PARTH ENTERPRISES, MUMBAI V. ITO 22(1)(4), MUMBAI

ITA 293/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92828 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Opportunity of cross examination; Corroborative evidences; Accommodation entries; Onus to prove; Retraction; Bogus loan
• Section: 143(3); 133A; 68

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI C - BENCH , , BEFORE S/SH. I. P. BANSAL,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO 293 /MUM/2013, / ASSESSMENT YEAR - 200 9 - 10 M/S. PARTH ENTERPRISES 9, HERMAN NIWAS GAODEVI ROAD GARDEN GALLI GHATKOPAR (W) MUMBAI - 400 086. PAN:AAIFP 8392 C VS ITO - 22 ( 1)(4) MUMBAI . /. ITA NO.976/MUM/2013, / A SSESSMENT YEAR - 2009 - 10 ITO - 22(1)(4) MUMBAI. VS M/S. PARTH ENTERPRISES 9, HERMAN NIWAS GAODEVI ROAD GARDEN GALLI GHATKOPAR (W) MUMBAI - 400 086. PAN:AAIFP 8392 C ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI VIMAL PUNMIYA / REVENUE BY :SHRI PREMANAND J. (DR) / DATE OF HEARING : 05 - 05 - 2015 / DATE OF PRONOUNCEMENT : 10 - 0 6 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALL ENGING THE ORDER DT.21.11.2012 OF THE CIT(A) - 33,MUMBAI, ASSESSING OFFICER(AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS.THE ASSESEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO.293/MUM/2013 1.THE LD. CIT(A) - 33 HAD ERRED IN LAW AND IN FACT BY CONFIRMING ADDITION OF RS.36,00,000/ - OUT OF TOTAL UNSECURED LOANS OF RS.3,35,00,000/ - U/S. 68 OF THE INCOME TAX ACT, 1961. 2. THE LD. CIT(A) - 33 HAD ERRED IN LAW AND IN FACT BY GIVING PART RELIEF AND CONFIRMING PART DISALLOWANCE OUT OF INTEREST PAID TO VARIOUS UNSE CURED LOAN CREDITORS AS PER 1 ABOVE. 3. APPELLANT PLEAD BEFORE YOUR HONOUR LEAVE OR ADD/ALTER OR AMEND ANY/ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. ITA NO.976/MUM/2013 GROUNDS OF APPEAL FILED BY THE AO READ AS UNDER: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2,99,00,000/ - OUT OF THE SAID UNSECURED LOANS, WHICH WAS ADDED TO THE TOTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND ALSO DELETED INTEREST OF RS.40,37,326/ - OF AC COUNT OF UNSECURED LOANS. IN RESPECT OF THE FACT THAT THE ASSESSEE HAD FAILED TO ADDUCE COGENT EVIDENCE AND 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 2 ONE OF THE CHARTERED ACCOUNTANT HAD CONFESSED BEFORE THE DGIT(INV.) THAT HE HAD ARRANGED FOR BOGUS LOANS. 2. THE APPELLANT PRAYS THAT THE ORDER OF T HE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE - FIRM, ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELO PERS,FILED ITS RETURN OF INCOME ON 20.09.09, DECLARING INCOME AT RS.7.72 LACS.THE AO COMPLETED THE ASSESSMENT ON 26.12.2011,U/S. 143(3) OF THE ACT,DECLARING THE INOME OF THE ASSESSEE AT 3.40 CRORES. 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT TH E A SSESSEE HAD SHOWN CLOSING BAL ANCE OF RS. 4,00, 2 1, 842/ - IN THE BALANCE S H EET AS ON 31.3.2009 , UNDER THE HEAD LOANS. ON VERIFICATION OF DETAILS SUBMITTED BY THE A SSESSEE , HE FOUND THAT IT HAD ACCEPTED UNSECURED LOANS OF RS. 3.35 CR ORES DURING THE Y EA R UNDER C ONSIDE RATION. OUT OF THE 90 CREDITORS, THE A SSESSEE HAD FILED C ONFIRMATION OF 77 PERSONS ONLY. HE FOUND THAT IT HAD NOT PAID INT EREST TO THE PARTIES FR O M WHOM LOAN WAS RECEIVED. THE AO CONDUCTED ENQUIRY FR O M EXTERNAL SOURCES ON THE BA S IS OF INFORMATION AVAIL ABLE ON RECO R D AND ON TEST CHECK BASIS ON 0 1.12.2011. AS PER THE AO IN CASE OF JAYANT V. A MONKAR (JVA), IT WAS FOUND THAT THE CREDITOR DENIED TO HAVING GIVEN ANY LOAN TO THE A SSESSEE , THAT THE SIGNATURE ON THE CONFIRMATION FILED WER E DIFFERENT, THAT ALL DOCU MENTS KEPT WERE BY ONE C HARTERED ACCOUNTANT,DEEPAK KAPADIA (DK). IN CASE OF LEEELAV N ATI K. G ANGANI LKG),S HE CONFIRMED OF HAVING GIV E N LOAN TO THE A SSESSEE , BUT STATED THAT HER CHEQUE BOOK AND PASS BOOK WERE KEPT BY DK.T HE AO FOUND THAT IN CASE O F GIRISH M.KOT HARI - HUF(GMK) THE CREDITOR CONFIRMED OF HAVING GIVEN LOAN TO THE A SSESSEE , BUT COULD NOT SPECIFY AS TO HOW MUCH LOAN WAS GIVEN AND WHEN AND HIS BA NK DOCUMENTS WERE KEPT WITH DK. IN THE CASE OF RAMESHCHAN D RA K. GANATRA (RKG), THE FACTS WERE SAME AS THAT OF GMK .ON THE BA S IS OF EN QUIRIES MADE IN THE MULUND AREA, THE AO HELD THAT THE PATTERN ADOPTED BY THE A SSESSEE INDICATED THAT CH EQUE BOOKS AND PASS BOOKS WERE KEPT BY DK. A SURVEY A CTION,U/S. 133A OF THE ACT, WAS CARRIED OUT AT THE BUSINESS PREMISES OF DK ON 0 1.1 2. 20 11 AND HIS STATEMENTS WERE RECORD . IN HIS STATEMENT, DK AGREED THAT HE HAD PROVIDED ENT R IES FOR LOAN IN LIEU OF CASH REC EIVE D FOR THE ASSESSEE AND OTHERS. HE FURTHER EXPLAINED THAT THE ASSESSEE APPROACHED THROUGH ONE SHRI VALJIBHAI BHAN U SHALI ( VB ) FO R ARRANGING BOGUS UNSECURED LOANS , THAT IT WAS HANDING OVER THE CASH TO VB AND HE WAS ISSUING CH E Q UE TO THE PERSONS CONCER N ED, THAT THE C HEQUES FOR THE INT EREST AM OU NT WERE GIVE TO DK THROUGH VB, THAT HE WAS DEDU C TING COMMISSION @ 0.6%, THAT INT EREST WAS PA ID THROUGH CH E Q UE AND TDS WAS MADE IN FEW CASES. THE AO FURTHER MENTIONED THAT SIMILAR PATTERN WAS FOUND DURING THE COURSE OF ENQUIRIES . A CCORDINGLY, HE ISSUED A SHOW CA USE NOTICE ON 9.12. 20 11 TO THE ASSESSEE CALLING FOR DETAILS FR OM THE ASSESSEE . AFTER CON SIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT THE ASSESSEE HAD NOT FURNISHED LOAN CONFIRMATION IN CASE OF THE 13 CREDITORS, THAT VIDE NOTICE DT.9.12. 20 11 THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO PRODUCE THE WITNESS FOR EXAMINATION , THAT HE DID NOT P RODUCE ANY WITNESS, THAT IT DID NOT FURNISH ANY SUPPORTING DO CUMENTARY EVID ENCE TO SUBSTANTIATE ITS CLAIM, THAT ASSESSEE HAD NOT DENIED ITS RELATION WITH DK AND VB TH R OUGH WHOM THEY HAD CONTA C TED DK FOR ARRANGING UNSECURED LOANS, THAT DK HAD ELABOR ATED THE MODUS OPERNADI , THAT THE ASSESSEE H AD NOT OFFERED ANY EXPLANATION, THAT IN CASE OF JVA THE SIGNATURE ON LOAN CONFIRMATION WERE FOUND TO BE DIFFERENT FROM THAT OBTAINED ON SPOT ENQUIRY, THAT THE ASSESSEE WAS PROVIDED WITH COPIES OF LOAN CONFIRMATIO N AND ENQUIRY REPORT THAT IT HAD NOT REBUTTED THE FACTS MENTIONED IN THE NOTICE, THAT MERELY SHOWING TRANSACTION THROUGH BANK A/C. PAYEE CHEQUES 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 3 DID NOT ESTABLISH THE GENUINENESS OF THE TRANSACTION, THAT IN MOST OF THE CASES CH EQUE BOOKS AND PASS BOOKS WER E NOT FOUND IN POSSESSION OF THE CREDITORS, THAT THE BURDEN OF PROOF WAS ON THE ASSESSEE. FINALLY, HE HELD THAT THE EXPLANATION OF THE ASSESSEE WITH REGARD TO UNSECURED LOAN OF RS. 3.35 CR ORES WAS NOT SATISFACTORY, THAT SAME WAS TO BE TAXED U/S.68 OF TH E ACT FOR THE Y EA R UNDER CONSIDERATION.HE FURTHER HELD THAT THE ASSESSEE HAD DEBITED INTEREST OF RS. 40.97 L A C S IN THE P&L A/C., BEING INTEREST PAID ON UNSECURED LOANS, THAT IT HAD NOT FURNISHED ANY EVIDENCE ON DEDUCTION IN PAYMENT OF TDS, THAT IT HAD NOT PR OVIDED COPIES OF FORM 15G OR 15H TO CLAIM EXEMPTION ON INTEREST PAYMENT. THEREFORE, THE ENTIRE INTEREST PAYMENT WAS DISALLOWED BY HIM. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM , THE ASSESSEE CONTENDED THAT THE AO HAD R ELIED UPON THE STATEMENT OF DK, THAT HE HAD USED THE STATEMENT OF DK WITHOUT GIVING OPPORTUNITY OF CROSS EXAMINATION, THAT DK HAD NO ROLE IN ARRANGING UNSECURED LOANS FOR THE ASSESSEE , THAT THE AO HAD NOT BROUGHT ON RECORD ANY MA TERIAL OR EVIDENCE THAT THE ASSESSEE HAD GENERATED ANY UNACCOUNTED CASH, THAT IT HAD DISCHARGED THE PRIMARY ONUS,THAT IT HAD GIVEN ALL DETAILS AS WELL AS DOCUMENTS WITH CONFIRMATION LETTERS TO PROVE IDENTITY, GENUINENESS AND CREDIT WORTHIN ESS OF THOSE PERSONS, THAT THE LOAN CREDITORS HAD CONFIRMED THEIR PAN AND OTHER DETAILS,THAT THE AO MADE THE ADDITION U/S 68 OF THE ACT WITHOUT HAVING DISCHARGED HIS ONUS OF MAKING ANY ENQUIRY TO SHOW THAT THE DETAILS GIVEN IN CONFIRMATIONS WERE NOT CORR ECT,THAT EVEN IF IT WAS CONSIDERED TO DRAW ADVERSE INFERENCE IN SOME OTHER CASES IT SHOULD BE CONFINED TO ONLY THOSE CASES, THAT THERE WAS NO LOAN OUTSTANDING IN THE NAME OF ONE PERSON ON THE DATE WHEN ENQUIRIES WERE CONDUCTED THAT LOAN WAS REPAID TO HIM IN SEPTEMBER 2010,THAT OTHER 3 PERSONS HAD CONFIRMED THE LOANS,THAT IT HAD DISCHARGED THE ONUS, THAT THE ASSESSEE HAD FILED CONFIRMATION OF THE CREDITORS NAMELY MANSUKH P. SHETH , B.N. DOSHI, HIRALAL P. PATEL, PUSHPA P SOLANKI AND JAGDISH V RATNANI, T HAT OUT OF 90 LOAN - CREDITORS 75 WERE REPAID IN THE SUCCEEDING ASSESSMENT YEARS, THAT NON - PRODUCTION OF CREDITORS COULD NOT BY ITSELF BE CONSIDERED A GOOD GROUND FOR MAKING ADDITION U/S. 68 OF THE ACT ,THAT DK HAD RETRACTED HIS STATEMENT ALSO SUBSEQUENTLY,T HAT VB HAD STATED THAT HE DID NOT HAD ANY PROFESSIONAL OR BUSINESS RELATIONSHIP WITH THE ASSESSEE ,THAT IT HAD ALSO BEEN STATED THAT HE HAD NOT INTRODUCED THE DK TO THE ASSESSEE .THE ASSESSEE RELIED UPON THE CASE OF THE HONBLE RAJASTHAN HIGH COURT DELIVER ED IN THE CASE OF R.S. RATHORE (212ITR390). DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FILED LOAN CONFIRMATION OF 13 PARTIES A S ADD ITIONAL EVIDENCE BEFORE THE FAA. HE CALLED FOR A REMAND REPORT FROM THE AO. IN HIS REPORT, THE AO MENTIONED THAT INCOME S HOWN BY ALL THE PARTIES WERE BELOW THE TAXABLE LIMIT, THAT NOT A SINGLE PERSON WAS HAVING CREDIT WORTHINESS TO ADVANCE THE LOAN, THAT THEY DID NOT HAVE THE CAPACITY, THAT THE CREDITORS ADMITTED OF NOT KNOWING THE ASSESSEE , THAT THEY HAD STATED THAT LOANS WERE GIVEN THROUGH THEIR CONSULTANT , THE CREDITORS WERE SHOWING INCOME IN THE RANGE OF RS 1 TO 1.5 LACS FOR ALL THE EARLIER Y EA RS, THAT NONE OF THEM HAD PAID TAXES, THAT IN THEIR STATEMENT ALL OF THEM ADMITTED THAT THEIR WITHDRAWAL WAS FROM RS 1 TO 1.5 LACS, THAT NONE OF THEM FILED CAPITAL ACCOUNT , THAT NON - PAYM E NT OF TAX BY THE CREDITORS PROVES THAT THE LOANS WERE MERE ACCOMMODATION ENTRIES . ABOUT THE 13 PARTIES, AFTER CONSIDERING THE REMAND REPORT AND SUBMISSION OF THE ASSESSEE THE FAA HELD THAT THE PARTIE S WERE IN EXISTENCE, THAT THEIR IDENTITY WAS NOT DOUBTED, THAT UNSECURED LOANS HAD BEEN GIVEN BY THEM TO THE ASSESSEE, THAT THEY HAD FILED THEIR LOAN CONFIRMATIONS, THAT ALL WERE HAVING INCOME BELOW TAXABLE LIMIT, THAT HE HAD GONE THROUGH THE INCOME TAX RE TURN FILED BY THEM, HE HAD CONSIDERED AFFIDAVIT FILED BY SHRI RAMESHCHANDRA B. SINGH WHO HAD NOT FILED HIS RETURN OF INCOME, THAT RAMESHCHANDRA B. SINGH HAD SIMPLY STATED THAT HE WAS IN TRADING AND HAD GIVEN LOAN AMOUT OF RS.3.5 LACS TO THE ASSESSEE, THAT AFFIDAVIT FILED BY HIM AND IN OTHER 12 CASES WERE 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 4 OF NO HELP TO THE ASSESSEE , THAT WHATEVER TDS HAD BEEN DEDUCTED SAME HAS BEEN CLAIMED AS REFUND, THAT IT WAS TOTALLY IN CONTRADICTION OF THE STAND TAKEN BY ASSESSEE THAT FORM 15H AND 15G WERE FILED IN CA SE WHERE INCOME WAS BELOW TAXABLE LIMIT AND NO TDS WAS MADE. THE FAA ASKED THE ASSESSEE TO GIVE THE REASON IF THE PERSONS WHO WERE NOT HAVING TAXABLE INCOME AT ALL AND WHERE NO TDS WAS MADE BY THE ASSESSEE ON PAYMENT OF INTEREST TO THEM WHAT WAS THE REQU IREMENT OF LAW FOR WHICH THEIR RETURN OF INCOME WERE FILED AND A COPY OF WHICH WAS PRODUCED IN SUPPORT OF THEIR CAPACITY AND CREDITWORTHINESS. AS PER THE FAA THE ASSESSEE HAD NOT BEEN ABLE TO ANSWER THAT, THAT IT WAS ALSO NOT IN POSITION TO STATE AS TO WH Y IN ALL THOSE CASES FOR INCOME BELOW TAXABLE LIMIT FORM NO.15G/H WERE NOT OBTAINED, THAT IN OTHER CASES SUCH CONFIRMATION WERE FILED DURING THE ASSESSMENT PROCEEDINGS. THE FAA REFERRED TO THE CASE OF ORIENT TRADING CO. OF BOMBAY HIGH COURT AND OASIS HOSPI TALITY (P) LTD. OF DELHI HIGH COURT. HE HELD THAT THE EXPLANATION OF THE ASSESSEE ABOUT THESE 13 PARTIES WAS NOT SATISFACTORY AND WAS LIABLE TO BE REJECTED. REFERRING TO THE CASES OF MK BROTHER (163 ITR 249) ; DURGAPRASAD MORE (82 ITR 540); SUMATI DAYAL ( 214 ITR 801); HE UPHELD THE ADDITION OF RS.31.00 LACS. HE ALSO HELD THAT THE CAPACITY AND CREDIT WORTHINESS OF THOSE PARTIES HAD NOT BEEN PROVED BY THE ASSESSEE, THAT PRIMARY ONUS REMAINED UNDISCHARGED.HE ALSO HELD THAT THE FIGURE OF UNSECURED LOAN INCLUD ED SQUARED UP LOAN AM OUN T AMOUNTING TO RS. 2 6 LACS DURING THE Y EA R ITSELF, THAT THE AO HAD CONDUCTED ON THE SPO T ENQUIRIES IN MULUND AND M ALAD AREA S, THAT HE HAD SPECIFICALLY MENTION ED THE OUTCOME OF THE ENQUIRIES IN CASE OF JVK, LKG , GMK (HUF) AND RKG, THA T OUT OF THE FOUR PERSON S THREE HAD CONFIRMED OF HAVING GIVEN LOANS TO THE ASSESSEE , THAT THEY HAD ALSO STATED THAT CH E Q UE BOOKS AND PASS BOOKS WERE KEPT WITH DK, THAT IN CASE OF JVA THE SIGNATURE ON CONF IRMATION LETTER WAS FOUND TO BE NON - GENUINE, THAT AO HAD FOUND THAT OUT OF THE 5 PARTIES I.E. MANSUKH P. SHETH , B. M . DOSHI, HIRALAL P. PATEL, PUSHPA P SOLANKI AND JAGDISH V RATNANI, THE FIRST PARTY WAS NOT FOUND ON GIVEN ADDRESS, THAT 4 WERE FOUND NOT TRACEABLE . REFERRING TO THE PROVISIONS OF SECTION 68 TH E FAA HELD THAT NO SPECIFIC ENQUIRY IN THOSE 55 CASES WERE MADE,THAT THE RATIO OF CASES WHERE FINDINGS WERE ADVERSE TO THE ASSESSEE HAD TO BE LIMITED TO THOSE SPECIFIC CASES AND COULD NOT BE STRETCHED TO HOLD IT AGAINST IT BY TREATING OTHER UNSECURED LO AN CREDITORS AS NON - GENUINE IN A GENERALISED MANNERS,THAT THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS IN 55 CASES,THAT THE ADDITIONS,MADE UNDER SECTION 68 OF THE ACT IN THOSE 55 CASES,AMOUNTING TO RS. 2,00,00,000/ - ,WHERE NO ENQUIRIES WERE CONDUCTED WAS NO T SUSTAINABLE.AS A RESULT,HE DELETED THAT ADDITION OF RS TWO CRORES.THE FAA FURTHER HELD THAT THE ASSESSEE WAS GIVEN THE OPPORTUNITY TO PRODUCE THE WITNESS FOR EXAMINATION WHICH HE HAD FAILED TO DO SO,THAT IT ALSO FAILED TO FURNISH ANY FURTHER SUPPORTING DOCUMENTARY EVIDENCE ABOUT THE GENUINENESS OF THE LOAN TRANSACTION THAT WERE SHOWN IN THE NAME OF FOUR PARTIES REFERRED IN THE EARLIER PART OF THE ORDER,THAT THE ASSESSEE HAD REPLIED IN CASE OF EACH OF THOSE PERSONS WHO FOUND NOT STAYING AT THE ADDRESS G IVEN,THAT ON THE REPLY GIVEN BY THE ASSESSEE THE AO FORMED AN ADVERSE OPINION FOR THE REASON THAT IT DID NOT PRODUCE THEM BEFORE THE AO,THAT ONLY FOR THE REASON THAT THE ASSESSEE HAD FAILED TO PRODUCE UNSECURED CREDITORS IN PERSON BEFORE THE AO ADDITIONS MADE WERE NOT SUSTAINABLE,THAT THE AO VERY WELL COULD HAD SUMMONED THEM OR CONDUCTED FIELD ENQUIRIES IN THE CASE,THAT MERELY NOT FINDING A PERSON THAT TOO FOR THE REASONS MENTIONED WHICH WERE NOT FOUND WRONG BY THE AO ITSELF WAS NOT A VALID BASIS FOR TR EATING THE LOAN SHOWN IN THOSE NAMES AS BOGUS.FINALLY,ADDITIONS MADE OF RS. 23,00,000/ - ,U/S.68 IN CASE OF THOSE PARTIES WAS ALSO DELETED.THE FAA ALSO HELD THAT IN CERTAIN CASES ENQUIRIES WERE ACTUALLY CONDUCTED,THAT STATEMENTS WERE RECORDED ON THE SPOT,TH AT THREE OUT OF THOSE FOUR PERSONS HAD ADMITTED HAVING GIVEN THE LOANS AND ALSO STATED THAT THEIR CHEQUE BOOKS AND PASS BOOKS ETC.WERE KEPT BY THEM WITH THE CHARTERED ACCOUNTANT,THAT ONE 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 5 PERSON DENIED HAVING GIVEN THE LOAN,THAT THE AO HAD ISSUED SHOW CA USE NOTICE TO THE ASSESSEE MENTIONING ABOUT OUTCOME OF ENQUIRIES IN THOSE FOUR CASES TO WHICH THE ASSESSEE HAD REPLIED,THAT IN CASE OF THREE PERSONS CHEQUE - BOOKS AND PASS BOOKS WERE KEPT BY THEIR CA,THAT THEY HAD SAID THAT IT WAS BETWEEN THEM AND THE CA, THAT THE AO HAD GIVEN A COPY OF THE STATEMENT RECORDED OF THE CHARTERED ACCOUNTANT TO THE ASSESSEE WHEREIN IT HAD BEEN ADMITTED THAT HE DID THE JOB OF PROVIDING ENTRY ON THE REQUEST OF ASSESSEE ,THAT THE ASSESSEE HAD APPROACHED HIM BY ONE OF THE ACQUAINTA NCES ITS NAMELY VB,THAT THE PARTIES DID NOT SAY THAT LOANS WERE BOGUS,THAT DK TERMED THE LOANS BOGUS,THAT FROM THE STATEMENTS OF DK NO WHERE IT WAS CLEAR THAT THOSE PARTIES SAID THAT THOSE WERE BOGUS LOANS,THAT IN THE QUESTIONS ASKED TO DK THERE WAS NO Q UESTION PERTAINING TO FINDING OF PASS BOOKS AND CHEQUE BOOKS AT HIS OFFICE,THAT STATEMENTS FOUR PERSONS WERE NOT CORROBORATED BY FINDINGS OF SURVEY PROCEEDINGS,THAT IN ABSENCE OF ANY SUCH FINDINGS THE STATEMENT OF CA REMAINED MERE STATEMENT NOT SUPPORTED BY ANY FINDING TO SUPPORT THE SAME,THAT 3 OUT OF THOSE 4 UNSECURED CREDITORS IDENTITIES WERE PROVED,THAT THEY HAD CONFIRMED HAVING GIVEN THE LOANS, THAT THEIR PASS BOOK AND CHEQUE - BOOKS WERE NOT BE FOUND IN THE OFFICE PRIMISES OF DK,THAT LOANS ADVANCED BY THEM COULD NOT BE TREATED AS UNEXPLAINED,THAT THOSE 3 UNSECURED LOAN CREDITORS WHO HAD CONFIRMED THEIR LOANS DID NOT HAD ANY CONTROL OVER THEIR TRANSACTION DONE IN THEIR NAMES.THE FAA REFERRED TO THE MATTER OF DAULAT RAM RAWATMULL OF THE APEX COURT.AB OUT THE LOAN OF JVA HE HELD THAT ON THE SPOT ENQUIRY WAS CONDUCTED,THAT FINDING OF THE INQUIRY WAS PROPERLY COMMUNICATED, THAT OPPORTUNITY WAS GIVEN TO THE ASSESSEE BY THE AO TO THE ASSESSEE TO AUGMENT ITS STAND BY ANY FURTHER SUPPORTING EVIDENCE,THAT TH E ASSESSEE HAD NOT BEEN PRODUCED ANY EVIDNENCE,THAT THE ASSESSEE DID NOT CHOOSE TO CROSS EXAMINE THE PARTY AND MERELY RELIED UPON THE LOAN CONFIRMATIONS FILED,THAT THE SUBSEQUENT ONUS HAD SHIFTED ON ASSESSEE WAS HEAVIER THAN HIS PRIMARY ONUS IN VIEW OF T HE OUTCOME OF THE ENQUIRY AND EVIDENCES COLLECTED BY THE AO,THAT THE ASSESSEE FAILED TO DISCHARGE, THAT DK HAD CLEARLY STATED THAT HE HAD PROVIDED ENTRIES,THAT IN THOSE TRANSACTION THERE WAS ONLY NAME LENDING AND SAME WERE NOT GENUINE LOAN TRANSACTIONS,T HAT THE LIST INCLUDED THE NAME OF 18 PARTIES,THAT ALL WERE HIS CLIENTS,THAT THE ASSESSEE ALSO COULD NOT DENY THAT BHANUSHALI WAS NOT A GOOD ACQUAINTANCES, THAT THE ASSESSEE HAD NOT ASKED FOR CROSS EXAMINATION OF THOSE PARTIES AND THE CA,THAT OUT OF TOTAL 18 PARTIES INQUIRIES WERE MADE IN SEVEN CASES,THAT IN BALANCE 11 CASES NO ENQUIRIES HAD BEEN CONDUCTED OR EVEN ATTEMPTED,THAT THE STATEMENT OF CA WAS CONTRADICTED BY AT LEAST THREE ASSESSEE S,THAT ADDITION MADE MERELY ON THE BASIS OF THE STATEMENTS OF THE DK COULD NOT BE SUSTAINED.HE REFERRED TO THE CASES OF MEHTA PAREKH & CO.(30ITR14),TARADEVI GOENKA (122 ITR 14), MOHANLALA M.PATEL(90 TTJ 57), SONA ELECTRIC CO.(152 ITR 507).HOWEVER,HE UPHELD THE ADDITION OF RS. 5 LAKHS APPEARING IN NAME OF JVA.WITH RE GARD TO THE AFFIDAVIT OF VB THE FAA HELD THAT THE ASSESSEE HAD NOT DENIED THAT HE WAS A GOOD ACQUAINTANCE,THAT DK HAD CLEARLY STATED THAT HE HAD DONE THE JOB OF PROVIDING ENTRY THROUGH VB,THAT THE AFFIDAVIT HAD BEEN FILED MUCH LATER,THAT THE AFFIDAVIT WAS AN AFTERTHOUGHT.ABOUT THE AFFIDAVIT OF 02.08.2012 OF DK THE FAA HELD THAT DK DID NOT MENTION WHAT WAS THE REASON FOR WITHDRAWING FROM HIS EARLIER STATEMENT,THAT IT WAS FILED IN 2012,THAT THE ASSESSEE CHOSE NOT TO CROSS - EXAMINE DK,THAT AFFIDAVIT WAS FILED DURING THE APPELLATE PROCEEDINGS,THAT NO COGNIZANCE OF THE SAME HAD TO BE TAKEN,THAT DK WAS SILENT ALMOST FOR NINE MONTHS,THAT THE ASSESSEE HAD SIMPLY RELIED UPON THE LOAN CONFIRMATIONS,THAT THE AO HAD STATED THAT IT HAD PURPOSELY CHOSEN NOT TO CROSS EXA MINE THOSE FOUR PERSONS WHO HAD GIVEN THEIR STATEMENT AS WELL AS ALSO HAD NOT ASKED FOR THE OPPORTUNITY TO EXAMINE DK.FINALLY, S HE CONFIRMED THE ADDITION OF 36.00 LACS (31 LACS + 5 LACS ),AS AGAINST THE ADDITION OF RS.3.35 CRORES MADE BY THE AO. WITH REGARD TO THE INTEREST DISALLOWANCE OF RS.40.37 LAKHS ,THE FAA DIRECTED THE AO THAT INTEREST PAID TO 14 CREDITORS ONLY SHOULD BE DISALLOWED. 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 6 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) ARGUED THAT THE CREDITORS OF THE ASSESSEE WERE GENUINE,THAT THERE WAS NO INVOLVEMENT OF CASH,THAT DK HAD RETRACTED HIS STATEMENT,THAT THE STATEMENT RECORDED DURING THE SURVEY, U/S/133 A OF THE ACT,HAD NO EVIDENTIAL VALUE,THAT INCOME COULD NOT BE ASSESSED ON A MERE RETRACTED STATEMENT IF THERE WAS NOT ENOUGH MATERIAL, THAT THE STATEMENT OF DK WAS WRONG AND CONTRADICTORY, THAT THE ASSESSEE HAD DISCHARGED HIS ONUS BY PROVING THE IDENTITY, CAPACITY AND GENUINENESS OF THE LENDERS, THAT IT HAD PAID INTEREST AND TDS WAS DEDUCTED,THAT COPY OF LOAN CONFIRMATION OF 77 PARTIES WERE FILED BEFORE THE AO, THAT NON - PRODUCTION OF PARTIES COULD NOT BE THE BASIS FOR ADDITIN, THAT INFERENCE OF SOME PARTIES COULD NOT BE APPLIED TO SOME PARTIES, THAT THE AO HAD NOT DISCHARGED THE BURDEN OF PROOF, THAT HIS ENTIRE ADDITION, WAS BASED ON THE STATEMENT OF DK,THAT NOT CORROBORATIVE EVIDENCE WAS PRODUCED BY THE AO IN SUPPORT OF THE HUGE ADDITION MADE BY HIM.DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THAT THE AO HAD MADE ON THE SPOT ENQUIRIES IN SOME CASES ,T HAT STATEMENT OF DK WERE REC ORDED, THAT 18 CREDITORS HAD ADMITTED THAT LOAN GIVEN TO THE ASSESSEE WAS ROUTED THROUGH DK , THAT THE AO HAD DIRECTED THE ASSESSEE TO PRODUCE THE CREDITORS BEFORE HIM, THAT IT DID NOT PRODUCE ANY OF HIS CREDITORS, THAT MERE FILING OF DOCUMENTS WAS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE LOANS, THAT ASSESSEE DID NOT ASK FOR ANY CROSS EXAMINATION,THAT PENALTY U/S. 271(1)(B) WAS IMPOSED BY THE AO FOR NON - COMPLIANCE, THAT ASSESSEE HAD NOT CALLED FOR CROSS EXAMINATION. 5. WE HAD HEARD THE RIVAL SUBMI SSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THERE WERE TOTAL 90 LOAN CREDITORS FROM WHOM UNSECURED CASH CREDIT AMOUNTING TO RS.3,35,00,000/ - HAD BEEN INTRODUCED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE ,THAT OUT OF THE 90 LOAN CREDITORS CONFIR MATIONS WERE SUBMITTED ONLY IN THE CASE OF 77 PARTIES AND FOR THE REMAINING 13 PARTIES CONFIRMATION WERE NOT FURNISHED DURING THE ASSESSMENT PROCEEDINGS,THAT DURING THE COURSE OF APPELLATE PROCEEDINGS OF THE REMAINING LOAN CONFIRMATION WERE FILED ALONG WITH OTHER SUPPORTING DOCUMENTS,THA T ENQUIRIES WERE CONDUCTED IN A FEW CASES, TO BE PRECISE FOUR IN NUMBER AND BASED ON THE STATEMENT GIVEN BY THOSE PARTIES ENQUIRIES UNDER SECTION 142(2) OF THE ACT,A SURVEY ACTION UNDER SECTION 133A OF THE IT ACT WAS CO NDUCTED ON 0 1.12. 2011 AT THE PREMISE OF DK BY THE DDIT (INVESTIGATION), UNIT IX (3), MUMBAI,THAT HIS STATEMENT WAS ALSO RECORDED, THAT IN HIS STATEMENT HE ADMITTED THAT HE HAD PROVIDED ENTRIES FOR LOANS IN LIEU OF CASH RECEIVED FROM THE ASSESSEE AND ALS O EXPLAINED THAT THE MODUS OPERANDI IS OF GIVING CHEQUES AND RECEIVING CASH BACK WHICH WERE THEN RETURNED TO THOSE PARTIES WHOSE NAMES ARE APPEARING AS UNSECURED CREDITORS IN THE BOOKS OF ACCOUNT OF THE APPELLANT,THAT DK ALSO STATED THAT ALL THOSE 18 PAR TIES WERE HIS CLIENTS AND THE JOB OF PROVIDING THE ENTRIES WAS DONE IN THE NAMES FOR THE REASON THAT THEY WERE HAVING REQUISITE BUILD UP CAPITAL,THAT HE PAID A COMMISSION OF 0.6% BY THE ASSESSEE , THAT ON THE BASIS OF THE STATEMENT GIVEN BY DK ADDITIONS OF RS.89 LACS WAS MADE WITH REGARD TO 18 PARTIES,THAT THE FAA UPHELD THE ADDITION OF RS.36 LAKHS AND DELETED THE REMAINING ADDITION , THAT THE FAA HELD THAT INTEREST PAID TO 14 PARTIES ONLY SHOULD BE DISALLOWED THAT WERE HELD TO BE NON - GENUINE . AS STATED EARLI ER,THE AO DID NOT MAKE ANY INQUIRY ABOUT 76 CREDITORS OUT OF THE 77 CREDITOR S . THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT NO INQUIRY WAS MADE AND HENCE THE ADDITION MADE BY THE AO FOR THOSE CREDITORS WAS NOT JUSTIFIABLE ,EXCP ET ONE CASE.IT IS SAID THAT 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 MATER IALITY OF EVIDENCES, IS THE BASIS FOR 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 7 DECIDING THE CASES FALLING UNDER SECTION 68.THE ASSESSEE HAD PRODUCED ALL THE REQUIRED DOCUMENTARY EVIDENCES AND DISCHARGED ITS ONUS AS FAR AS THOSE 76 CREDITORS ARE CONCERNED.THE AO DID NOT MAKE ANY FURTHER INQUIRY.SO ,IN OUR OPINION,ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.IN CASE OF REMAINING 14(JVA AND 13 CREDITORS ABOUT WHOM THE ASSESSEE FILED DETAILS BEFORE THE FAA)CREDITORS THE FAA HAD RIGHTLY HELD THAT IT HAD FAILED TO DISCHARGE THE INITIAL BURDE N.IN MATTERS REGARDING CASH CREDIT,THE ONUS OF PROOF IS NOT A STATIC ONE - THE INITIAL BURDEN OF PROOF LIES ON THE ASSESSEE.AMOUNT APPEARING IN THE BOOKS OF A/CS. OF THE ASSESSEE IS CONSIDERED A PROOF AGAINST HIM. BUT,IF IT PRODUCES EVIDENCES ABOUT IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE LENDER ONUS OF PROOF SHIFTS AGAIN TO THE REVENUE.IN THE MATTER BEFORE US,THE FAA - AFTER CONSIDERING THE REMAND REPORT AND REPLY OF THE ASSESSEE - FOUND THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE BURDEN CAST UPON IT BY THE PROVISIONS OF SECTION 68 OF THE ACT.ALL THOSE CREDITORS WERE FILING BELOW TAXABLE RETURN AND THERE WAS DISPUTE ABOUT DEDUCTION OF TAXES AS WELL AS FORM NO.15G/H. S H E HAS SPECIFICALLY HELD THAT IT HAD NOT PROVED THE GENUINENESS AND CREDIT WORTHINESS O F THE LENDERS. THE ASSESSEE DID NOT ASK FOR CROSS EXAMINATION OF DK.IN OUR OPINION,THE SO - CALLED RETRACTION BY HIM ALSO OF NO HELP TO THE ASSESSEE. HE IS A PROFESSIONAL AND HE VERY WELL KNEW AS TO WHAT STATEMENT HE HAD GIVE N .WITHDRAWING THE SAME AFTER A PER IOD OF NINE MONTHS,WITHOUT ASSIGNING ANY REASON FOR RETRACTION,GOES AGAINST HIM AND THE ASSESSEE.NEITHER DK NOR THE ASSESSEE HAS DENIED THEIR ACQUAINTANCE WITH VB.ALL THESE SURROUNDING CIRCUMSTANCES,IN OUR OPINION STRENGTHEN,THE STAND TAKEN BY THE FAA. S O, CONFIRMING H ER ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE WITH REGARD TO THE CREDITORS WHO HAD ADVANCE RS.36 LACS TO IT. IN OUR OPINION,THE FAA HAD RIGHTLY RESTRICTED THE INTEREST DISALLOWANCE. 6. WHILE DECIDING THE APPEAL OF THE ASSESSEE WE HAVE HELD THAT THE FAA HAD RIGHTLY DELETED THE ADDITION OF RS.2.99 CRORES.THE AO HAD MADE NO EFFORT TO VERIFY THE DETAILS FILED BY THE ASSESSEE BEFORE HIM.HE COULD HAVE AT LEAST MADE PRELIMINARY INQUIRY ABOUT THEM.HE MADE INQUIRY ABOUT FOUR PE RSONS DIRECTLY AND ON THE BASIS OF SUCH INQUIRY MADE AN ADDITION OF RS. 3.55 CRORES. PROVISIONS OF THE SECTION 68 DO NOT PERMIT SUCH ACTION - ON THE BASIS OF SPECIFIC INQUIRY GENERAL ADDITIONS CANNOT BE MADE.HONBLE RAJASTHAN HIGH COURT IN THE CASE OF R S R ATHORE (SUPRA) HAS CLEARLY LAID DOWN THE SAID PRINCIPLE.NO DISCREPANCY WAS FOUND BY THE AO IN THE DOCUMENTS FILED BY THE ASSESSEE.THEREFORE,UPHOLDING THE ORDER OF THE FAA,WE DECIDE THE FIRST LIMB OF THE FIRST GROUND OF APPEAL AGAINST THE AO. SECOND PART OF THE FIRST GROUND DEALS WITH DELETION OF INTEREST AMOUNT OF RS.40.37 LAKHS. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE,WE HAVE UPHELD THE DECISION OF THE FAA IN RESTRICTING THE INTEREST DISALLOWANCE.SECOND GROUND OF APPEAL IS ALSO DECIDED AGAINST THE AO . AS A RESULT,APPEAL S FILED BY THE ASSESSEE AND THE AO STAND DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE ,2015. 10 , 2015 SD/ - SD/ - ( /I. P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, / DATE: 10 .0 6 .2015 293 & 976 /13 PARTH ENTERPRISES ( 09 - 10 ) 8 JV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.