SANJAY PRAKASHMAL JAIN, MUMBAI V. ACIT 15(3), MUMBAI

ITA 3262/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2974 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 05-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2013
• Court: TRIBUNAL
• Department Lawyers: MRS BEENA SUBHASH
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH (JM) & SHRI B.R. BASKARAN (AM) I.T.A. NO. 3262 /MUM/ 20 1 3 (ASSESSMENT YEAR 200 9 - 1 0 ) SANJAY PRAKASHMAL JAIN C/O. D.C. BOTHRA & CO.(CAS) 297, TARDEO ROAD WILLE MANSION 1 ST FLO OR, OPP BANK OF INDIA NANA CHOWK MUMBAI - 400 007. VS. ACIT 15(3) MATRU MANDIR 1 ST FLOOR TARDEO ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) PAN NO . ADYPJ4763A ASSESSEE BY SHRI RAJKUMAR SINGH DEPARTMENT BY MRS. BEENA SUBHASH DATE OF HEARING 30.8 . 201 6 DATE OF PRONOUNCEMENT 16 . 9 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 28 - 03 - 2013 PASSED BY LD CIT(A) - 26, MUMBAI FOR ASSESSMENT YEAR 2009 - 10 CONFIRMING THE FOLLOWING ADDITION S MADE BY THE AO. (A) ASSESSMENT OF LOAN AS UNEXPLAINED CASH CREDIT RS.25.00 LAKHS (B) DISALLOWANCE OF INTEREST EXPENDITURE. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS THE PROPRIETOR OF M/S NEXUS IMPEX AND IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS, NON - FERROUS AND BASIC METALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED LOAN OF RS.25.00 LAKHS FROM M/S SAMKIT DIAMONDS. WITH REGARD TO THE ABOVE SAID LOAN, THE ASSESSEE FURNISHED CONFIRMATION LETTER OBTAINED FROM THE ABOVE SAID PARTY ALONG WITH COPY OF ITR, COPIES OF RELEVANT BANK STATEMENTS. THE AO NOTICED THAT THE BANK ACCOUNT OF M/S SAMKIT SHRI SANJAY PRAKASHMAL JAIN 2 DIAMONDS REVEALED THAT THE SAID CONCERN WAS HAVING FINANCIAL TRANSACTIONS WITH ANOTHER CONCERN NAMED M/S SEVEN STAR JEWELS . THE AO NOTICED THAT M/S SEVEL STAR JEWELS WAS HAVING MEAGRE CAPITAL AND IT WAS CARRYING OF HUGE FINANCIAL TRANSACTIONS OF ADVANCING LOANS. IT WAS FURTHER NOTICED THAT IT WAS HAVING REGULAR TRANSACTIONS WITH ENTITIES SUCH AS M/S MOXDIAM AND M/S MOREWEL IMPEX PVT. LTD. THE AO NOTICED THAT THESE TWO CONCERNS HAVE BEEN SURVEYED BY THE REVENUE AND THEY HAVE ADMITTED THAT THEY WERE PROVIDING ACCOMMODATION ENTRIES. ACCORDINGLY THE AO TOOK THE VIEW THAT THE ASSESSEE HAS AVAILED ONLY ACCOMMODATION ENTRIES AND ACCORDINGLY TOOK THE VIEW THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE TO PROVE GENUINENESS OF THE LOANS CANNOT BE RELIED UPON. ACCORDINGLY HE ASSESSED THE SUM OF RS.25.00 LAKHS OBTAINED AS LOAN FROM M/S SAMKIT DIAMONDS AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 3. THE AO ALSO NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE AGAINST THE LOAN TAKEN FROM M/S SAMKIT DIAMONDS (RS.54,863/ - ), M/S BASANT DIA JEWELLERS (RS.1,70,137/ - ) AND M/S NAVRANG STEEL CENTRE (RS.1,67,145/ - ). THE AO DISALLOWE D THE ABOVE SAID INTEREST EXPENDITURE ALSO. 4. THE LD CIT(A) DELETED THE DISALLOWANCE OF INTEREST EXPENDITURE PERTAINING TO M/S NAVRAJ STEEL CENTRE AND CONFIRMED THE REMAINING ADDITIONS. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE NOTICE THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION OF RS.25.00 LAKHS ONLY ON THE REASON THAT THE BANK ACCOUNT OF M/S SAMKIT DIAMONDS, FROM WHOM THE ASSESSEE HAD TAKEN THE ABOVE SAID LOAN, CONTAINED FINANCIAL TRANSACTIONS WITH M/S SEVEN ST AR JEWELS. THE AO HAS OBSERVED THAT THE SAID CONCERN WAS HAVING FINANCIAL DEALINGS WITH M/S MOXDIAM AND M/S MOREWEL IMPEX PVT. LTD, WHO HAD ADMITTED TO BE INDULGING IN PROVIDING ACCOMMODATION ENTRIES. SINCE M/S SEVEN STAR JEWELS WERE HAVING TRANSACTIONS WITH M/S SHRI SANJAY PRAKASHMAL JAIN 3 MOXDIAM AND M/S MOREWEL IMPEX PVT LTD AND SINCE M/S SAMKIT DIAMONDS WAS HAVING FINANCIAL TRANSACTIONS WITH M/S SEVEN STAR JEWELS, THE AO HAS DRAWN PRESUMPTION THAT THE LOANS ADVANCED BY M/S SAMKIT DIAMONDS TO THE ASSESSEE SHOULD BE ONLY ACCOMMODAT ION ENTRIES. 6. WE NOTICE THAT THE CONCLUSION DRAWN BY THE ASSESSING OFFICER DOES NOT HAVE ANY BASIS EXCEPT THE PRESUMPTION ENTERTAINED BY HIM. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN PLACED UPO N HIM U/S 68 OF THE ACT. BECAUSE OF THE REMOTE CONNECTION OF THE ASSESSEE WITH TWO ENTITIES, WHO HAD BEEN SURVEYED AND WHO HAD ADMITTED THE NATURE OF TRANSACTIONS, THE AO HAS DRAWN ADVERSE INFERENCES. THOUGH THE AO HAS TAKEN THE SUPPORT OF THE DECISION R ENDERED BY HONBLE SUPREME COURT IN THE CASE OF M/S SUMATI DAYAL VS. CIT (214 ITR 801) IN ORDER TO OBSERVE THAT THE DOCUMENTARY EVIDENCES SHOULD BE EXAMINED BY APPLYING THE TEST OF HUMAN PROBABILITIES, YET WE ARE OF THE VIEW THAT THE AO HAS FAILED TO SHOW THAT THE LOAN TRANSACTION WAS NOT REAL. THE QUESTION OF DOUBTING THE GENUINENESS OF THE DOCUMENTS FURNISHED BY THE ASSESSEE TO DISCHARGE THE BURDEN PLACED UPON THE ASSESSEE U/S 68 OF THE ACT SHALL ARISE ONLY IF IT IS ESTABLISHED THAT THE LOAN TRANSACTION WAS NOT REAL. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE CONCLUSION REACHED BY THE AO, WE ARE OF THE VIEW THAT THE AO HAS ARRIVED AT SUCH A CONCLUSION ONLY ON THE BASIS OF SURMISES AND CONJECTURES. ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ASSESSMENT OF RS.25.00 LAKHS MADE U/S 68 OF THE ACT. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THIS ADDITION. 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF INTEREST EXPENDITUR E. SINCE WE HAVE HELD THAT THE LOAN TAKEN BY THE ASSESSEE FROM M/S SAMKIT DIAMONDS CANNOT BE HELD TO BE NON - GENUINE, THE RELEVANT INTEREST EXPENDITURE IS ALLOWABLE. WITH REGARD TO THE DISALLOWANCE OF INTEREST EXPENDITURE GIVEN TO M/S BASANT DIA SHRI SANJAY PRAKASHMAL JAIN 4 JEWELS, W E NOTICE THAT THE ASSESSEE HAS TAKEN LOAN FROM THE ABOVE SAID CONCERN IN THE IMMEDIATELY PRECEDING YEAR AND THE SAID LOAN WAS ACCEPTED. HENCE, WE ARE OF THE VIEW THAT THE INTEREST EXPENDITURE PERTAINING TO THE SAME CANNOT BE DISALLOWED DURING THE YEAR UND ER CONSIDERATION. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THE ISSUE OF INTEREST EXPENDITURE PAID TO M/S SAMKIT DIAMONDS AND M/S BASANT DIA JEWELS AND DIRECT THE AO TO DELETE THE ADDITIONS. 8. IN THE RESULT, THE APPEAL FILED BY THE A SSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 16 .9 .2016 SD/ - SD/ - (MAHAVIR SINGH ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 9 / 20 1 6 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