT THE ASSESSEE WOULD HAVE PAID CASH FOR PURCHASES TO SOME UNDISCLOSED PARTIES. IT WAS SUBMITTED THAT THE SAME IS ONLY PR ESUMPTION NOT SUPPORTED BY ANY FACTS, AS THE ASSESSEE HAS MADE PAYMENT THROUGH BANKING CHANNELS BY WAY OF ACCOUNT PAYEE CHEQUES. IT WAS SUBMITTED THAT THE AO HAS NOT SHOWED THAT THERE WAS FLOW BACK OF CASH AGAINST PAYMENTS M ADE BY CHEQUE. ACCORDINGLY IT WAS SUBMITTED THAT THE ADDITION MADE U/S 69C OF THE ACT IS NOT CORRECT. THE ASSESSEE PLACED HIS RELIANCE ON THE F OLLOWING CASE LAWS TO SUPPORT HIS VARIOUS CONTENTIONS:- (A) M/S BALAJI TEXTILE INDUSTRIES P LTD VS. ITO (4 9 ITD 177) (B) CIT VS. M/S S.M. OMER (201 ITR 608)(CAL) (C) M/S VIJAY PROTEINS LTD (58 ITD 428) (D) ITO VS. PREMANAND (ITAT, JODHPUR) (E) JAGDAMBA TRADING CO. VS. ITO (ITAT, JODHPUR) (F) CIT VS. LEADERS VALVES (P) LTD (P & H)(285 IT R 435) (G) NIKUNJ EXIMP ENTERPRISES P LTD (BOM)(216 TAXM ANN 171) (H) GANPATRAJ A SANGHAVI VS. ACIT (ITA NO.2826/MUM /2013) ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 5 7. THE ASSESSEE ALSO SUBMITTED THAT HE COULD NOT PR ODUCE THE PARTIES, SINCE THE PURCHASES WERE MADE THROUGH BROKERS. IT WAS ALSO SUBMITTED THAT THE SUPPLIERS COULD NOT BE PRODUCED DUE TO PASSAGE OF TIME AND ABSENCE OF CONTACTS. IT WAS CONTENDED THAT THE STATEMENT GIVE N BY THEM BEFORE SALES TAX AUTHORITIES IS SELF SERVING STATEMENT AND HENCE THE SAME CANNOT BE RELIED UPON FOR MAKING THE ADDITION. 8. THE LEARNED CIT(A) TAKING SUPPORT OF THE DECISIO N RENDERED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB PVT. LTD. [355 ITR 290 (GUJ.)] AND CIT V. SIMIT SHETH [(2013) 38TAXMANN.COM 385 (GUJ.) ] , TOOK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN T HE BOGUS PURCHASES ALONE SHOULD BE ASSESSED TO TAX AS THE ASSESSEE HAS RECON CILED THE PURCHASES WITH SALES. HE NOTICED THAT THE HONBLE GUJARAT HIG H COURT IN THE CASE OF SIMIT SHETH (SUPRA) HAS ESTIMATED THE PROFIT ELEMENT EMBEDDED IN THE ALLEGED BOGUS PURCHASES AT 12.5%. ACCORDINGLY, THE LEARNED CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF 12.5% OF TH E VALUE OF BOGUS PURCHASES. BOTH PARTIES ARE AGGRIEVED BY THE DECISI ON SO RENDERED BY THE LEARNED CIT(A). 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE LEARNED CIT(A), IN PARA 6.3 OF HIS ORDER, HAS OBSERVED THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE AS TO HOW THE MATERIALS WERE PURCHASED BY IT. FURTHER HE HAS OBSERVED THAT THOUGH THE ASSESSEE HAS TRIED TO RECONCILE THE PURCHASES WITH THE SALES BUT THE SAME HAS NOT BEEN DONE PROPERLY. THE LEARNED CIT(A) HAS ALSO OBSERVED THAT THE SUPPLIERS ARE WITNESSES OF THE ASSESSEE AND HENCE THE ASSESSING OFFICER WAS NOT RE QUIRED TO FORCE THEIR ATTENDANCE. THE LEARNED DR SAID THAT THE LEARNED CI T(A), HAVING OBSERVED ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 6 SO, HOWEVER PROCEEDED TO ESTIMATE THE PROFIT ELEMEN T EMBEDDED IN SUCH PURCHASES AT THE RATE OF 12.5% INSTEAD OF SUSTAININ G THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER. THE LEARNED DR SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF JANSAMPARK ADVERTISING & MARKETING LTD (ITA 525/2014) HAS HELD THAT THE APPELLATE AUTHORITIES ARE DUTY BOUND TO CORRECT THE MISTAKES MADE BY THE ASSESSING OFFICER. THE LEA RNED DR ALSO PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BEN CH OF THE TRIBUNAL IN THE CASE OF SHORELINE HOTEL (P) LTD. V. CIT [ITA NO.964/MUM/201 5 DATED 19.06.2015] WHEREIN THE CO-ORDINATE BENCH HAS UPHELD THE REVIS ION ORDER PASSED BY THE LEARNED CIT DIRECTING THE ASSESSING O FFICER TO MAKE ADDITION OF 100% OF VALUE OF BOGUS PURCHASES. HE FURTHER SUB MITTED THAT THE ORDER SO PASSED BY THE TRIBUNAL HAS SINCE BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHORELINE HOTEL (P) LTD. V. CIT [(2018) 98 TAXMANN. COM 234 (BOMBAY)] . ACCORDINGLY THE LEARNED DR SUBMITTED THAT THE ORD ER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE SHOULD BE REVER SED AND THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE SUSTAINED. 10. THE LD A.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS RECONCILED THE PURCHASES AND SALES, MEANING THEREBY , THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THEM. H E SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DOCUMENTS AVAILABLE WITH IT IN ORDER TO PROVE THE GENUINENESS OF PURCHASES. HE SUBMITTED THAT TH E ASSESSEE DID NOT HAVE DIRECT CONTACT WITH THE SUPPLIERS, SINCE THE GOODS WERE PURCHASED THROUGH THE BROKERS. HENCE THE ASSESSEE WAS NOT AWARE OF P RESENT ADDRESS OF THE SUPPLIERS AND ALSO COULD NOT PRODUCE THEM BEFORE TH E AO. HE FURTHER SUBMITTED THAT THE IMPUGNED SUPPLIERS HAVE FAILED T O PAY VAT TAX COLLECTED ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 7 BY THEM TO THE SALES TAX AUTHORITIES AND HENCE THEY HAVE BEEN CLASSIFIED AS HAWALA DEALERS. HE FURTHER SUBMITTED THAT THE SUPPL IERS CANNOT BE CONSIDERED AS WITNESS OF ASSESSEE AND THEY ARE ACTUALLY WITNES S OF THE AO, SINCE IT IS THE AO WHO HAS ATTEMPTED TO DISPROVE THE EVIDENCES FURNISHED BY THE ASSESSEE BY PLACING RELIANCE ON THE STATEMENT GIVEN BY THE SUPPLIERS BEFORE THE SALES TAX DEPARTMENT. IN THIS REGARD, THE LD A .R PLACED RELIANCE ON THE DECISION REPORTED IN 49 ITR 561 (ALL). 11. THE LD A.R FURTHER SUBMITTED THAT THE AO HAS INVOKED THE PROVISIONS OF SEC.69C OF THE ACT FOR MAKING THE IMPUGNED ADDITION . HE SUBMITTED THAT THE PROVISIONS OF SEC.69C ARE NOT APPLICABLE IN THIS CA SE, SINCE THE ALLEGED BOGUS PURCHASES CANNOT BE CONSIDERED TO BE EXPENDITURE NO T RECORDED IN THE BOOKS OF ACCOUNTS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS ALSO NOT CONFRONTED THE STATEMENTS GIVEN BY THE SUPPLIER S BEFORE THE SALES TAX AUTHORITIES WITH THE ASSESSEE. ACCORDINGLY HE SUB MITTED THAT THE AO WAS NOT JUSTIFIED IN DISBELIEVING PURCHASES, PARTICULAR LY WHEN HE HAS ACCEPTED THE SALES. ACCORDINGLY HE SUBMITTED THAT THE ADDITION CONFIRMED BY LD CIT(A) IS ALSO NOT JUSTIFIED. THE LD A.R SUBMITTED THAT THE CO-ORDINATE BENCHES OF TRIBUNAL HAS DELETED ENTIRE ADDITIONS IN THE CASES OF HIRALAL CHUNILAL JAIN VS. ITO (ITA NO.4547/MUM/2014 & OTHERS DATED 01-01-2016 ); ACIT VS. SHRI RAMILA PRAVIN SHAH (ITA NO.5246/MUM/2013 DATED 5-3- 2015) AND SHRI GANPATRAJ A SANGHAVI VS. ACIT (ITA NO.2826/MUM/2013 DATED 5.11.2014). THE LD A.R ALSO PLACED HIS RELIANCE ON THE DECISION S RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HARIRAM BH AMBHANI (2015)(92 CCH 0046) AND CIT VS. NIKUNJ EXIMP ENTERPRISES (P) LTD (372 ITR 619). ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 8 12. THE LD A.R FURTHER SUBMITTED THAT THE DECI SION RENDERED IN THE CASE OF SHORELINE HOTELS WAS RELATED TO VALIDITY OF PROCEED INGS U/S 263 OF THE ACT AND THE PRAMETERS CONSIDERED FOR DETERMINING VALIDITY O F REVISION PROCEEDINGS U/S 263 OF THE ACT IS DIFFERENT FROM NORMAL ASSESSMENT PROCEEDINGS. HE SUBMITTED THAT THE REVISION PROCEEDINGS ARE IN THE NATURE OF SUPERVISORY JURISDICTION AND THE CRITERIA TAKEN INTO CONSIDERAT ION IS WHETHER THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF REVENUE. THE LD A.R SUBMITTED THAT THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF JANSAMPARK ADVERTISING (SUPRA) IS NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE, AS THERE IS NO GAP TO BE FILLED I N. 13. THE LD A.R FURTHER SUBMITTED THAT THE GROSS PROFIT RATE AND NET PROFIT RATE DECLARED BY THE ASSESSEE OVER THE YEARS IS CON SISTENT, I.E., THE AVERAGE RATE OF G.P DECLARED BY THE ASSESSEE WAS 1.97% AND THE AVERAGE RATE OF N.P DECLARED BY THE ASSESSEE WAS 0.76%. ACCORDINGL Y THE LD A.R SUBMITTED THE G.P RATE AND N.P RATE WOULD HAVE GONE DOWN, HAD THE ASSESSEE ACCOUNTED FOR BOGUS PURCHASES, AS ALLEGED BY THE AO . ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ENTIRE ADDITION SHOULD BE DE LETED. 14. IN THE REJOINDER, THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS RECORDED A FINDING THAT THE ASSESSEE HAS NOT DONE ONE TO ONE RECONCILIATION OF PURCHASES AND SALES, I.E., THE ASSESSEE HAS ONLY SH OWN THAT THE AGGREGATE QUANTITY OF PURCHASES MADE FROM THE HAWALA DEALERS HAVE BEEN SOLD. IN THE ABSENCE OF ONE TO ONE RECONCILIATION, IT CANNOT BE SAID THAT THE ASSESSEE HAS SOLD THE VERY SAME GOODS. THE LD D.R SUBMITTED THA T THE TRIBUNAL HAS CONFIRMED ADDITIONS AT HIGHER RATES ALSO IN MANY CA SES. ACCORDINGLY HE ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 9 SUBMITTED THAT THE DECISION RENDERED BY THE TRIBUNA L WOULD DEPEND UPON THE FACTS PREVAILING IN THAT CASE AND HENCE NO STANDARD PARAMETER CAN BE PRESCRIBED IN THE MATTER. 15. WE HAVE HEARD RIVAL CONTENTIONS AND PERUS ED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED AD DITION IN BOTH THE YEARS, MAINLY FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIERS BEFORE HIM AND FURTHER THE NOTICES ISSUED TO THE SU PPLIERS HAVE BEEN RETURNED BACK UNSERVED. FURTHER THESE PARTIES WERE ALSO ID ENTIFIED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARA SHTRA. THOUGH THE ASSESSEE COULD FURNISH THE COPIES OF INVOICES, DELI VERY CHALLANS AND PAYMENT DETAILS, YET THE ASSESSEE ALSO COULD NOT FURNISH EV IDENCES FOR TRANSPORTATION OF MATERIALS FROM THE SUPPLIERS TO IT. THOUGH THE ASSESSEE CLAIMS THAT IT HAS RECONCILED PURCHASES WITH SALES, AS POINTED BY LD C IT(A), THE ASSESSEE HAS NOT CORRELATED THE PURCHASES WITH SALES ON BILL TO BILL BASIS, I.E., THE ASSESSEE COULD TALLY THE QUANTITY OF PURCHASES WITH THE QUAN TITY OF SALES ON OVER ALL BASIS. 16. IN ANY CASE, THE TAX AUTHORITIES HAVE ACCEP TED THAT THE ASSESSEE HAS CORRELATED THE QUANTITY OF PURCHASES WITH THE QUANT ITY OF SALES. EVEN THOUGH THE LD CIT(A) HAS OBSERVED THAT THERE WAS NO ONE TO ONE RECONCILIATION, YET THE FACT REMAINS THAT THE AGGREGATE QUANTITY OF PUR CHASES HAS BEEN CORRELATED WITH THE AGGREGATE QUANTITY OF SALES. W E HAVE ALSO NOTICED THAT THE AO HAS ACCEPTED THE SALES. HENCE THERE IS MERI T IN THE CONTENTIONS OF THE ASSESSEE THAT HE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THE MATERIALS. UNDER THESE FACTS, AS PER THE DECISION RENDERED BY HONBLE ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 10 GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (SU PRA), THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES MAY BE ASSESSED TO TAX. SINCE THE SUPPLIERS HAVE BEEN BRANDED AS HAWALA DEALERS PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING MATERIALS, IT IS FOR THE ASSESSEE TO PROVE THAT THE PURCHASES WERE ACTUALLY MADE FROM THOSE SUPPLIERS O NLY. IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO PROVE THE SAME, AS HE HA S TAKEN THE STAND THAT HE HAS PURCHASED GOODS THROUGH BROKERS. IN THESE SET OF FACTS, ONE OF THE POSSIBILITIES IS THAT THE ASSESSEE COULD HAVE PURCH ASED MATERIALS FROM ONE SOURCE AND COULD HAVE OBTAINED ACCOMMODATION BILLS FROM THESE HAWALA DEALERS. IN THESE KIND OF SITUATIONS, THERE IS ALS O A POSSIBILITY THAT THE ASSESSEE COULD HAVE MADE PROFIT ON PURCHASES IN THE FORM OF SAVINGS BY WAY OF VAT TAX AND ALSO BY WAY OF DISCOUNTS. WE HAVE N OTICED THAT THE LD CIT(A) HAS FOLLOWED THE DECISION RENDERED BY HONBL E GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (SUPRA), WHEREIN THE PROF IT RATE WAS DETERMINED AT 12.50% AND THE HENCE THE LD CIT(A) HAS ALSO SUSTAIN ED ADDITION TO THE EXTENT OF 12.50% IN THE INSTANT CASES ALSO. FOR TH E REASONS DISCUSSED IN THE ENSUING PARAGRAPHS, WE ARE OF THE VIEW THAT THE PRO FIT RATE OF 12.50% DETERMINED BY THE LD CIT(A) IS ON THE HIGHER SIDE. 17. BEFORE ADDRESSING THE ISSUE RELATING TO RATE OF PROFIT, WE PREFER TO ADDRESS THE VIEW TAKEN BY THE AO. WE HAVE NOTICED THAT THE ASSESSING OFFICER HAS ASSESSED PEAK AMOUNT OF PURCHASES. WE HAVE EARLIER NOTICED THAT THE ASSESSING OFFICER HAS ACCEPTED THE SALES A ND THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT PURCHASING THEM. HENCE THE HONBLE GUJARAT HIGH COURT HAS HELD THAT THE PROFIT ELEMENT EMBEDDE D IN SUCH PURCHASES ALONE SHOULD BE BROUGHT TO TAX. HENCE THE APPROACH OF THE ASSESSING OFFICER ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 11 TO ASSESS THE PEAK CREDIT OF PURCHASES CANNOT BE SU STAINED FOR THE ABOVE SAID REASON AND ALSO FOR THE REASON THAT THE AO HIM SELF HAS ACCEPTED THAT THE ASSESSEE HAS RECONCILED THE QUANTITY OF PURCHAS ES WITH QUANTITY OF SALES. 18. FURTHER, WE HAVE NOTICED THAT THE AO HAS ALS O INVOKED THE PROVISIONS OF SEC.69C OF THE ACT. A PERUSAL OF PROVISIONS OF SEC .69C WOULD SHOW THAT THE SAID SECTION SHALL APPLY ONLY IN THE CASES, WHERE T HE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF EXPENDITURE INCURRED BY HIM T O THE SATISFACTION OF THE AO. THERE SHOULD NOT BE ANY DISPUTE THAT, WHEN THE PURCHASES HAVE BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS, THE SOURCES OF EXPENSES WOULD STAND EXPLAINED BY THE ENTRIES RECORDED IN THE BOOKS OF A CCOUNTS. HENCE, IN OUR VIEW, THE AO WAS NOT RIGHT IN LAW IN INVOKING THE P ROVISIONS OF SEC.69C IN THE INSTANT CASE. 19. WE HAVE EARLIER NOTICED THAT THE ASSESSEE HAS NOT CORRELATED QUANTITY OF PURCHASES WITH THE QUANTITY OF SALES ON BILL TO BIL L BASIS. FURTHER THE ASSESSEE HAS ALSO NOT PRODUCED EVIDENCES TO SHOW TH AT THE MATERIALS WERE ACTUALLY TRANSPORTED FROM THE IMPUGNED SUPPLIERS TO THE ASSESSEE. THE AO COULD NOT TRACE THE SUPPLIERS AND THE ASSESSEE ALSO COULD NOT OBTAIN CONFIRMATION LETTERS FROM THEM AND THE ASSESSEE ALS O COULD NOT PRODUCE THEM BEFORE THE AO. UNDER THESE SET OF FACTS, IT C ANNOT BE SAID THAT THE ASSESSEE HAS CONCLUSIVELY PROVED THE PURCHASES. HE NCE WE ARE OF THE OPINION THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES ALONE COULD BE ASSESSED TO TAX. WE HAVE EARLIER OBSERVED THAT THE PROFIT RATE OF 12.50% EST IMATED BY LD CIT(A) IS ON ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 12 THE HIGHER SIDE. THIS IS FOR THE REASON THAT THE V AT RATE APPLICABLE TO THE PRODUCTS DEALT IN BY THE ASSESSEE WAS ONLY 4%. WE HAVE EARLIER OBSERVED THAT THE ASSESSEE, AT THE MOST, COULD HAVE MADE SAV INGS BY WAY OF VAT TAX AND OBTAINED DISCOUNT. THE ASSESSEE COULD HAVE ALS O INCURRED EXPENSES IN GETTING THE ACCOMMODATION BILLS. CONSIDERING THESE FACTS, THE PROFIT THAT COULD HAVE MADE BY THE ASSESSEE IN THE IMPUGNED PUR CHASES, IN OUR VIEW, MAY BE DETERMINED @ 5%. HENCE, WE HAVE HELD THAT T HE ESTIMATE OF 12.50% MADE BY THE AO IS ON THE HIGHER SIDE. ACCOR DINGLY WE MODIFY THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE ADDITION TO 5% OF THE VALUE OF ALLEGED BOGUS PURCHA SES. 20. THE FACTS RELATING TO THE ISSUE OF BOGUS P URCHASES IS IDENTICAL IN AY 2012-13 ALSO. FOLLOWING THE DECISION TAKEN BY US I N THE PRECEDING PARAGRAPHS FOR AY 2011-12, WE MODIFY THE ORDER PASS ED BY LD CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION TO 5% OF THE VALUE OF ALLEGED BOGUS PURCHASES. 21. THE REVENUE HAS TAKEN ONE MORE GROUND IN AY 2012-13 REGARDING THE ADDITION OF CASH CREDITS MADE U/S 68 OF THE ACT., I .E., THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE CASH CREDIT ADDITION OF RS.75.00 LAKHS. THE FACTS RELATING TO THE SAID ISS UE ARE DISCUSSED IN BRIEF. THE AO NOTICED THAT THE ASSESSEE HAS TAKEN LOAN FRO M FOLLOWING TWO COMPANIES DURING THE YEAR RELEVANT TO AY 2012-13:- SANKHALA PROPERTIES P LTD - RS.45.00 LAKHS SONAM GEMS P LTD - RS.30.00 LAKHS ---------------- RS.75.00 LAKHS ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 13 ========== THE AO FURTHER NOTICED THAT BOTH THE ABOVE SAID COM PANIES BELONG TO BHANWARLAL JAIN GROUP, WHICH HAD BEEN SUBJECTED TO SEARCH AND SEIZURE OPERATIONS. DURING THE COURSE OF SEARCH OPERATIONS , SHRI BHANWARLAL JAIN HAD ADMITTED THAT HIS GROUP CONSISTING OF ABOUT 70 CONCERNS WERE ONLY PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF UNSE CURED LOANS AND PURCHASE BILLS. THE DIRECTORS OF VARIOUS CONCERNS WERE FOUND TO BE EMPLOYEES OF BHANWARLAL JAIN AND THEY HAVE ALSO ADM ITTED THE SAME IN THEIR STATEMENT. HENCE THE AO PROPOSED TO ASSESS THE ABO VE SAID LOANS U/S 68 OF THE ACT. 22. THE ASSESSEE SUBMITTED THAT HE HAS SUBMITTE D ALL THE DOCUMENTS TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CRE DITORS AND GENUINENESS OF TRANSACTIONS. ACCORDINGLY THE ASSESSEE OBJECTED TO THE PROPOSAL OF THE AO. HOWEVER, THE ASSESSING OFFICER TOOK THE VIEW THAT T HE INVESTIGATION WING OF THE DEPARTMENT HAS PROVED THAT THIS GROUP HAS PROVI DED ONLY ACCOMMODATION ENTRIES. ACCORDINGLY HE ASSESSED THE ABOVE SAID TW O LOANS AGGREGATING TO RS.75.00 LAKHS AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 23. THE LD CIT(A) DELETED THE ADDITION WITH TH E FOLLOWING OBSERVATIONS:- 7.3 I HAVE CAREFULLY CONSIDERED THE ISSUES BROUGHT OUT BY THE AO IN THE IMPUGNED ASSESSMENT ORDER AND ALSO THE SUBMISSIONS MADE BY T HE AR ON BEHALF OF THE APPELLANT. FROM THE MATERIAL, THE AO HAS BROUGHT OU T IN THE BODY OF THE ASSESSMENT ORDER, HIS CASE AGAINST THE APPELLANT WH ICH IS SUMMARISED AS UNDER: A. 'SHRI BHANWARLAL JAIN GROUP, IN WHOSE CASES A SEARCH ACTI ON WAS CONDUCTED IN 2013 BY THE INVESTIGATION WING, HAD BEEN FOUND T O BE RUNNING A HAWALA RACKET THROUGH A CLUTCH OF BENAMI CONCERNS, RUN WITH THE H ELP OF DUMMY DIRECTORS / PARTNERS / PROPRIETORS, WHO WERE SIMPLY EMPLOYEES O F THE SAID SHRI JAIN &OTHERS AND WERE PAID NOMINAL SALARIES. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 14 B. THROUGH THE SAID BENAMI CONCERNS, HAWALA OF TWO TYPES WERE BEING GIVEN - (1) HAWALA FOR PURCHASE OF DIAMONDS; AND (2) HAWALA FOR UNSECURED LOANS. C. IN HIS STATEMENT, MADE UNDER SECTION 132(4), SHR I BHANWARLAL JAIN HAVE ADMITTED TO THE SAID HAWALA RACKET AND ALSO THE EXI STENCE OF DUMMY / BENAMI ENTITIES, THROUGH WHICH THE SAID RACKET WAS BEING RUN. D. DUMMY DIRECTORS / PARTNERS / PROPRIETORS HAD ALSO A DMITTED TO BEING PART OF THE HAWALA RACKET RUN BY SHRI BHANWARLAL JAIN GROUP . E. M/S SANKHALA PROPERTIES PVT. LTD. AND M/S. SONAM GEMS PVT. LTD. , FROM WHOM THE IMPUGNED LOAN OF ` 40,00,000/- AND 35,00,0 00/-WAS SHOWN TO HAVE BEEN OBTAINED BY THE APPELLANT, FIGURED IN THE DATA BASE OF ENTITIES AND ENTRIES COMPILED BY THE INVESTIGATION WING, THEREFORE, THIS LOAN, THE APPELLANT HAD SHOWN IN ITS BOOKS OF ACCOUNT, WAS SUSPECT. F. THOUGH THE APPELLANT*HAD PROVIDED CONFIRMATIONS AND OTHER SUPPORTING EVIDENCE IN RESPECT OF THE IMPUGNED CREDITS, IN VIE W OF THE FINDINGS OF, THE INVESTIGATION WING, THE IMPUGNED LOAN WAS TREATED A S NON-GENUINE AND THE LOAN AMOUNT WAS ADDED U/S 68 TO THE COMPUTATION OF TOTAL INCOME OF THE APPELLANT.' 7.3.1 THE ABOVE BEING THE BASIC THRUST OF THE CASE AGAINST THE APPELLANT, THE IMPUGNED ASSESSMENT ORDER NEEDS TO BE EXAMINED TO F IGURE OUT THE QUALITY OF APPELLANT-SPECIFIC EVIDENCE IF ANY AVAILABLE. A SEA RCH FOR SUCH AN EXAMINATION LEADS TO THE FOLLOWING QUESTIONS: A. 'WHAT IS THE NATURE OF EVIDENCE THAT HAS BE EN BROUGHT ON RECORD TO SHOW THAT THE LENDER PARTIES, WHO ADVANCED THE IMPUGNED LOANS TO THE APPELLANT, WERE BENAMIS OF SHRI BHANWARLALJAIN GROUP? B. IS THERE ANY MATERIAL THAT HAS BEEN BROUGHT OUT BY THE ASSESSING OFFICER TO SHOW THAT THE LOANS IN QUESTION ARE PAPER ENTRIES P URCHASED AGAINST PAYMENT OF UNACCOUNTED CASH?' 7.3.2 FIRST OF ALL, IT WOULD BE WORTHWHILE TO EXAMI NE THE IMPUGNED ASSESSMENT ORDER WITH REGARD TO MATERIAL THAT SHOWS THAT THE H AWALA RACKET WAS RUN THROUGH BENAMI ENTITIES OF SHRI BHANWARLAL JAIN. IN THIS RE GARD IT IS MENTIONED IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER CLAIMS THAT IN THEIR RESPECTIVE STATEMENTS, RECORDED U/S 132(4) ALL DIRECTORS / PRO PRIETORS / PARTNERS OF THE ALLEGED BENAMI ENTITIES RUN BY SHRI BHANWARLAL JAIN HAVE ADMITTED TO BEING DUMMIES, BUSINESS IN WHOSE NAMES WAS ACTUALLY BEING RUN BY SHRI BHANWARLAL JAIN. HOWEVER NO MENTION OF ANY PARTICULAR STATEMEN T FROM ANY PARTICULAR PERSON WAS REPRODUCED IN THE ORDER. IT IS ALSO MENTIONED T HAT BOOKS OF ACCOUNTS, WERE FOUND AT ONE PLACE. HOWEVER, THE AO HAS NOT MENTION ED ANYTHING ABOUT THE INCRIMINATING EVIDENCES FOUND, PERTAINING TO THE AP PELLANT TO COME TO THE CONCLUSION THAT THE LOANS OBTAINED BY THE APPELLANT ARE ACCOMMODATION ENTRIES. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 15 7.3.3 CERTAIN CONCLUSIONS ARE OBVIOUS. ONE, THE ASS ESSING OFFICER HIMSELF IS NOT SO CLEAR ABOUT FACTS AND HAS REFERRED TO MOSTLY THE MATERIAL FACTS WHAT HAS HAPPENED IN THE SEARCH ON BHANWARLAL JAIN GROUP, WH ICH ARE NOT RELEVANT TO THE CASE. TWO, THE ASSESSING OFFICER HAS NOT REFERRED T O ANY ADVERSE MATERIAL IN THE CASES OF LOAN CREDITORS THAT ARE BEING DUBBED BY HI M TO BE BENAMIS OF SHRI BHANWARLAL JAIN. HENCE, IT IS TO BE INFERRED THAT T HE QUALITY OF EVIDENCE, SPECIFIC TO THE APPELLANT IS BUT POOR AND NOT FULLY RELIED UPON . FROM THE IMPUGNED ASSESSMENT ORDER IT IS SEEN THAT THOUGH THE ASSESSI NG OFFICER APPEARS TO HAVE TAKEN THE VIEW THAT THE IMPUGNED LOAN CREDITORS ARE MERE ENTRY PROVIDER AND THAT THE IMPUGNED LOAN ENTRIES HAVE BEEN OBTAINED TO INT RODUCE THE UNACCOUNTED CASH IN ITS BOOKS OF ACCOUNT, NO SPECIFIC MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT CREDITOR IS ENTRY PROVIDER ND THAT ENTRI ES FOR THE LOAN IN QUESTION HAS ACTUALLY BEEN OBTAINED AGAINST PAYMENT MADE BY THE APPELLANT IN CASH OUTSIDE REGULAR BOOKS OF ACCOUNT. ALL THIS GOES TO SUPPORT THE CONTENTIONS OF THE APPELLANT THAT ASSESSING OFFICER HAS PASSED THE ORDER ON THE BASIS OF MERE CONJECTURES AND SURMISES, WITHOUT BOTHERING TO BRING ANY CONCRE TE MATERIAL ON RECORD. 7.3.4 ABSENCE OF MATERIAL TO SHOW THAT THE LOAN ENTRY IS UNEXPLAINED: FROM THE FORGOING, IT IS OBVIOUS THAT THERE IS NO S COPE FOR ARRIVING AT A CONCLUSION THAT THE APPELLANT HAD TAKEN HAWALA ENTRY IN THE FO RM OF LOAN, TO INTRODUCE THE UNACCOUNTED CASH IN ITS BOOKS OF ACCOUNT. HENCE, TH E ONLY ISSUE THAT REMAINS TO BE SEEN IS WHETHER ON THE BASIS OF FACTS BROUGHT ON RECORD THE IMPUGNED LOAN COULD BE TREATED AS UNEXPLAINED WITHIN THE FORE-COR NERS OF SECTION 68 OF THE ACT. AT THE OUTSET, IT WILL NECESSARY TO LOOK AT SOME LE GAL PRECEDENTS WITH REGARD TO THE INTENT AND APPLICATION OF SECTION 68 OF THE ACT. IT NEEDS NO ELABORATION THAT THROUGH A CATENA OF DECISIONS THE COURTS HAVE LA ID DOWN THE FOLLOWING THREE FUNDAMENTAL TESTS WHICH HAVE TO BE ESTABLISHED TO D ISCHARGE THE BURDEN UNDER SECTION 68 OF THE ACT: IDENTITY OF THE CREDITOR CREDITWORTHINESS OF THE CREDITOR, AND GENUINENESS OF THE TRANSACTION. 7.3.5 THE HON'BLE SUPREME COURT IN CASE OF CIT V. P. MOHANAKALA [2007] 291 JTR 278 / 161 TAXMAN 169 HELD THAT THE EXPRESSION 'ASSESSEE OFFERS NO EXPLANATION' MEANS WHERE THE ASSESSEE OFFERS NO PRO PER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUM FOUND CRE DITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. IT FURTHER HELD THAT TH E OPINION OF THE AO FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE A S NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL & OT HER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE AO IS REQUI RED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 16 7.3.6 THE LAW IS WELL-SETTLED THAT THE ONUS OF PROV ING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE IS , ON HIM AND WHERE THE NATURE AND SOURCE OF A RECEIPT, WHETHER IT BE OF MO NEY OR OTHER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BUR DEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE [ROSHAN DI HATTI V. CIT[1977] 107ITR 938 (SC)]. 7.3.7 THE INITIAL BURDEN TO PROVE THE GENUI NENESS OF CASH CREDIT LIES ON THE TAXPAYER. IF THE ASSESSEE FAILS TO PROVE SAT ISFACTORILY THE SOURCE AND NATURE OF AMOUNTS OF CASH RECEIVED AND CREDITWORTHINESS OF THE CREDITOR, THE AO IS ENTITLED TO DRAW INFERENCE THAT THE RECEIPTS ARE OF AN ASSESSABLE NATURE [A . GOVINDARAJULU MUDALIAR V. CIT [1958] 34 ITR 807(SC) ]. 7.3.8 IN THE CASE OF ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXM AN 523 (GUJ.) IT WAS HELD THAT IF THE IDENTITY OF THE CREDITORS I S PROVED AND THE AMOUNTS ARE RECEIVED BY ACCOUNT-PAYEE CHEQUES, THE INITIAL BURDEN OF PROVING CREDIT IS DISCHARGED AND THE SOURCE OF CREDITS NEED NOT BE PROVED. 7.3.9 IN THE CASE OF CIT VS. SMT SUSHILADEVI KHADARIA [2009] 319 ITR (BO M) THE HON. BOMBAY HC HELD THAT WHEN LOANS WERE TAKEN BY ACCOUNT PAYEE CHEQUES AND THE RECORD INDICATED THAT THERE WAS NO CASH PAYMENT IN THE ACCOUNT OF THE BORROWER PRIOR TO THE ISSUANCE OF SUCH CHEQU ES, THE LOANS AND INTEREST PAID ON SUCH LOANS WERE NOT INCLUDIBLE IN THE TOTAL INCO ME OF THE ASSESSEE U/S.68 OF THE ACT. 7.3.10 IN THE CASE OF ITO V. ANANT SHELTERS (P) LTD. [2012] 051 SOT 0234, THE HONBLE 1TAT (MUMBAI) HELD THAT IN MATTERS REGA RDING CASH CREDIT THE ONUS OF PROOF WAS NOT A STATIC ONE. AS PER THE PROVISIONS O F THE SECTION 68, THE INITIAL BURDEN OF PROOF LIES ON ASSESSEE. AMOUNT APPEARING IN BOOKS OF ACCOUNTS OF THE ASSESSEE WAS CONSIDERED A PROOF AGAINST HIM. HE CAN PROVE THE IDENTITY OF THE CREDITORS BY EITHER FURNISHING THEIR PANS OR ASSESS MENT ORDERS. SIMILARLY, GENUINENESS OF TRANSACTION COULD BE PROVED BY SHOWI NG THAT MONEY WAS RECEIVED BY AN ACCOUNT PAYEE CHEQUE OR BY DRAFT. CR EDIT WORTHINESS OF THE LENDER COULD BE ESTABLISHED BY ATTENDING CIRCUMSTANCES. ON CE ASSESSEE PRODUCES EVIDENCES ABOUT IDENTITY, GENUINENESS AND CREDIT WO RTHINESS OF THE LENDER, ONUS OF PROOF SHIFTS TO REVENUE. THEREFORE, IT WAS HELD THAT ASSESSEE HAD FURNISHED ALL THE DETAILS REGARDING GENUINENESS OF CASH CREDIT, I .E., HE HAD DISCHARGED HIS BURDEN OF PROOF. AO DID NOT MAKE ANY ATTEMPT TO DIS CHARGE HIS BURDEN OF PROOF TO REBUT THE EVIDENCES PRODUCED BY ASSESSEE. NO ADDITI ON U/S.68 CAN BE SUSTAINED. 7.3.11 IN THE CASE OF CIT V. JAI KUMAR BAKLIWAL [2014] 366 ITR 217 (RAJ) IT WAS HELD BY THE RAJASTHAN HIGH COURT THAT ALL THE C ASH BY THE RAJASTHAN HIGH COURT THAT ALL THE CASH CREDITORS WERE ASSESSED TO INCOME-TAX AND THEY PROVIDED ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 17 A CONFIRMATION AS WELL AS THEIR PERMANENT ACCOUNT N UMBER. THEY HAD THEIR OWN RESPECTIVE BANK ACCOUNTS WHICH THEY HAD BEEN OPERAT ING AND IT WAS NOT THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS OPER ATING THEIR BANK ACCOUNTS. MOST OF THE CASH CREDITORS APPEARED BEFORE THE ASSE SSING OFFICER AND THEIR STATEMENTS UNDER SECTION 131 OF THE INCOME-TAX-ACT, 1961, WERE ALSO RECORDED ON OATH. THERE WAS NO CLINCHING EVIDENCE NOR HAD TH E ASSESSING OFFICER BEEN ABLE TO PROVE THAT THE MONEY ACTUALLY BELONGED TO N ON BUT THE ASSESSEE. THE ADDITION UNDER SECTION 68 WAS NOT JUSTIFIED. 7.3.12 THE QUESTION WHETHER AN ASSESSEE IS REQUIRED TO PROVE THE SOURCE OF SOURCE ALSO HAS BEEN ANSWERED BY THE HON'BLE GAUHAT I HIGH COURT IN CASE OF NEMI CHAND KOTHARI V. CIT[2004] 136 TAXMAN 213. THE HIGH COURT HELD THAT THE ASSESSEE'S BURDEN IS CONFINED TO PROVING THE CR EDITWORTHINESS OF CREDITOR WITH REFERENCE TO TRANSACTION BETWEEN ASSESSEE AND CREDI TOR AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF GENUINENESS OF TRANSACTION WHICH TOOK PLACE BETWEEN THE CREDITO R AND SUB-CREDITOR AND/OR THE CREDITWORTHINESS OF THE SUB-CREDITORS. 7.3.13 HENCE, IT IS TO BE INFERRED THAT IN A CASE W HERE THE ASSESSEE HAS SUPPLIED ALL POSSIBLE INFORMATION TO THE ASSESSING OFFICER T O EXPLAIN THE CREDIT TRANSACTION, HE HAS* SATISFACTORILY DISCHARGED THE BURDEN CAST O N HIM AND IT WOULD BE FOR THE REVENUE TO PROVE THAT THE TRANSACTION IS NOT SATISF ACTORILY EXPLAINED AND PROVISIONS OF SECTION 68 OF THE ACT ARE APPLICABLE. 7.3.14 IN THE CASE BEFORE ME, THE RECORD ALSO SHOWS THAT TO PROVE THE GENUINENESS OF THE IMPUGNED LOAN ENTRY FROM M/S SAN KHALA PROPERTIES PVT. LTD. AND M/S. SONAM GEMS PVT. LTD, THE APPELLANT HAS FUR NISHED TO THE ASSESSING OFFICER THE FOLLOWING DETAILS COPIES OF WHICH WERE ALSO FURNISHED PRESENT PROCEEDINGS: /. COPY OF LEDGER ACCOUNT CONFIRMATION II. BANK STATEMENTS OF THE PARTIES III. INCOME TAX ACKNOWLEDGEMENT OF THE PARTIES IV. BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF PARTIES V. AFFIDAVITS GIVEN BY THE DIRECTORS OF BOTH THE COMPANIES CONFIRMING THE LOANS GIVEN TO APPELLANT AND EXPLAINING THE SOURCE OF GIV ING LOAN VI. COPY OF AFFIDAVIT FILED BY BHANWARLAL JAIN TO T HE DEPUTY DIRECTOR OF INCOME TAX, UNIT IX, MUMBAI RETRACTING THE STATEMENTS GIVE N BY HIM AT THE TIME OF SEARCH CONDUCTED ON HIS PREMISES. 7.3.15 AS SUCH, IN SO FAR AS THE APPELLANT IS CONCE RNED, THEY HAVE PROVIDED ALL POSSIBLE DOCUMENTARY EVIDENCE TO PROVE IDENTITY OF THE CREDITORS FROM WHOM THE IMPUGNED LOAN OF RS 75,00,000/- WAS OBTAINED. THE E VIDENCES ALSO PROVES CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENE SS OF THE TRANSACTIONS. FROM ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 18 THIS IT HAS TO BE SAID THAT THE APPELLANT HAD DONE EVERYTHING IN ITS POWER TO PROVE THE THREE INGREDIENTS REQUIRED TO PROVE THE SATISFA CTORY NATURE OF THE LOAN TRANSACTIONS. IN THESE CIRCUMSTANCES, THE ONUS HAD SHIFTED TO THE ASSESSING OFFICER. FURTHER, IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH WHAT HAD BEEN GIVEN TO HIM BY THE APPELLANT, HE WAS DUTY BOUND TO SPECIFY WHAT MORE MATERIAL HE WANTED THE APPELLANT TO FURNISH. THE ASSESSING O FFICER NEVER ASKED FOR ANY FURTHER MATERIAL, WHICH LEADS TO THE INESCAPABLE CO NCLUSION THAT THE ASSESSING OFFICER COULD NOT THINK OF ANY FURTHER MATERIAL TO ASK FOR AND PROCEEDED TO REJECT THE APPELLANT'S CLAIM. THE UNEQUIVOCAL CONCLUSION I S THAT ALL THE THREE INGREDIENTS HAVING BEEN SATISFIED, THE IMPUGNED LOAN OF RS 75,0 0,000/- HAVE TO BE TREATED AS EXPLAINED SATISFACTORILY AND THE ASSESSING OFFICER WAS WRONG IN HAVING DISREGARDED OVERWHELMINGLY SUPPORTIVE EVIDENCE. NO COGENT MATERIAL WAS ADDUCED BY HIM, TO SHOW THAT LOANS WERE UNEXPLAINED . THEREFORE, THE IMPUGNED ADDITION OF RS 75,00,000/-, MADE IN THE ASSESSMENT ORDER, FAILS ON THE COUNT THAT EVIDENCE THAT IS RELIED UPON IS TOTALLY INADEQUATE AND FAILURE TO RECOGNISE THE SATISFACTORY NATURE OF THE EXPLANATION/EVIDENCE TEN DERED BY THE APPELLANT TO EXPLAIN IDENTITY OF CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE LOAN TRANSACTIONS. HENCE, THE IM PUGNED ADDITION OF RS 75,00,000/- IS HEREBY DELETED. GROUND NO. 2 IS TREA TED AS 'ALLOWED'. 24. WE HEARD THE PARTIES ON THIS ISSUE. THE LD D.R SUBMITTED THAT THE LENDERS BELONG TO BHANWARLAL JAIN GROUP AND IT HAS ADMITTED THAT THEY HAVE PROVIDED ONLY ACCOMMODATION ENTRIES. ACCORDINGLY H E SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION M ADE U/S 68 OF THE ACT. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE ASSESSI NG OFFICER HAS MADE THE IMPUGNED ADDITION U/S 68 OF THE ACT. HE SUBMITTED THAT THE INITIAL BURDEN PLACED UPON THE ASSESSEE UNDER THE PROVISIONS OF SE C.68 OF THE ACT IS TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF LENDER AND GENUINENESS OF TRANSACTIONS. HE SUBMITTED THAT THE ASSESSEE HAS F URNISHED ALL THE DOCUMENTS TO PROVE THE ABOVE SAID THREE INGREDIENTS AND THE AO HAS NOT FOUND FAULT WITH THE SAME. HE FURTHER SUBMITTED TH AT THE AO HAS PLACED HIS RELIANCE ON THE STATEMENT GIVEN BY SHRI BHANWARLAL JAIN AND IT IS STATED THAT HE HAS RETRACTED THE STATEMENT. HE FURTHER SUBMITT ED THAT AN IDENTICAL ISSUE WAS CONSIDERED IN THE CASE OF M/S RELIANCE CORPORAT ION VS. ITO (ITA ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 19 NO.1069 TO 1071/MUM/2017 DATED 12.04.2017) BY THE C O-ORDINATE BENCH AND THE IDENTICAL ADDITION MADE IN THE ABOVE SAID CASE HAS BEEN DELETED. 25. A PERUSAL OF THE ORDER PASSED BY LD CIT(A) WOULD SHOW THAT THE LD CIT(A) HAS EXAMINED THE DOCUMENTS FURNISHED BY THE ASSESSEE AND HAS COME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHA RGED THE INITIAL BURDEN OF PROOF PLACED UPON HIS SHOULDERS U/S 68 OF THE ACT, I.E., HE HAS PROVED THE IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF CREDI TOR AND GENUINENESS OF TRANSACTIONS. ONCE THE ASSESSEE DISCHARGES THE INI TIAL BURDEN PLACED UPON HIM, THEN THE ONUS SHIFTS TO THE SHOULDER OF THE AS SESSING OFFICER TO PROVE OTHERWISE. IN THE INSTANT CASE, WE NOTICE THAT THE AO HAS FAILED TO PROVE THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE ARE WRONG. THE ABOVE VIEW IS SUPPORTED BY THE DECISION RENDERED BY THE CO-ORDINA TE BENCH IN THE CASE OF RELIANCE CORPORATION (SUPRA). HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND ACCORDINGLY U PHOLD THE SAME. 26. IN THE RESULT, BOTH THE APPEALS FILED BY TH E REVENUE ARE DISMISSED AND BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER HAS BEEN PRONOUNCED IN THE COURT ON 14.12.2 018 SD/- SD/- (SANDEEP GOSAIN) (B.R.BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :14 TH DECEMBER, 2018. SA ITA NO.2100/MUM/2016 & ORS. SHRI ASHOK NAGRAJ MEHTA. 20 !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-30, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI