SHREE SACHDHANAND DEVELOPERS, THANE V. ADDL CIT RG 3, THANE

ITA 3292/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7857 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUMAN RATNAM
• Keywords: Unexplained cash credit; Principle of natural justice; Accommodation entries
• Section: 143(3); 142(1); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM , , ITA NO. 3292 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 20 0 9 - 10 ) M/S SHREE SACHDHANAND DEVELOPERS, SHREEJI PALACIA, OPP.SWASTIK REGLIA, WAGH BILL ROAD, KAVESAR, GHODBUNDEER ROAD, THANE (W). / VS. ADDL. COMMISSIONER OF INCOME TAX - RANGE - 3, THANE. ( / APP ELLANT) ( / RESPONDENT ) ./ PAN : ABDFS7991N ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI RAJEEV KHANDELWAL /RE VENUE BY : DR.SUMAN RATNAM / DATE OF HEARING : 8. 2 .2017 / DATE OF PRONOUNCEMENT : 31. 3 .2017 / O R D E R PER RAJESH KUMAR, A. M: BY WAY OF THIS APPEAL, THE ASSESSEE IS CHALLENGING THE ORDER DATED 19.2.2015 PASSED BY THE LD.CIT ( A) - 2, THANE FOR THE ASSESSMENT Y EAR 200 9 - 10. 2. THE ISSUE RAISED IN GROUNDS OF APPEAL NO.1 AND 2 IS AGAINST THE CONFIRMATION OF ADDITION OF RS.1,28,00,000 / - BY THE FIRST APPELLATE AUTHORITY 2 ITA NO. 3292 /MUM/201 5 AS MADE BY THE AO IN THE ASSESSMENT ORDER AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INCOM E TAX ACT, 1961(THE ACT) IN RESPECT OF 31 PARTIES. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A DEVELOPER FILED E - RETURN ON 29.9.2009 DECLARING A TOTAL INCOME OF RS.2,52,25,076/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STA TUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE BALANCE SHEET OF THE ASSESSEE THAT THE ASSESSEE HAS SHOWN UNSECURED LOANS OF RS.1,80,00,000/ - OUT OF WHICH A LOAN S BY 31 CREDITORS WERE NOT GENUINE AND THE CREDITORS HA VE NO CREDITWORTHINESS . T HE AO ON THE BASIS OF INFORMATION FILED BY THE ASSESSEE QUA THE NAMES AND ADDRESSES OF THE CREDITORS, COP IES OF BANK ACCOUNTS, INCOME TAX RETURN S, OBSERV ED THAT THERE WERE CASH DEPOSITS AND CHEQUES TRANSFER ENTRIES IN THE BANK ACCOUNTS OF THE LENDERS AND ONLY THEREAFTER ISSUED CHEQUES IN FAVOUR OF THE ASSESSEE AND ALSO ALL THESE CREDITORS WERE HAVING INCOME BELOW THE TAXABLE LIMITS , THOUGH, THESE CREDITOR S WERE FILING INCOME TAX RETURN AND THUS THESE LOANS WERE NOTHING BUT MANIPULATIONS ONLY . THE AO MADE INDEPENDENT INQUIRIES AND ALSO RECORDED THE STATEMENT S OF THE FEW LENDERS WHO WERE FOUND TO BE LABO U RERS IN THE PAYROLL OF THE SUB - CONTRACTORS WORKING UNDER THE ASSESSEE DEVELOPERS. THE SAID LABOURERS /LOAN CREDITORS CONFIRMED TO HAVE OPEN ED THE BANK ACCOUNT S ON THE ADVICE OF THEIR EMPLOYER AND MONEY WAS DEPOSITED BY THE 3 ITA NO. 3292 /MUM/201 5 SAID EMPLOYER OUT OF THEIR SAVINGS AS CONFIRMED IN THE STATEMENT S GIVEN TO THE AO BY SIX LENDERS . THE PERSONS, WHO WERE EXAMINED, DENIED TO HAVE ANY INDEPENDENT SOURCE EXCEPT THE LABOUR EARNINGS AND THE MONEY WAS TRANSFERRED ON THE ADVICE OF THEIR EMPLOYER. THE AO DISCUSSED THE ISSUE OF UNSECURED LOANS OF RS.1,28,00,000/ - FROM 31 P ARTIES IN PARAS 4 TO 35 OF THE ASSESSMENT ORDER AND FINALLY CAME TO THE CONCLUSION THAT THE SAID LOANS W ERE NOT BE GENUINE AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS, CREDITWORTHINESS AND IDENTITY OF THE CREDITORS AND HENCE ADD ED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT U/S 143(3) OF THE ACT V IDE OR DER DATED 28.12.2011 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,80,25,080/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LD.CIT(A). DURING THE APPELLATE PROCEEDINGS BEFORE THE LD.CIT(A), THE REMAND REPORT WAS CALLED FOR FROM THE AO WHICH WAS SUBMITTED VIDE LETTER DATED 3.1.2013. WHILE CALLING UPON THE REMAND REPORT, THE FAA FORWARDED CERTAIN ADDITIONAL EVIDE NCES LIKE, CONFIRMATION LETTERS ALONG WITH THE IT RETURN S ETC AND ALSO DIRECTED TO EXAMINE THE REMAINING 25 LOAN CREDITORS ON THE SAME LINES AS WAS DONE DURING THE ASSESSMENT PROCEEDINGS IN RESPECT OF 6 LOAN CREDITORS. DURING THE APPELLATE PROCEEDINGS, TH E LD.AR SUBMITTED BEFORE THE FAA THAT THE AO HAS NOT BOTHERED TO EXAMINE DETAILS SUBMITTED BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS , DESPITE THE FACT 4 ITA NO. 3292 /MUM/201 5 THAT ALL THE 25 CREDITORS WERE ASSESSED TO TAX IN THE SAME RANGE. FINALLY, THE FAA AFTER CONS IDERING THE SUBMISSION OF THE APPELLANT AS REPRODUCED IN PARAS 6 AND 7 OF THE APPEAL ORDER DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 8.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, CASE LAWS RELIED UPON AND THE FACTS OF THE CASE. THEREFORE, I PROCEED TO DECIDE THE APPEAL OF THE APPELLANT. I) THE UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT CAN TAKE PLACE ONLY WHEN THE APPELLANT FAILED TO PROVE THE FOLLOWIN G: A) IDENTITY B) GENUINENESS C) CREDITWORTHINESS II) THE AO HAS CONDUCTED INQUIRIES IN THE CASES OF 6 LOAN CREDITORS AND FOUND THAT THEY WERE NOT IN A CAPACITY TO LEND MONEY, THEREFORE, THEIR CREDITWORTHINESS HAVE NOT BEEN PROVED. IT WAS ALSO OBSERV ED THAT CHEQUES WERE DEPOSITED AND CASH WERE WIT HDRAWN SUBSEQUENTLY FROM THE BANK ACCOUNTS. THESE SIX (6) LOAN CREDITORS STATEMENTS WERE RECORDED U/S.131 OF THE ACT AND IN THE COURSE OF THIS PROCEEDINGS U/S.131 IT WAS ESTABLISHED THAT THESE 6 PARTIES ARE B ASICALLY GIVING ACCOMMODATION. IN THE REMAINING 25 LOAN CREDITORS ALSO, THE AO DEPUTED THE INSPECTOR AND CARRIED OUT THE INVESTIGATION FROM THE BANKS AND OBSERVED THESE LOAN CREDITORS ALSO HAVE NO CREDITWORTHINESS. THE BRIEF DETAILS OF THESE SIX(6) PARTIES INCLUDING REMAINING 25 PARTIES ARE DISCUSSED BELOW: SR. NO. NAME OF LOAN CREDITORS AMOUNT(RS.) REMARKS 1 AMBALAL ARJAN PATEL 4,00,000 CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. STATEMENT RECORDED U/S.131, PROVES THAT HE WAS A LABOUR SUPERVISOR A T THE SITE OF APPELLANT; SOURCE OF LOAN ADVANCED NOT EXPLAINED. HE WAS EARNING A MEAGER SALARY OF RS.15,OOO 2 VINOD KARMSHI DHOLUL 3,00,000 R/I OF RS.1,62,030/FILED.CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED,. STATEMENT RECORDED U/S.131, PROVES THAT HE WAS A LABOUR SUPERVISOR AT THE SITE OF APPELLANT; SOURCE OF LOAN ADVANCED NOT EXPLAINED. HE WAS EARNING A MEAGER SALARY OF RS.15,OOO 5 ITA NO. 3292 /MUM/201 5 3 NITIN I. MAKANI AND NITIN MAKANI (HUF) 6,25,000 5,00,000 R/I OF RS.L,47,911 AND RS.L,48,848/ - FILED BY NITIL I MAKAN I AND NITIN I, MAKANI (HUF) RESPECTIVELY. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. STATEMENT RECORDED U/S.131, PROVES THAT HE WAS A PETTY LABOUR CONTRACTOR AT THE SITE OF APPELLANT; SOURCE OF LOAN ADVANCED NOT EXPLAINED. 4 DINESH POKER (HUF) 7,00,00 0 R/I OF RS.1,48,990/ - FILED.CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED,. STATEMENT RECORDED U/S.131, PROVES THAT HE WAS A LABOUR SUPERVISOR AT THE SITE OF APPELLANT; SOURCE OF LOAN ADVANCED NOT EXPLAINED. HE WAS EARNING A MEAGER SALARY OF RS.12,OOO 5 A MRUTLAL PETHABHAI PATEL (HUF) 3,75,000 HE WAS EARNING A MEAGER SALARY OF RS.12,OOO/ - . STATEMENT RECORDED U/S.131, SHOWS THAT HE WAS NOT AWARE OF THE ENTIRE TRANSACTIONS.. SOURCE OF LOAN ADVANCED NOT EXPLAINED. 6. SAROJ VASANT BHIMANI 4,00,000 CASH WERE D EPOSITED BEFORE LOAN WAS ADVANCED. STATEMENT RECORDED U/S.131, SHOWS THAT SHE WAS A COOK EARNING ONLY RS.3,000/ - PM. SOURCE OF LOAN ADVANCED NOT EXPLAINED. 7 PRAKASH M DHOLU 3,00,000 R/I OF RS.1,42,866/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCE D. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH P.M.DHOLU. LOAN TRANSACTION IS NOT GENUINE. 8 AMRUTLAL S PATEL R/I OF RS.1,41,108/ - FILED, CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH A. S. PATEL 9 N.S. CHHABHAIYA (HUF) 5,00,000 R/I OF RS.1,44,587/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY A CCOUNTS AND CHEQUES ISSUED THROUGH N.S. CHHABHAIYA (HUF) 10. MAGANLAL D PATEL 2,50,000 R/I OF RS.1,48,250/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH M D PATEL 11 REENA KAMLESH PATEL 2,50,000 R/I OF RS.1,77,269/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH M D PATEL 12. BHARAT MANGAL PATEL 5,00,000 R /I OF RS.1,44,433/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH M D PATEL 13. LAKHAMSHI K PARASIYA (HUF) 2,50,000 R/I OF RS.1,46,604/ - . CASH WERE DEPOSI TED BEFORE LOAN WAS ADVANCED. 14 ASHVIN PATEL (HUF) 5,00,000 R/I OF RS.1,41,521/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH A K PATEL(HUF) 15. VINO D K CHAUHAN 4,00,000 R/I OF RS.1,1,05,693/ - . CASH WERE DEPOSITED BEFORE LOAN WERE DEPOSITED BY THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH V K 6 ITA NO. 3292 /MUM/201 5 CHAUHAN 16 ASHOK CHHABHAIYA (HUF) 5,00,000 R/I OF RS.1,45,951/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE THE CASH WERE DEPOSITED BY THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH A K CHHABHAIYA(HUF) 17. VISHANJI B PATEL 5,00,000 R/I OF RS.L,31,254/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WER E DEPOSITED BY THIRD PARTY AND CHEQUES ISSUED THROUGH VISHANJI B. PATEI 18. AMRUTLAL N PATEL 5,00,000 R/I OF RS.1,55,458 FILED/ - : CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THIRD PARTY AND CHEQUES ISSUED THROU GH AMRUTLAL N PATEL 19 JAYANTI BHIMANI 3,00,000 R/I OF RS.1,39,542/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED IN THE THIRD PARTY ACCOUNTS AND CHEQUES ISSUED THROUGH JAYANTI BHIMANI 20. NIRMALA M LIMBANI 2,50,000 R/I OF RS.1,68,818/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH NIRMALA M LIMBANI 21. KETAN J BHAGAT 4,00,000 R/I OF RS.1,34,890/ - FILED. CASH WERE D EPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH KETAN J BHAGAT 22 DAMYANTI M PAHUJA 6,00,000 R/I OF RS.1,76,160/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH DAMYANTI M PAHUJA 23 HIMMATLAL JOSHI (HUF) 2,00,000 R/I OF RS.1,37,271/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PAR TY AND CHEQUES ISSUED THROUGH HIMMATLAL JOSHI (HUF) 24 DAYALAL G PATEL 5,00,000 R/I OF RS.1,34,462/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH DAYALAL G PATE L 25. PRAFUL D POKAR 4,00,000 R/I OF RS.1,33,643/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH DAMYANTI M PAHUJA TO PRAFUL D POKAR TO APPELLANT 26. KIRIT DEV JI THAKKAR (HUF) 5,00,000 R/I OF RS.1,61,504/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH KIRIT DEVJI THAKKAR (HUF) TO APPELLANT 27. DIMPLE KANTILAL CHHADWA 2,50,000 R/I OF RS.1,05,176/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH KIRIT DEVJI THAKKAR (HUF) TO DOMPLE KANTILAL CHHADWA TO APPELLANT 28 SOHANLAL P JAI N (HUF) 5,25,000 R/I OF RS.1, 47,610/ - - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES 7 ITA NO. 3292 /MUM/201 5 ISSUED THROUGH KIRIT DEVJI THAKKAR (HUF) TO SOHANLAL P JAIN TO APPELLANT 29 SHIVUBHA M JA DEJA 2,50,000 R/I OF RS.1, 48,558/ - - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH SHIVUBHA M JADEJA TO APPELLANT 30 SHITAL JITENDRA PATEL 4,50,000 R /I OF RS.1, 78 ,790/ - FILED. CASH WERE DEPOSITED BEFORE LOAN WAS ADVANCED. IN THIS CASE, THE CASH WERE DEPOSITED BY THE THIRD PARTY AND CHEQUES ISSUED THROUGH SHITAL JITENDRA PATEL TO APPELLANT. AO HAS CARRIED OUT A COMPLETE INVESTIGATION AND HAS PROVED THAT THESE LO AN CREDITORS DO NOT HAVE ANY CREDITWORTHINESS AND FURTHER ESTABLISHED THAT, THESE LOAN CREDITORS WERE PROVIDING ACCOMMODATION ENTRIES, ROUTING UNACCOUNTED MONEY OF THE APPELLANT. IN VIEW OF THE ABOVE STATED FACTS, THE ADDITION MADE BY THE AO OF RS.1,28,O O,OOO/ - AS UNEXPLAINED CASH CREDIT U/S.68 OF THE IT.ACT, IS CONFIRMED AND THE APPEAL OF THE APPELLANT IS REJECTED. 5 . THE LD.AR VEHEMENTLY SUBMITTED BEFORE US THAT THE ORDER OF THE LD. CIT(A) IS WRONG AND AGAINST THE FACTS ON RECORD. THE LD.AR ARGUED TH AT THE ASSESSEE HAS BORROWED MONEY FROM 31 PARTIES WHO HAPPEN ED TO BE EMPLOYEES OF THE ASSESSEE S SUB - CONTRACTOR WHO WERE HAVING PAN , FILING INCOME TAX RETURN S , HAVE BANK ACCOUNT S ETC WHICH WERE FILED BEFORE THE AO AND THE AO FOUND THAT NONE OF THE INFORMA TION GIVEN BY THE ASSESSEE WAS EITHER FALSE OR FABRICATED. THE LD AR SUBMITTED THAT IT WAS CUSTOMARY IN THE BUSINESS OF DEVELOPERS THAT THE LABOUR CHARGES WERE EITHER PAID WHEN THESE LABOURERS GO TO THEIR NATIVE PLACES. BUT IN THE CASE OF THE ASSESSEE THES E LABOURERS WERE HIRED THROUGH SUB - CONTRACTORS AND WERE PAID ACCORDINGLY. SO WHEN THE ASSESSEE WAS IN NEED OF FUNDS THE MONEY USED TO BE BORROWED FROM THESE LABOURERS WHICH USED TO BE ARRANGED BY THE SUBCONTRACTORS. THE 8 ITA NO. 3292 /MUM/201 5 LD AR SUBMITTED THAT THE AO DOUBTED AND ADDED THE ENTIRE AMOUNT OF LOAN S ON THE BASIS OF EXAMINATION OF ONLY SIX PARTIES/CREDITORS. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE ALSO PAID INTEREST ON THE UNSECURED LOANS RIGHT FROM THE ASSESSMENT YEAR 2009 - 10 AND ALSO IN THE SUBSEQUENT Y EAR S WHICH HAS BEEN ALLOWED BY THE REVENUE IN THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12. SO MUCH SO THAT THE INCOME TAX AUTHORITIES HAVE ALSO ALLOWED THE INTEREST PAID ON THESE UNSECURED LOANS DURING THE ASSESSMENT YEAR 2009 - 10 THEREBY ACCEPTING THE FACTS THAT THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST ON BORROWINGS MADE FROM THESE 31 PARTIES . IT WAS ALSO SUBMITTED BEFORE US BY THE LD.AR THAT THE INVESTIGATION S CARRIED OUT BY THE INSPECTOR WAS NOT CONFRONTED TO THE ASSESSEE BEFORE MAKING THE ADDITION QUA THESE LOANS AND THEREFORE THE SAID EVIDENCE S WERE USED AGAINST THE ASSESSEE WITHOUT ALLOWING CROSS - EXAMINATION OF THE CREDITOR S WHO GAVE ADVANCES TO THE ASSESSEE WHICH WAS IN GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. IT WAS ARGU ED THAT HOW C OULD THE ADDITION S FOR THE MONEY BORROWED FROM VARIOUS PARTIES COULD BE MADE WHEN THE AO ALLOWED THE INTEREST PAID TO THE SAID PARTIES IN T HE CURRENT YEAR AND ALSO IN THE SUBSEQUENT YEARS EVEN IN THE ASSESSMENT MADE UNDER SECTION 143(3) O F THE ACT. 6 . ON THE OTHER HAND , THE LD. DR STRONGLY RELIED ON THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT THE BANK ACCOUNT S OF THE LENDERS WERE 9 ITA NO. 3292 /MUM/201 5 OPENED FEW DAYS PRIOR TO THE LENDING OF THE MONEY TO THE ASSESSEE AND NEXUS WAS CLEARLY ESTABLISHED AS 3 TO 4 TIMES CASH WERE BESIDES CHEQUE CLEARINGS AND THEREAFTER THE ENTIRE MONEY WAS GIVEN AS ADVANCED TO THE ASSESSEE AS UNSECURED LOANS. THE LD. DR SUBMITTED THAT MERE ACCEPTANCE OF PAYMENT OF INTEREST ON THE SE LOAN S BY THE REVEN UE AUTHORITIES WOULD NO T AUTOMATICALLY PROVED THE EXISTENCE OF THREE INGREDIENTS I.E. IDENTITY , CREDITWORTHINESS AND GEN UINENESS OF THE TRANSACTIONS AND THEREFORE THE ADDITION AS MADE BY THE AO AND CONFIRMED BY THE FAA SHOULD BE UPHELD BY DISMISSING THE APPEAL OF THE ASSE SS E E. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND VARIOUS CASE LAW S RELIED UPON BY THE ASSESSEE . WE FIND FROM THE RECORD THAT THE MONEY HAS BEEN BORROWED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FROM 31 PARTIES WHO WERE EMPLOYED WITH T H E SUB - CONTRACTOR ENGAGED BY THE ASSESSEE. IT IS ALSO UNDISPUTED FACT THAT THE ALL THESE PERSONS WERE ASSESSED TO INCOME TAX AND FILING INCOME TAX RETURN EVERY YEAR WHICH WERE AVAILABLE BEFORE THE AO. HOWEVER, THE AO EXAMINED SIX PERSONS ONLY AND ACCORDINGLY MADE ADDITION BY FORMING THE OPINION THAT THE LOAN S TAKEN BY THE ASSESSEE WERE NON - GENUINE AND BOGUS. IT IS ALSO UNDISPUTED FACT THAT THE AO HAS ALLOWED INTEREST ON THESE BORROWINGS AMOUNTING TO RS.7,78,282 / - DURING THE YEAR . WHILE MAKING THE ADDITION OF 10 ITA NO. 3292 /MUM/201 5 MONEY BORROWED FROM THESE PARTIES AS BEING BOGUS AND NON - GENUINE. S IMILAR DEDUCTION IN RESPECT OF INTEREST ON THESE UNSECURED LOANS WAS AL SO ALLOWED IN THE SUBSEQUENT YEARS . NOW IT IS VERY STRANGE THAT HOW THE AO HAS ACCEPTED THE TRANSACTION IN PART BY ALLOWING THE INTEREST ON THESE LOANS WHILE MAKING THE ADDITION FOR THE AMOUNT OF LOANS BY TREATING THE SAME AS N O N - GENUINE AND BOGUS UND ER SECTION 68 OF THE ACT. MOREOVER, THESE LOANS WERE REPAID BY ACCOUNT PAYEE CHEQUES IN THE SUBSEQUENT YEARS AND NO MORE OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE ALSO NOTE THAT T HE AO DEPUTED INCOME TAX I NSPECTOR TO CARRY OUT FURTHER INVE STIGATION AND VERIFICATION OF THESE LOAN CREDITORS A ND RECORDED THE STATEMENT S OF SIX OUT OF 31 PARTIES BUT DID NOT CONFRONT THE STATEMENT S OF THESE SIX PARTIES TO THE ASSESSEE NOR WAS THE CROSS - EXAMINATION OFFERED TO THE ASSESSEE OF THESE SIX PARTIES TH EREBY VIOLATING THE PRINCIPLE OF NATURAL JUSTICE AS THE ADDITION U/S 68 WAS MADE BY THE AO WHILE RELYING ON THE IMPUGNED MATERIAL WITHOUT PUTTING THE SAME BEFORE THE ASSESSEE FOR REBUTTAL. THE CONFIRMATION OF THESE CREDITORS, PAN, IT RETURNS, ADDRESSES W ERE ALSO FILED BEFORE THE AO . THE AO ALSO FAILED TO PROVE THAT THE MONEY PASSED ON FROM THE ASSESSEE INTO THE BANK ACCOUNT OF THESE CREDITORS. FROM THE FACTS HEREINABOVE IT IS CLEAR THA T THE IDENTITY OF THE CREDITOR S HAVE NOT BEEN DOUBTED WHEREAS THE CRE DITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE LENDERS SEEMS TO BE DOUBTED WHICH BECOMES MEANINGLESS AND ABSURD IN THE PRESENT CASE AS T HE AO HAS ALLOWED INTEREST ON THE BORROWED FUNDS IN THE CURRENT YEARS AND ALSO 11 ITA NO. 3292 /MUM/201 5 IN THE SUBSEQUENT YEARS AND THEREF ORE THE ORDER OF THE LD.CIT(A) CONFIRMING THE ADDITION U/S 68 IN RESPECT OF 31 CREDITORS IS NOT CORRECT AND CANNOT BE SUSTAINED. WE HAVE THEREFORE LEFT NO OPTION BUT TO SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 8 . IN TH E RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAR , 2017. SD SD ( /MAHAVIR SINGH ) ( / RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 31. 3 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI