SHRI RAJENDRA PRASAD AGRAWAL, Indore V. THE ADDL. CIT RANGE-1, Indore

ITA 327/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6082 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Unexplained cash credit; Loose papers; Question of law; Accommodation entries; Onus to prove
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO.327/IND/2015 A.Y. : 2007-08 SHRI RAJENDRA PRASAD AGRAWAL, ADDL. CIT, RANGE I, INDORE. VS INDORE. APPELLANT RESPONDENT PAN NO. ABHPA2573Q APPELLANTS BY : SMT. RICHA PARWAL, C. A. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R PER D.T.GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, INDORE, DATED 16.09.2014 FOR THE ASSESSM ENT YEAR 2007-08. DATE OF HEARING : 04 . 0 5 .2016 DATE OF PRONOUNCEMENT : 20 . 0 5 .2016 SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 2 2 2. THE FIRST GROUND IS OF GENERAL NATURE. 3. THE SECOND GROUND IN THIS APPEAL IS THAT THE LD. CI T(A) ERRED IN CONFIRMING THE ADDITION OF RS. 5,00,000/- U/S 68 OF THE INCOME-TAX ACT, 1961. IN RESPECT OF UNSECURED LOAN TAKEN FROM M/S. K.K.PATEL FINANCE COMPANY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS TAKEN UNSECURED LOAN OF RS. 5 LAKHS FROM ONE M/S. K .K. FINANCE LIMITED AND THE ASSESSEE HAS ALSO PAID INTE REST OF RS. 34,684/- FOR THE SAME. 5. THE AO WAS OF THE VIEW THAT THERE WAS A SURVEY U/S 133A WAS CONDUCTED ON THE BUSINESS PREMISES OF LUNKAD GROUP OF COMPANIES ON 02-05-2006 AS THEY WERE INDUL GED IN PRACTICE OF GIVING ACCOMMODATION ENTRIES OF SHARE A PPLICATION MONEY AND UNSECURED LOAN. THESE COMPANIES NAMELY M/ S. LUNKAD SECURITIES LTD., LUNKAD MEDIA AND ENTERTAINM ENT LTD., WEST END MANAGEMENT TECHNOLOGIES (P) LTD., RA JVEER MARKETING AND INVESTMENT LTD AND M/S LAGOON RESORTS (P) LTD. ARE SITUATED AT 13-RACE COURSE ROAD, INDORE. A LL THESE COMPANIES ARE BEING RUN IN ONE ROOM OF THE SAID SUR VEY SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 3 3 PREMISED BY SHRI VIJAY LUNKAD & HIS SONS SHRI SANJE EV LUNKAD AND SHRI RITESH LUNKAD. OTHER THAN THESE, FA MILY MEMBERS NAMELY SMT. SARLA LUNKAD, SMT. SNEHA LUNKAD , SMT. RACHNA LUNKAD AND STAFF MEMBERS NAMELY SHRI RA JESH PATEL AND SHRI GHANSHYAM JAGTAP ARE ALSO INVOLVED A S DIRECTORS. MODUS OPERANDI SHRI VIJAY LUNKAD, SHRI SANJEEV LUNKAD & SHRI RITESH LUNKAD FLOATED SEVERAL COMPANIES (REFER PARA 3) AND ASSOCIATED THEMSELVES, THEIR FAMILY AND STAFF MEMBE RS AS DIRECTORS. THROUGH THESE COMPANIES THEY STARTED THE ALLEGED BUSINESS OF PROVIDING ENTRIES OF UNSECURED LOAN, SH ARE APPLICATION MONEY, INVESTMENT IN REAL ESTATE FOR NE EDY PERSONS WHO ARE ACTUAL BENEFICIARIES: THESE PERSONS USED TO GIVE CASH EITHER DIRECTLY TO LUNKAD OR THROUGH MEDIATORS (REF ER PARA 4). THESE HUGE AMOUNT IN CASH SO RECEIVED WERE DEPOSITE D IN VARIOUS BANK ACCOUNTS (REFER PARA 5) OPENED IN THE NAME OF THESE COMPANIES. AFTER BEING ROUTED THROUGH ONE OR MORE BANK ACCOUNTS OF THESE COMPANIES THROUGH CHEQUES, THESE SUMS WERE FINALLY CLEARED IN THE BANK ACCOUNTS OF BENEFIC IARIES (REFER SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 4 4 PARA 7). LUNKADS USED TO CHARGE COMMISSION (REFER P ARA 6) ON ACCOUNT OF THESE ENTRIES RANGING FROM 2% TO 3% IN C ASH FROM THE BENEFICIARIES. AFTER THE NEED OF THE BENEFICIAR IES FOR THE ENTRY WAS OVER, THE REVERSE PROCESS STARTED. LUNKADS EITHER USED TO WITHDRAW CASH FROM THE BANK OR THE CHARGES R ECEIVED FROM THE BENEFICIARIES OR PAID CASH OUT OF CASH REC EIVED FROM OTHER BENEFICIARIES. THESE ALLEGED TRANSACTIONS WERE BEING CARRIED BY LUNKADS FROM THE LAST 8-10 YEARS. APART FROM HIS OWN COMPANIES; LUNKADS HAVE ALSO COND UCTED THESE ALLEGED TRANSACTIONS OF ENTRIES THROUGH SOME ASSOCIATE COMPANIES. THE RUBBER STAMP OF THESE ASSOCIATE COMP ANIES WERE ALSO FOUND AT SURVEY PREMISES. AT THE TIME OF SURVEY AND IN POST SURVEY INVESTIGAT ION, LUNKADS WERE NON-COOPERATIVE. THEY DID NOT ATTEND O R FILE ANY DETAILS. ABOVE FINDINGS ARE ILLUSTRATIVE IN NATURE AND MATTER IS UNDER FURTHER INVESTIGATION. DETAIL OF COMPANIES INVOLVED :- LUNKADS COMPANIES :- DURING THE SURVEY AND IN POST SURVEY INVESTIGATION DETAILS OF SEVERAL COMPANIES WERE FOUND, WHO WERE IN DULGED IN SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 5 5 ENTRY TRANSACTIONS. IN THESE COMPANIES SHRI VIJAY L UNKAD, SHRI SANJEEV LUNKAD, SHRI RITESH LUNKAD, THEIR FAMI LY AND STAFF MEMBERS WERE FOUND TO BE INVOLVED AS DIRECTOR S. THESE COMPANIES HAVE COMMON ADDRESS AND FAMILY MEMBERS & STAFF MEMBERS OF LUNKAD AS DIRECTORS, THAT IS WHY AT SEVER AL PLACES THE WORD LUNKAD GROUP HAS BEEN USED. THESE ALLEGE D COMPANIES ARE : S.NO. NAME OF COMPANY DIRECTORS CORRESPONDENCE / REMARKS REGD. OFFICE 01 LUNKAD SECURITIES LTD. SANJEEV LUNKAD / LUNKAD HOUSE 13- RITESH LUNKAD RACE COURSE INDORE 02 LUNKAD MEDIA & ENTERTAINMENT SANJEEV LUNKAD / LUNKAD HOUSE, 13- LTD. / LUNKAD REAL ESTATE LTD. SNEHA LUNKAD, RA CE COURSE, INDORE RACHNA LUNKAD 03 PARKSON SECURITIES LTD. 04 LAGOON RESORTS (P) LTD. VIJAY LUNKAD / LUNKAD HOUSE, 13- SHARAD DARAK RACE COURSE, INDORE 05 PARTH CREDIT & CAPITAL MARKER SANJEEV LUNKAD / 21-AMBER, M.G.ROAD, LTD. SANJAY BINDAL INDORE. 06 SAOKAR INVESTMENT & FINANCE VIJAY LUNKAD / G. LUNKAD HOUSE, 13- LTD. J AGTAP RACE COURSE, INDORE 07 HISTORIC ARTS & EXPORTS (P) LTD. VIJAY LUNKAD / G. LUNKAD HOUSE, 13- J AGTAP RACE COURSE, INDORE - 08 RAJVEER MARKETING & SANJEEV LUNKAD/ LUNKAD HOUSE, 13- INVESTMENT LTD. RITESH LUNKAD RACE COURSE, INDOR E 09 WEST-END MANAGEMENT VIJAY LUNKAD/SANJAY BINDAL LUNKAD HOUSE, 13- TECHNOLOGIES P.LTD. RACE COURSE ROAD 10 RAJVEERBIOTECH (P) LTD. SANJEEV LUNKAD/ LUNKA D HOUSE, 13- RITESH LUNKAD RACE COURSE, INDORE 11 PRATEEK REALITY (P) LTD. SANIEEV LUNKAD LUNKAD HOUSE, 13- RITESH LUNKAD RACE COURSE, INDORE 12 ALPINE EISEN LTD. SANJEEV LUNKAD/ LUNKAD HOUS E, 13- SNEHA LUNKAD RACE COURSE, INDORE 13 INDORE BIOSOFT (PVT) LTD. 14 RITESH INVESTMENT (P) LTD. VIJAY LUNKAD/ G. L UNKAD HOUSE, 13- J AGTAP RACE COURSE, INDORE .I SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 6 6 - 15 CELERITY CAPITAL MARKET & VIJAY LUNKAD / G. LUNKAD HOUSE, 13- FINVEST (P) LTD. JAGTAP RACE COURSE, INDORE 16 ALPINE AGROTECH LTD. SANJEEV LUNKAD / LUNKAD HOUSE, 13- SNEHA LUNKAD RACE COURSE, INDORE 17 ALPINE INFOSYS LTD. SANJEEV LUNKAD / LUNKAD HOUSE, 13- SNEHA LUNKAD RACE COURSE, INDORE 18 HIMALYA GRAH NIRMAN SAHAKARI SAMITI MARYADIT ASSOCIATE COMPANIES;- SIMILARLY, COMPANIES AS MENTIONED BELOW HAVE TAKEN VOLUMINOUS ENTRIES FROM LUNKAD GROUP OF COMPANIES A ND FINALLY ROUTED THESE ENTRIES TO THE ULTIMATE BENEFI CIARIES. THE PERSONS INVOLVED IN THESE COMPANIES ARE DARAK (SH ARAD DARAK), WHO ARE ASSOCIATED AS DIRECTORS THESE NAMES ALSO AP PEAR AT SEVERAL PLACES IN DAILY CASH RECEIPTS AND PAYMEN TS DETAILS FOUND DURING THE SURVEY. NAME OF COMPANY NAME OF DIRECTOR TRIMURTI FINVEST [P] LTD. SHARAD DARAK EAST - WEST FINVEST LTD. SHARAD DARAK JAYANT SECURITIES AND FINANCE KRISHNA KRINA HOLDINGS (P1 PURVI FINVEST PVT LTD, SHARAD DARAK K.K. PATEL FINANCE LTD. ANIL SAINI 4. MEDIATORS DURING SURVEY SEVERAL PAPERS RELATED TO DAILY HUGE CASH RECEIPTS AND PAYMENTS WERE FOUND AND IMPOUNDED. SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 7 7 ON PERUSAL OF THESE PAPERS, IT WAS FOUND THAT THESE CASH HAVE BEEN DIRECTLY RECEIVED FROM PARTIES (BENEFICIARIES) OR THROUGH MEDIATORS. SINCE, THERE ARE NUMEROUS ENTRIES OF CASH RECEIPTS FROM VARIOUS PARTIES/ MEDIATORS AND CASH PAYMENT/ DEPOSI T IN BANK ACCOUNTS, THE FEW ENTRIES WERE ILLUSTRATED IN A OS ORDER. LIST OF BANK ACCOUNTS. S.NO. NAME OF COMPANY BANK ACCOUNT NO. 01. LUNKAD SECURITIES LIMTED CENTURION BANK, HS BC BANK IDBI BANK 02 LUNKAD MEDIA & ENTERTAINMENT LTD. /LUNKAD REAL ESTATE LIMITED BANK OF RAJASTHAN, CETURION BANL 03 PARKS ON SECURITIES LTD. CENTURION BANK 04 LAZOON RESORTS RP) LTD. BANK OF RAJASTHAN 05 PARTH CREDIT & CANITAL MARKET LTD. CENTURION BANK 06 SAOKAR INVESTMENT & FINANCE LTD. CENTURION BANK BANK OF RAJASTHAN 07 HISTORIC ARTS & EXPORTS PVT.LTD .. BANK OR RAIASTHAN 08 RAJVEER MARKETING & INVESTMENT LTD. BANK OF RAJASTHAN 09 WEST-END MANAGEMENT TECHNOLOEIES RP) LTD. CENTURION BANK 10 RAIVEER BIOTECH RP) LTD. CENTURION BANK 11 PRATCEK REALITV RP) LTD . CENTURION BANK BANK OF RAIASTHAN 12 ALNINE EISEN LTD. 13 INDORE BIOSOFT PVT.LTD. CENTURION BANK 14 RITESH INVESTMENT IP) LTD. BANK OF RAJASTHAN 15 CELERITY CAN-TAL MARKET & FINVEST (P) LTD. BANK OF RAJASTHAN CENTURION BANK 16 ALPINE AAROTECH LTD. CENTURION BANK 17 ALPINE INFOSVS LTD. BANK OF RAIASTHAN CENTURIO N BANK 18 HIRNALVA GRAH NIRMAN SAHAKARI SAMITI MARVADIT. BANK OF RAJASTHAN, CENTURION BANK 6. COMMISSION ON ENTRIES: - ON PERUSAL OF DOCUMENTS IMPOUNDED DURING THE SURVEY , IT IS EVIDENT THAT ON THESE ALLEGED TRANSACTIONS, THE ASSESSEE HAS CHARGE D COMMISSION RANGING FROM 2% TO 3%. THE LIST OF THE COMPANY AND CORRESPO NDING CHARGE OF COMMISSION IS AS UNDER: - SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 8 8 S.NO. NAME OF THE COMPANY COMMISSION REMARKS ~ . 1 BUDHARIA SECURITIES & FINVEST LTD. 3% REF: PAGE 25-29, LPS 20, SURVEY DOCUMENT. 2. PARKSON HOLDING PVT LTD. 2.75% -D O- 3. LV. MODI SECURITIES LTD. 3% -DO- 4. RONIMA FINANCE & INVESTMENT PVT LTD 2.4% - DO - 5. KRISHNA KRINA HOLDINZS PVT LTD. 2.75% -DO- 6. LAGOON RESORTS PVT LTD. 2.75% - D O - AUTHENTICITY OF DOCUMENTS: - LOOSE PAPERS (PAGE-38 OF LPS-34) CONTAINING DETAILS OF PAYMENTS IN CASH WERE IMPOUNDED DURING THE SURVEY ON LUNKADS. CONSEQUENT TO THIS A SURVEY WAS FURTHER CONDUCTED ON THE BUSINESS PREMISES OF M/S. SACHIN LEASING (P) LTD. & M/S. CASTOR OIL & DERIVATIVE (P) LTD. THIS SURVEY WAS PARTICULARLY AI MED AT THE AMOUNT OF RS.26,68,580/- WHICH HAD CHANGED HANDS AT THE TIME OF TRANSACTION OF LAND AT BADIA KEMA, WHICH WAS PURCHASED BY SMT. SNEHA LUNKAD W/O SANJEEV LUNKAD & BY M/S. PARTH CREDIT & CAPITAL MARKETING PVT. LTD. (DIRECTOR SHRI SANJEEV LUNKAD). SHREE SACHIN SHARMA , DIRECTOR OF M/S. SACHIN LEASING (P) LTD., ADMITTED TO HAVE RECEIVED RS. 26,68,500/- AS UNACCOUNTED ADDITIONAL SALE CONSIDERATION OF AGRICULTURE LAND S OLD BY M/S. SACHIN LEASING (P) LTD TO COMPANIES/FAMILY MEMBERS OF LUNKAD. THIS ADMISSION BY MR. SACHIN SHARMA CONFIRMS AUTHENTICITY OF TRANSACTIONS & PAPERS FOUNDED AND IMPOUNDED DURING THE SURVEY . HOW ENTRIES HAVE ROUTED? SINCE THERE ARE SEVERAL BANK ACCOUNTS AND NUMEROUS ENTRIES HAVE ROUTED FROM CASH DEPOSIT TO ULTIMATE BENEFICIARIES, FEW BA NK ACCOUNTS WERE EXAMINED FOR THE SAKE OF MOVEMENT OF ENTRIES. THE C ASE DEPOSIT AND THE SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 9 9 MOVEMENT OF ENTRY TO FINAL BENEFICIARY ARE AS UNDER . DATE CASH RECEIPTS CHEQUES GIVEN TO PURVI K.K. EAST TRIMURTI 6/31 2000000 7/31 2000000 8/31 10,00,000 7,00,000 (WEST END) 9/3 10,00,000 (LUNKAD SECURITIES) 10/3 700000 90000,000 10,00000 5000000 (LUNKAD MEDIA 10,00000 (LUNKAD SECURITIES) 9,000,000 (RAJVEER MAKTG.) 11/3 500000 LUNKAD SECURITIES 650000 350000 (WEST-END) 13/0 50,0000 (WEST-END) 1000000 LUNKAD SECURITIES) 14/0 1500000 1000000 6000000 1000000 (RAJVEER BIO) 1000000 PARKSONS 400000(LUNKAD SECURITEIS) 300000 (LUNKAD SECURITIES 16/3 1000000 800000200000(ALPINE)AGRO) 200000(WEST-END) 17/3 1000000 1200000 500000(RAJVEER MKTG) THESE TRANSACTIONS APPEAR AT PAGE 17 OF LPS 11 ( SU RVEY DOCUMENT) ()----- ARE COMPANIES OF LUNKAD FROM WHERE CHEQUES WERE FINALLY GIVEN TO BENEFICIARY. NOTE: - PURVI STANDS FOR PURVI FINVEST PVT.LTD., KK STANDS FOR KRISHNA KRIPA HOLDINGS PVT.LTD., TRIMURTI STANDS FOR TRIMURTI FINVEST PVT.LTD., EAST STANDS FOR EAST-WEST FINVEST LTD. THE ABOVE CHART AS / SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 10 10 APPEARING IN THE SURVEY DOCUMENT CLEARLY INDICATES HOW CASH HAS MOVED FROM MEDIATOR / PARTIES TO THE ULTIMATE BENEFICIARY THROUGH THE COMPANIES OF LUNKADS. THUS THE MODUS OPERANDI IS VERY CLEAR AND SIMPLE. T HE WHOLE GROUP OPENED A SERIES OF BANK ACCOUNTS IN THE NAME OF COMPANIES WHOSE TAXABLE INCOME IS PEANUT. THEY STAR TED DEPOSITING CASH IN ONE BANK ACCOUNT (THIS IS CONFIR MED WITH THE HELP OF IMPOUNDED DOCUMENTS DURING THE COURSE O F SURVEY PROCEEDINGS IN THE LUNKAD GROUP AND AS REFER RED EARLIER). AFTER DEPOSITING CASH IN ONE ACCOUNT, TO GIVE IT A COLOR OF GENUINE TRANSACTION, THROUGH CHEQUE A WEB I S CREATED GIVING MULTIPLE ENTRIES IN MULTIPLE BANK AC COUNTS AND SHOWN IN THE RESPECTIVE COMPANIES EITHER - SHARE CAPITAL, SHARE PREMIUM OR UNSECURED LOANS. BUT WHEN ONE TRY TO SEE THESE TRANSACTIONS IN TOTALITY IT APPEAR S THAT IT IS A FACADE TO BRING THE UNACCOUNTED CASH AVAILABLE IN T HE HANDS OF VARIOUS IN THE SYSTEM. FROM THE ANGLE OF NATURE OF BUSINESS OF THE LOAN PROVIDER AND THE AMOUNT OF INCOME TAX THEY ARE PAYI NG, IT I~ CLEAR FROM THE P/L ACCOUNT OF ABOVE FOUR COMPANIES THAT SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 11 11 THESE INTEREST RECEIPT AND TAXABLE INCOME IS TOTALL Y MISMATCH. PARTICULARS INTEREST RECEIVED TAXABLE A.Y.05 - 06 TRIMURT I FINVSET P. LTD. RS.89.68 LAKH NIL PURVI SECURITIES LTD. RS. 61.39 L AKH NIL ---- EAST WEST FINVEST LTD. RS.66.03 L AKH (NOT ELIGIBLE NIL K.K. PATEL FINANCE LTD. RS. 45.45 LAKH RS. 11,813 / - IT IS IMPORTANT TO NOTE HERE THAT ASSESSEE HAS NOT DISCHARGED HIS PRIMARY ONUS OF PRODUCING THE DIRECTORS OF M/S. J AYANT SECURITIES LTD., IN WHOSE CASE ALSO INVOLVEMENT WITH LUNKAD GROUP IS EVIDENT FROM THE IMPOUNDED DOCUMENTS AS ST ATED ABOVE. CONCLUSION;- FROM THE ABOVE DISCUSSION/FINDINGS, IT IS CLEAR THA T THE LOAN TRANSACTIONS WITH M/S. K.K. PATEL FINANCE LTD., IS MERELY ACCOMMODATION ENTRIES. THE CASH HAS BEEN REC EIVED FROM THE ASSESSEE AND AFTER BEING ROUTED THROUGH VA RIOUS COMPANIES, THIS AMOUNT WAS GIVEN AS CHEQUES TO M/S. SANGHVI FOODS PVT. LTD. THE ASSESSEES SUBMISSION T HAT LOAN RECEIVED ARE GENUINE IS NOT AT ALL ADMISSIBLE. THE ATTENDANCE/NON CO-OPERATION AND FAILURE TO EXPLAIN THE SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 12 12 SOURCES OF THE FUND UTILIZED OF LOAN CREDITORS FURT HER CONFIRM THE MENS-REA. HENCE, THE AMOUNT OF RS.5 LAKH RECEIV ED FROM M/S. K.K. PATEL FINANCE LTD., IS TREATED AS UNEXPLAINED CASH CREDIT AND TO BE ADDED U/S 68 OF INCOME TAX ACT. DURING THE YEAR THE ASSESSEE HAS SHOWN PAYMENT OF IN TEREST ON THESE ACCOMMODATION ENTRIES AS WELL OF RS.34,684/-. SINCE, THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENT RIES ONLY; THE INTEREST PAID HAS BEEN RECEIVED BACK IN C ASH FROM THE ENTRY OPERATOR. HENCE, PAYMENT OF TOTAL INTERES T OF RS. 34,684/- ON THE LOAN ENTRY IS NOT ALLOWED AS BUSINE SS EXPENDITURE AND ADDED IN THE INCOME OF THE ASSESSEE . IN VIEW OF THE ABOVE REGARDING FAILURE ON THE PART O F ASSESSEE TO SATISFY AO AND THE CIRCUMSTANCES NARRATED ABOVE, IT IS VERY CLEARLY SHOWS THAT THE ASSESSEE COMPANY HAS FIL E INACCURATE PARTICULARS RESULTING IN THE CONCEALMENT OF INCOME AND, THEREFORE, I INITIATE PENALTY U/S 271(1 ) FOR RS. 5 LAKH AS LOAN AND RS. 34,684/- AS INTEREST ON THAT . EXPENSES ON ENTRIES :- AS DISCUSSED ABOVE IN PARA JB, ASSESSEE HAS INCURRE D EXPENSES IN CASH OUT OF BOOKS @ 5%FOR OBTAINING ENT RIES OF SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 13 13 SHARE CAPITAL FROM LUNKADS AND THEIR ASSOCIATE COM PANIES. THEREFORE, AN AMOUNT @ 5% OF RS. 5 LAKH I.E. EQUAL TO RS. 25,000/- IS HEREBY ADDED U/S 69A AS OUT OF BOOKS EXPENDITURE BY THE ASSESSEE. PENALTY U/S 271(1) IN ITIATED ON THIS ISSUE ALSO AS PER SATISFACTION RECORDED. 6. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS CONFIRMED THE ADDITION BY OBSERVING AS UNDER :- 6. GROUND NO. 6 OF APPEAL IS AGAINST ADDITION OF RS. 5 LAKH U/S 68 OF THE INCOME-TAX ACT, 1961. HELD AS UNEXPLAINED LOAN BY AO. THIS LOAN IS TAKEN FROM M/S. K.K. PATEL FINANCE LIMITED. ACCORDING TO AO, I N A SURVEY ACTION CONDUCTED AT PREMISES OF LUNKAD GROUP IT WAS FOUND THAT THEY ARE ROTATING HUGE UNACCOUNTED CASH OF VARIOUS BENEFICIARIES OR FELLOW ENTRY PROVIDES AND FINALLY GIVING ENTRIES OF LOAN/SHARE CAPITAL TO VARIOUS BENEFICIARIES. IN THE CASH BOOK SEIZED FROM LUNKAD GROUP SOME PART OF WHICH IS REPRODUCED IN ASSESSMENT ORDER IT COULD BE SEEN THAT AS PER POINT 3B REPRODUCED ON PAGES 7 & 8 OF THIS ORDER, AO OBSERVED THAT SOME COMPANIES SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 14 14 INCLUDING K.K. PATEL FINANCE LIMITED (ANIL SAINI) H AS TAKEN VOLUMINOUS ENTRIES FROM LUNKAD GROUP OF COMPANIES AND FINALLY ROUTED THESE ENTRIES TO ULTIMATE BENEFICIARIES. SINCE THESE FINDINGS PERTAI NS TO SAME ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007- 08 AND APPELLANT COULD NOT CONTROVERT SUCH FACTS EITHER BY FURNISHING ANY AFFIDAVIT OR RELEVANT BANK ACCOUNTS OF K.K. PATEL FINANCE LIMITED & THAT OF LUNKAD, HENCE SUCH ADDITION OF RS. 5 LAKH MADE U/S 68 OF THE INCOME-TAX ACT, 1961. IS CONFIRMED BECAUS E APPELLANT FAILED TO PROVE GENUINENESS AND CREDITWORTHINESS OF SUCH CREDITOR. GROUND NO. 6 OF APPEAL DISMISSED. 7. BECAUSE GROUND NO. 6 OF APPEAL ARE DISMISSED, HENCE GROUND NO. 7 &8 OF APPEAL ARE ALSO DISMISSED, BECAUSE SUCH GROUNDS ARE CONSEQUENTIAL TO GROUND NO. 6. GROUND NO. 7 IS ON DISALLOWANCE OF INTEREST OF RS. 34,684/- ON AFORESAID LOAN OF RS. 5 LAKH. GROUN D NO. 8 OF ADDITION OF COMMISSION BEING PAID ACCOMMODATION ENTRY OF THIS LOAN, WHICH IS CALCULAT ED SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 15 15 AT 5% OF SUCH LOAN I.E. 5% OF RS. 5,00,000/-. BOTH THESE GROUNDS BEING CONSEQUENTIAL TO GROUND NO.6, GROUND NOS. 7 & 8 OF APPEAL ARE ALSO DISMISSED. 7. LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS TAKEN LOAN FROM ONE K.K.PATEL FINANCE AND ASSESSEE PAID INTEREST OF RS. 34,684/-. THE ASSESSEE HAS TAKEN THE LOAN AND INTER EST WAS PAID ON IT. THE ASSESSEE HAS TAKEN LOAN FROM K.K .PATEL FINANCE. COPY OF ACCOUNT OF CREDITORS WAS FILED ON P AGES 20-29 OF THE PAPER BOOK. THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS FURNISHED ALL THE DETAILS AB OUT LOANS, NAME AND ADDRESSES OF CREDITORS, PAN NOS., C OPY OF ACCOUNTS FROM THE DATE OF ACCEPTANCE OF LOAN UPTO T HE DATE OF REPAYMENT OF LOAN, CONFIRMATIONS AND COPY OF BAN K ACCOUNT AND COPY OF ACKNOWLEDGEMENT OF ALL THE CREDI TORS. NO FURTHER ENQUIRY OR QUERY WAS RAISED REGARDING TH ESE UNSECURED LOANS. ALL OTHER LOANS EXCEPT LOAN FROM M /S. K.K. PATEL FINANCE LIMITED WERE TREATED AS GENUINE. THE DEPARTMENT HAS CONDUCTED THE SURVEY ON THE PREMISES OF THE LUNKAD GROUP AND ASSESSEE OBSERVED THAT THE GRO UP SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 16 16 WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES THROU GH ITS VARIOUS COMPANIES IN THE FORM OF LOAN OR SHARE APPLICATION MONEY AND M/S. K.K. PATEL FINANCE LIMIT ED WAS ONE OF THE ASSOCIATE OF LUNKAD GROUP. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTH ER SUBMITTED THAT NO INCRIMINATING MATERIAL WAS FOUND A T THE PREMISES OF LUNKAD GROUP, WHICH SUGGESTED AND INDICA TED THAT THE ASSESSEE HAS ANY NEXUS WITH THE GROUP AND H AD GIVEN CASH TO ANY OF THE LUNKAD GROUP OF COMPANY F OR OBTAINING UNSECURED LOANS. THE ASSESSEE HAS GIVEN N AMES AND ADDRESSES OF THE CREDITORS, PAN DETAILS, COPY O F ACCOUNT OF CREDITOR, COPY OF ACKNOWLEDGEMENT AND COP Y OF BANK STATEMENT OF THE CREDITOR. THE ASSESSEE IS A L IMITED COMPANY AND ALLOTTED PAN NO. AND REGISTERED WITH REGISTRAR OF COMPANIES AND IT FILED ITS RETURN OF I NCOME, WHICH PROVES THE IDENTITY OF THE CREDITOR. THE TRANS ACTION WAS ROUTED THROUGH BANKING CHANNEL, INTEREST HAVE BE EN PAID, TAX HAS BEEN DEDUCTED AND PROPER DISCLOSURE W AS MADE IN THE BOOKS OF BOTH THE PARTIES ALSO CONFIRMA TION ,OF PARTY, COPY OF BANK ACCOUNT OF CREDITOR PROVED THE SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 17 17 GENUINENESS OF THE TRANSACTION. THE COPY OF BANK AC COUNT SHOWS THAT THE CREDITOR HAS SUFFICIENT FUND IN THE B ANK ACCOUNT BEFORE ADVANCING LOAN OF RS. 5,00,000/- TO THE ASSESSEE. NO CASH OR CHEQUE HAS BEEN DEPOSITED IN T O THE ACCOUNT TO AFFECT THE LOAN TRANSACTION OF RS. 5 LAK HS ON 01.09.2006, WHICH PROVED THE CREDITWORTHINESS OF THE TRANSACTION. THE PRIMARY ONUS OF SECTION 68 HAS BEE N DISCHARGED BY THE ASSESSEE AS THE ASSESSEE HAS GIVE N ALL THE DETAILS. IF THE AO HAS ANY DOUBT REGARDING GENU INENESS, THEN HE SHOULD HAVE DONE FURTHER ENQUIRY. THE AO HA S TREATED THAT HIS CASH CREDIT IS UNEXPLAINED ONLY ON THE BASIS OF SURVEY CONDUCTED AT LUNKAD GROUP ON 02.05. 2006 AND NO FINDING HAS BEEN GIVEN FOR TREATING THIS TRA NSACTION AS UNEXPLAINED CREDIT. THE ASSESSEE WAS NOT GIVEN A NY OPPORTUNITY THAT LUNKAD GROUP WAS ASSOCIATES OF THE ASSESSEE. THEREFORE, THE APPEAL MAY BE ALLOWED. 8. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT SUBMITTED THE BANK ACCOUNT, CO PY OF ACCOUNT OF LOAN BEFORE THE AO AND CIT(A). WHEN THE ASSESSEE HAS NOT GIVEN ANY EVIDENCE, THEN HOW THE ID ENTITY, SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 18 18 CAPACITY AND GENUINENESS OF THE CREDITORS WERE EXPL AINED. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT THE ASSESSEE COMPANY IS ENTRY PROVIDER AND WHICH IS PROVED FROM THE SURVEY OF LUNKAD GROUP. THEREFORE, THE AO IS JUSTIFIED IN TREATING THE LOAN AS UNEXPLAINED. T HE AO IN THE ASSESSMENT ORDER HAS EXPLAINED THE MODUS OPERAN DI OF THE ASSESSEE. WHEN THE ASSESSEE DID NOT PROVIDE AFF IDAVIT OF RELEVANT ACCOUNT OF K.K. FINANCE LIMITED, THE CIT(A ) HAS RIGHTLY OBSERVED THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAD TAKEN THE LOAN ,OF RS . 5,00,000/- FROM M/S. K.K. PATEL FINANCE LIMITED. TH E ASSESSEE HAS SUBMITTED THE COPY OF LOAN ACCOUNT OF THE CREDITOR GIVING COMPLETE DETAILS OF PAN NOS. AND CO PY OF ACKNOWLEDGEMENT, WHICH IS ON PAGE 38 TO 40 OF THE PAP ER BOOK. WE FOUND THAT THE ASSESSEE HAS PROVED THE IDE NTITY OF THE CREDITOR BY FILING THE NAME AND ADDRESSES OF TH E CREDITOR AND PAN DETAILS. THE LOAN WAS OBTAINED FROM SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 19 19 LIMITED COMPANIES AND THAT HAS ALLOTTED PAN AND IT WAS REGISTERED WITH THE REGISTRAR OF COMPANIES AND FILED ITS ANNUAL RETURN AND INCOME TAX RETURNS, WHICH PROVES T HE IDENTITY OF THE CREDITOR. THE ASSESSEE HAS ALSO SUB MITTED THE COPY OF ACCOUNTS OF THE CREDITOR IN ASSESSEES BOOKS, WHICH IS ON PAGES 20-22. THE ASSESSEE HAS ALSO PRODU CED THE CONFIRMATION OF ACCOUNT BY M/S. K.K. PATEL FINA NCE LIMITED, WHICH IS ON PAGE 30, COPY OF THE BANK ACCOU NT OF THE ASSESSEE FOR REPAYMENT OF LOAN ON PAGE 31. THE ASSESSEE HAS ALSO FILED THE COPY OF ACCOUNT FROM TH E DATE OF ACCEPTANCE OF THE LOAN UP TO THE DATE OF REPAYMENT OF THE LOAN, CONFIRMATION AND COPY OF THE BANK ACCOUNT. CO PIES OF ACKNOWLEDGEMENT OF CREDITORS WERE FURNISHED. THE ASS ESSEE HAS FILED THE COPY OF BANK ACCOUNT OF THE CREDITOR, WHEREIN IT IS PROVED THAT IT HAD SUFFICIENT BALANCE OF RS. 34 LAKHS AND HE HAS GIVEN LOAN ON 01.09.2006, WHICH PROVES TH E CREDITWORTHINESS OF THE TRANSACTION. SECTION 68 OF T HE INCOME-TAX ACT, 1961, REQUIRES THAT THERE HAS TO BE CREDIT IN THE BOOKS MAINTAINED BY THE ASSESSEE. SUCH CRED ITOR HAS PUT A SUM DURING THE YEAR AND THE ASSESSEE OFFE RS NO SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 20 20 EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DIT OR EXPLANATION OFFERED BY THE ASSESSEE NOT IN THE OPIN ION OF ASSESSING AUTHORITIES SATISFACTORILY, THEN SUM SO C REDITED MAY BE CHARGED TO TAX AS INCOME OF THE ASSESSEES P REVIOUS YEAR. AS PER SECTION 68 OF THE ACT, ONCE THERE IS C REDIT IN THE BOOKS MAINTAINED BY THE ASSESSEE, THE PRIMARY O NUS IS ON THE ASSESSEE TO OFFER EXPLANATION AS TO THE NATU RE AND SOURCE OF THE CREDIT. WHEN THE ASSESSEE PRODUCED TH E IDENTITY OF THE CREDITOR, THE GENUINENESS OF THE TR ANSACTION WAS ESTABLISHED. THE PRIMARY ONUS, WHICH RESTED WITH T HE ASSESSEE TO DISCHARGE, BUT THE REVENUE DOES NOT SAT ISFY WITH THE SOURCE OF THE FUND IN THE HANDS OF THE ASSE SSEE. IT WAS THE REVENUE TO TAKE THE APPROPRIATE ACTION. THE BURDEN OF PROOF IN LOAN TRANSACTION, IT IS WELL SETT LED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEG ED LOAN TAKEN BY THE ASSESSEE WAS GENUINE TRANSACTION, THE INITIAL ONUS ALWAYS UPON THE ASSESSEE AND IF NO EXPL ANATION IS GIVEN OR EXPLANATION GIVEN BY THE ASSESSEE IS NO T SATISFACTORY, THE AO CAN DISBELIEVE THE ALLEGED TRA NSACTION OF A LOAN, BUT THE LAW IS EQUALLY SETTLED THAT IF TH E INITIAL SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 21 21 BURDEN IS DISCHARGED BY PRODUCING THE SUFFICIENT MA TERIAL IN SUPPORT OF LOAN TRANSACTION, THE ONUS IS UPON TH E AO AND AFTER VERIFICATION, HE CAN CALL FOR FURTHER EXP LANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT UPON THE ASSESSEE. HOWEVER, THE AO FAILED TO VERIFY THE SAME, THE ONUS IS DISCHARGED AND NO ADDITION CA N BE MADE. IN THIS CASE, THE ASSESSEE HAS PROVED THE IDE NTITY OF THE CREDITOR. THE ASSESSEE HAS PRODUCED BOOKS OF AC COUNTS, CONFIRMATION OF PARTY, COPY OF THE BANK ACCOUNT OF THE CREDITOR, PROVED THE GENUINENESS OF THE TRANSACTION . THE ASSESSEE HAD TAKEN LOAN OF RS. 5 LAKHS AND CREDITOR HAS SUFFICIENT FUNDS OF RS. 34 LAKHS PRIOR TO GIVING TH E LOAN OF RS. 5 LAKHS, THAT PROVES THE CREDITWORTHINESS. THERE FORE, IN OUR OPINION, THE LD. CIT(A) IS NOT JUSTIFIED IN HIS ACTION. IN THE CASE OF DY. CIT VS. ROHINI BUILDERS, (2002)256 ITR 360, WHEREIN THE HON'BLE GUJARAT HIGH COURT HAS HELD AS U NDER :- APPEAL TO HIGH COURT CASH CREDITS IDENTITY OF CREDITORS PROVED AMOUONTS RECEIVED BY ACCOUNT PAYEE SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 22 22 CHEQUES INMITIAL BURDEN OF PROVIGN CREDITS DISCHARGED SOURCE OF CREDITS NEED NOT BE PROVED FACT THAT EXPLANATION WAS NOT SATISFACTORY WOULD NOT AUTOMATICALLY RESULT IN DEEMING AMOUNTS AS INCOME OF ASSESSEE TRIBUNAL HOLDING AMOUNT REPRESENTING CASH CREDITS NOT INCLUDIBEL IN TOTAL INCOEM OF ASSESSEE JUSTIFIED NO SUBSTANTIAL QUESTION OF LAW INCOME-TAX ACT, 1961. , SS. 68, 260A. 10. WE, RESPECTFULLY FOLLOWING THE ABOVE JUDGME NT, HOLD THAT, IN THIS CASE, THE ASSESSEE HAS TAKEN THE LOAN OF RS. 5 LAKHS FROM M/S. K.K. PATEL FINANCE LIMITED AN D THE ASSESSEE HAS REPAID THIS LOAN TO M/S. K.K. PATEL FI NANCE BY ACCOUNT PAYEE CHEQUE. THEREFORE, LOOKING TO THE FAC TS OF THE CASE, WE FIND THAT NO ADDITION IS REQUIRED. THEREFO RE, WE SH RAJENDRA PD. AGRAWAL, INDORE VS. ADDL. CIT, RANG E I, INDORE, I.T.A.NO. 327/IND/2015 A.Y.` 2007-08 . 23 23 ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDI TION OF RS. 5 LAKHS AND WE ALSO DELETE THE ADDITION OF INTER EST PAID. 11. DURING THE COURSE OF HEARING, THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DID NOT ARGUE GROUN D NO.4. THEREFORE, IT IS DISMISSED. 12. IN THE RESULT, THE APPEAL IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 20 TH MAY, 2016. CPU*