BHAGATRAM GODHWANI , MUMBAI V. ITO - 10(3)(3), MUMBAI

ITA 364/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7858 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC-1
• Assessment Year: 2009-2010
• Appeal Filed On: 22-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Unexplained cash credit; Period of limitation; Source of fund; Accommodation entries; Retraction; Sham transactions
• Section: 147; 131; 68; 143(3); 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER) ITA No. 364/MUM/2021 Assessment Year: 2009-10 & ITA No. 365/MUM/2021 Assessment Year: 2012-13 Bhagatram Godhwani, 165, 5-B, Sanjay Building No. 5, Mital Industries Estate, Sakinaka, Andheri East, Mumbai-400059. Vs. Income Tax Officer-10(3)(3), Aayakar Bhavan, 2 nd floor, M.K. Road, Mumbai-400020. PAN No. AABPG 3339 D Appellant Respondent Assessee by : Mr. Anil Thakrar, AR Revenue by : Mr. Brajendra Kumar, DR Date of Hearing : 02/02/2022 Date of pronouncement : 28/02/2022 ORDER PER OM PRAKASH KANT, AM These two appeals by the assessee are directed against two separate orders both dated 28/02/2020 passed by the Ld. Commissioner of Income Tax (Appeals)-17, Mumbai [in short the Ld. CIT(A)] for assessment year 2009-10 and 2012-13 respectively. As common issue of dispute is involved in both these appeals, same were heard together and disposed off by way of this consolidated order for convenience. Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 2 ITA No. 364/MUM/2021 Assessment Year: 2009-10 2. First we take up the appeal of the assessee for assessment year 2009-10. The grounds raised by the assessee are reproduced as under: 1. The Ld. Assessing Officer is erred in adding sum of ₹25,00,000/- u/s 68 of the Income Tax Act only based on information from Investigation Wing & Third party information without proving that the cash has changed hands. 2. The Ld. CIT(A) is also erred in conforming addition without appreciating the fact that, identity, genuineness & capacity of the lenders were proved by the assessee at the time of assessment. 3. The brief facts for adjudicating the issue in dispute are that the assessee is an individual and filed his return of income declaring total income of ₹7,80,310/-. In the assessment proceedings under section 143(3) read with section 147 of the Income Tax Act, 1961 (in short ‘the Act’), the total income was assessed at ₹32,80,310/- thereby making addition of ₹25 lakh on account of unsecured loans treated as unexplained cash credit under section 68 of the Act in respect of following parties: Serial No. Name of the party Amount 1. Mohit International Rs, 10,00,000/- 2. Jasoda Exports Rs. 5,00,000/- 3. Natasha Enterprises Rs. 10,00,000/- 3.1 The Ld. CIT(A) also upheld the addition. Aggrieved, assessee is in appeal before the Tribunal, raising the grounds as reproduced above. 4. At the outset, we find that the registry has pointed out a delay of 322 days in filing the appeal. The Ld. counsel of the assessee referred to the application filed for condoning the delay along with the affidavit filed by the assessee and Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 3 submitted that the delay was occurred due to old age of the assessee and the pandemic situation. The Ld. counsel of the assessee submitted that appeal was due to be filed after 28/03/2020, but due to lock down as a result of Covid-19, the accountant of the assessee could not approach him (i.e. the assessee) and thereafter he resigned. The Ld. counsel submitted Hon’ble Supreme Court vide order dated 19/07/2021 in miscellaneous application No. 665/2021 in SMW (C) No. 3/2020 has held that in computing the period of limitation for any suit, appeal, application or proceedings, the period from 15/03/2020 till 14/03/2021 seller stands excluded. The Ld. counsel further submitted that Hon’ble Supreme Court held that whereas the limitation would have expired it during the period between 15/03/2020 and 14/03/2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15/03/2021. The Ld. counsel submitted that in view of the order of the Hon’ble Supreme Court, there is no delay in filing of the appeal and delay if there any is due to the compelling reasons of health of the assessee. 5. The Ld. Departmental Representative (DR) did not object for condoning the delay. 6. We have heard rival submission of the parties on the application for condemnation of the delay. As the delay period is covered by the order of the Hon’ble Supreme Court (supra), delay in filing of the appeal is condoned and the appeal is admitted. The parties were accordingly directed to argue the appeal. Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 4 6.1 The ground Nos. 1 & 2 of the appeal are connected with the issue of the addition of unsecured loans amounting to ₹ 25 lakh made by the Assessing Officer in terms of section 68 of the act. 7. The Ld. counsel of the assessee in support of the grounds submitted that the assessee had submitted all the required details such as loan confirmation, bank statements of both the receiver and lender, Income-tax return acknowledgement, which proves that persons were all alive. According to him all the three ingredient of section 68 i.e. identity, creditworthiness and genuineness of the transaction have been established by the assessee. The Ld. counsel submitted that additions were made based on the statement of Sh Praveen, Kumar Jain, but he retracted from statement and therefore no reliance can be placed on said statement. He further submitted that Assessing Officer failed to prove that any cash had changed hands. According to the Ld. counsel, the details in respect of the unsecured loan parties were available in their Income-tax records and therefore onus was on the Assessing Officer to verify from their Income-tax records. Ld. counsel in support of his claim relied on following decisions: 1. SIL Gold Vs ITO, New Delhi (ITA No. 1049/Del/2018 2. Sh Ashok Kumar Banthia Vs ITO (ITA No. 2192, 2193, 2194,2196 to 2198/Mum/2018) 8. On the other hand, ld. departmental representative relied on the order of the lower authorities and submitted that the assessee failed to discharge its onus of satisfying identity, creditworthiness and genuineness of the transaction as assessee failed to produce the parties before the Assessing Officer, despite Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 5 specifically asked for in terms of notice under section 133(6) and section 131 of the Act issued by the Assessing Officer to those parties. 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The assessee had shown unsecured loan of ₹ 25 lakh from three parties mentioned above. The Assessing Officer received information from the investigation wing of the Income Tax Department that during the course of the search proceeding at the premises of Shri Praveen Jain, he stated on oath that he was engaged in providing accommodation entries in the guise of loan/share capital etc. through various companies controlled by him. The assessee being one of the beneficiary of loan from companies controlled by Sh. Praveen Jain, the Assessing Officer reopened the assessment proceedings in the case of the assessee for year under consideration. In response to the notice under section 143(2) of the Act, in support of the claim of unsecured loan made in the return of income, the assessee filed, copy of confirmation, copy of acknowledgement of Income-tax return in respect of all the three parties but filed bank statements in respect of ‘Mohit international’ and ‘Jasoda exports’ only. It was claimed by the assessee that loans in respect of ‘Mohit international’ and ‘Natasha Enterprises’ were paid back during the year-end consideration along with interest and therefore creditworthiness and genuineness of the transaction stand discharged. However, for verification of the documents filed by the assessee in respect of the unsecured loan parties and for verification of their identity, creditworthiness and genuineness of the transaction, the Ld. Assessing Officer issued notice under section 133(6) of the Act to the unsecured loan parties. In view of the non-compliance of notice under section 133(6) of the Act, he also Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 6 issued summons under section 131 of the Act. In the case of Jasoda Exports, the notices returned back with the remark of postal authority that party left. There was no compliance from other two parties also. In view of non-compliance of notice under section 133(6) and 131 of the Act, the Assessing Officer apprised the assessee about non-compliance and asked for arranging the attendance of the unsecured loan parties, who were witnesses of the assessee, along with requisite evidences for cross-examination by the Assessing Officer. The assessee did not make any compliance of the said query of the Assessing Officer. Above facts have not been disputed by the parties, however the contention of the Ld. counsel of the assessee is that assessee has discharged its onus required under section 68 of the Act by way of filing confirmation, copy of bank statement and copy of Income-tax return acknowledgement of those parties. In our opinion, the contention of the Ld. counsel is not justified. When the Assessing Officer found non-compliance of notice under section 133(6) of the Act and section 131 of the Act issued for independent verification and when this fact was brought to the notice of the assessee, the onus shifted to the assessee and he was duty bound to discharge its onus by way of producing those parties before the Assessing Officer, but the assessee failed in doing so. 10 The Ld. counsel before us has taken another plea that Income-tax jurisdiction of unsecured loan parties was appearing in acknowledgement of return of income filed by the assessee in respect of those unsecured loan parties, and the Assessing Officer could have cross-checked the details as regard to the income of the lenders so as to find identity and creditworthiness of the lenders. According to him, it was onus of the Assessing Officer to verify details of creditworthiness of unsecured loan parties from their Income-tax Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 7 records and assessee was not required to produce them. This contention of the Ld. counsel is not justified. The primary onus is of the assessee to produce those parties on being asked by the Assessing Officer and establish the identity creditworthiness and genuineness of the transaction. The assessee cannot shift his onus to the Assessing Officer. This plea of the Ld. counsel is accordingly rejected. 10.1 Further, the Ld. counsel has submitted that loans were repaid during the year and therefore conditions of section 68 are not attracted whenever loan has been repaid. This contention of the Ld. counsel is also not justified. Notwithstanding that loan has been repaid, the assessee is required to discharge his onus of establishing identity, creditworthiness and genuineness of the transaction at the time of credit of said money in his bank of account. Subsequent payment cannot discharge the onus of the assessee of satisfying requirement of section 68 of the Act. 11. The Assessing Officer has referred to the decision of Tribunal in the case of Agrawal Coal Corporation Private Limited (supra), wherein the Tribunal held that merely filing of registration with ROC, return of income, PAN details, bank accounts, share application forms etc. did not establish identity of those parties, as those companies were existing on paper but on verification by the Assessing Officer found to be nonexistence. The Assessing Officer has also referred to the decision of the Hon’ble Delhi High Court in the case of Nova Promoters and finance private Limited (supra) wherein identical circumstances of non-compliance of summons to the unsecured loan/share applicant, the Hon’ble High Court upheld the addition made under section 68 in view of background of those parties of involving in providing accommodation Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 8 entries. The Assessing Officer has also referred to the decision of the Hon’ble Delhi High Court in the case of NR Portfolio Private Limited (supra), wherein the share applicants did not respond to the summons issued by the Assessing Officer, the Hon’ble High Court held that merely filing of PAN details, bank statement and other particular of share replicants, it cannot be held that assessee discharged its onus of proving identity and creditworthiness of the investors. The Hon’ble High Court has observed that, the concept of “shifting onus” does not mean that once certain facts are provided, the duty of assessee is over and if on verification, the Assessing Officer cannot contact the share applicants, or the information becomes unverifiable, the onus shifts back to the assessee. 11.1 In view of the above, we are of the opinion that the assessee has failed to discharge its onus of proving identity and creditworthiness of the unsecured loan parties and genuineness of the transaction. 12. We find that after commencement of the reassessment proceeding, the Assessing Officer asked the assessee to discharge its onus under section 68 of the Act by way of establishing identity, creditworthiness and genuineness of the transaction. In the assessment order, the Assessing Officer has reproduced statement of Sri Praveen Jain, wherein he has stated the complete modus operandi of obtaining cash from the parties in lieu of cheque issued in the guise of unsecured loan or share application money or capital gain benefit etc. The Assessing Officers also mentioned the fact of retraction of said statement by Sh Praveen Jain, however according to him the retraction was without corroboration of material evidences. Before us, the Ld. counsel of the assessee has submitted that in view of the retraction of the statement by the Praveen Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 9 Jain, the Assessing Officer is not justified in making addition under section 68 of the Act. In respect of this contention of the Ld. counsel of the assessee, we are of the opinion that when in view of the non-compliance of notice u/s 133(6) and 131 of the Act, the onus shifts to the assessee and the assessee was required to discharge his onus of proving identity, creditworthiness in genuine in respect of the transaction in plenary terms of section 68 of the Act. In failure to do so, even without referring to the statement of Sh Praveen Jain, the Assessing Officer is justified in making the addition. 13. The Ld. counsel has also taken another plea that Assessing Officer has not proved that cash has changed hands and only referred to modus operandi of receiving cash by the accommodation entry provider against issue of cheque. We find that in the instant case, the assessee was required to discharge his onus u/s 68 of the Act. The Assessing Officer was required to examine the nature and source of the credit, and he was not required to establish as how the cash changed hands, more so when the assessee himself as failed to discharge his onus of establishing identity, creditworthiness and genuineness of the transactions. 14. In the case of SIL Gold Vs ITO (supra), relied upon by the assessee, the issue was of purchase of bills from Mohit international, which were found to be bogus by the Assessing Officer. In the said case the Tribunal held that when the assessee had already shown gross profit in the books of accounts on sale of the goods which were purchased from an accommodation entry provider, no further addition could be made on account of the gross profit as it would amount to double addition. This ratio of said decision is not applicable once Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 10 facts of the instant case. In the case of Sh Ashok Kumar Banthoa (supra) relied upon by the Ld. counsel of the assessee, no enquiries under section 133(6) or section 131 of the Act were carried out by the Assessing Officer, except relying on the statements and investigation report to prove that loan transactions were non-genuine. In the facts of those circumstances, the Tribunal held that assessee has discharged his primary onus and balance shifted to the Assessing Officer, which he could not prove otherwise. Thus, the facts of the case relied upon by the assessee are distinguishable. 15. During the course of hearing of the case before us, the Ld. counsel of the assessee was asked whether the assessee can produces those parties before the Assessing Officer for verification of evidences. But he expressed his inability in producing those parties before the Assessing Officer. In the facts and circumstances of the case, we do not find any error in the finding of the Ld. CIT(A) on the issue-in-dispute and accordingly uphold the same. The grounds raised by the assessee are accordingly dismissed. 16. The appeal for assessment year 2012-13 has also been found to be with delay of 322 days as pointed by the registry vide letter dated 25/03/2000 2021 communicated to the assessee. Before us, the Ld. counsel of the assessee referred to the application for condonation of the delay and the affidavit filed by the assessee in this regard. Facts and circumstances for delay being identical to the delay in assessment year 2009-10 and delay period covered by the decision of the Hon’ble Supreme Court (supra), the delay in filing the present appeal is also condoned and the appeal is admitted. Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 11 16.1 In the year under consideration, the assessee has shown loan amounting to ₹31 lakh/-and interest of rupees 1, 70, 826/- from following parties: Serial No. Name of the party Amount (₹) 1. Duke Business Pvt. Ltd. 10,00,000/- 2. Sumukh Commercial Pvt. Ltd. 5,00,000/- 3. Dolly Exim Pvt. Ltd. 16,00,000/- 16.2 The assessee filed confirmation of the unsecured loan parties along with their financial statements. On verification of financial statements of those parties, the Assessing Officer found that none of the concern had accumulated balance in their bank accounts. The immediate source of money forwarded to the assessee was cheque/RTGS payment received immediately (or one day before), before it was forwarded to the assessee, which corroborates the statement of the ‘Praveen Jain’ and makes it abundantly clear that the accommodation entry has been camouflaged as loan. In case of ‘Duke Business private limited’, the AO was observed that there was no free reserve except reserve shown by way of securities premium. There was a cumulative losses in the books and schedule of loans and advances was not submitted. In case of ‘M/s Sumukh commercial private limited’ identical facts are observed. In case of ‘Dolly Exims Private Limited’, no balance sheet and schedule of loans and advances was filed. The assessee also failed to produce above parties for examination or verification by the Assessing Officer. Thus according to the Assessing Officer, the assessee failed to establish identity, creditworthiness and genuineness of the transaction and accordingly he held the unsecured loan as unexplained cash credit. The Ld. CIT(A) observed that the Assessing Officer has conducted independent field inquiries for verification of the identity and Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 12 creditworthiness of the creditors. The Ld. CIT(A) after relying on various decisions, held the unsecured loan received under reference and interest as unexplained cash credit observing as under: “4.6 In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The inquiry revealed that investor Firms are shell Firms operated by Shri Pravin Jain. Further, notice issued u/s133(6) and summon u/s.131, some notice was served by the postal authority but notices received back as unserved. Hence, identity of the appellant company is not established by the appellant company. ii. The enquiries revealed that the investor Firms had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest such huge funds for purchase of shares. iii. There was no explanation whatsoever offered as to why the investor Firms/individuals had applied for shares of the appellant Company at a high cost. iv. Furthermore, none of the so-called investor Firms established the source of funds from which the high share premium was invested, v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 4.7 Therefore, it is clear that appellant itself was indulged for bogus share application money on high security premium through the investors account, routed their own cash through the Firms layering channel to get Share capital and premium in the books. Therefore, it is a not a genuine transactions, but a sham transactions. 4.8 In view of above facts and that no further cogent evidences or arguments have been put forth by the appellant during the course of appellate proceedings. It is held that no interference is called for in the decision of assessing officer as the appellant has failed to discharge the onus required under Section 68 of the Act and the Assessing Officer was justified in added the amounts to the appellant's income of Rs.25,00,000/- Therefore, addition u/s 68 of the Act is confirmed. The appeal of the assessee on this ground is dismissed.” Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 13 17. We have heard rival submission of the parties on the issue in dispute. Ld. counsel has repeated the arguments which were taken for assessment at 2009- 10, except that in the present case the unsecured loan parties complied the notice under section 133(6) of the Act, Albeit, on being asked, the assessee failed to produce them before the Assessing Officer. Before us the Ld. counsel has relied on the decision of the Mumbai Tribunal in the case of DCIT Vs DNH Spinners Private Ltd (In ITA No. 6315 & 6316/M/2017), but the facts of the said case are distinguishable in view of the finding of the Tribunal (supra), which is reproduced as under: “16. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that during the year, the assessee allotted shares to seven parties out of which the AO made an addition in respect of three companies by stating the same to be related to Shri Pravin Kumar Jain. During the course of assessment proceedings the assessee filed all the necessary evidences in the form of share application forms, allotment returns, copy of bank statements of the investors, copy of the balance sheet of the investors, their confirmations etc. along with ITR copies. However, the AO did not carry out any further investigations to find out the truth. It M/s. D.N.H. Spinners Pvt. Ltd. is also undisputed that the corresponding investment entries were duly appearing in the respective balance sheets of these investors and were examined by the respective AOs during assessment proceedings and were accepted in the assessment framed u/s 143(3) of the Act. The AO has relied on the statement of Shri Pravin Kumar Jain recorded under section 132(4) of the Act, copy whereof is filed at page No.127 to 131 which contained an exhaustive list of concerns/companies/entities in which Shri Pravin Kumar Jain was either shareholder/director or connected with the management and control of the said concerns. We find that none of these three investors who bought share capital in the assessee company were appearing in the said statement of Shri Pravin Kumar Jain and therefore we do not find any merit in the conclusion drawn by the AO that all these three entries were related to Shri Pravin Kumar Jain. Further, we note that the AO has not made any investigation or enquiry despite the assessee having filed all the necessary evidences before the AO to prove the identities and creditworthiness of the investors and genuineness of the Bhagatram Godhwani ITA Nos. 364 & 365/M/2021 14 transactions. We also observe that the Ld. CIT(A) has examined the issue in great depth and has relied on a series of decisions of Apex Court of M/s. Andman Timber Industries civil appeal No.4228 of 2006 and the CIT vs. Lovely Exports Pvt. Ltd. 216 ITR 295 (SC). The ld CIT(A) also relied upon the decisions of the Hon'ble Bombay High Court in the case of CIT vs. creative World Telefilms Ltd (2011) 333 ITR 100 and decision of Hon'ble Delhi High Court in Osis Hospitality Pvt. Ltd. 333 ITR 119( Delhi) while deciding the appeal of the assessee.” 17.1 The facts and circumstances and arguments taken by the parties being more or less identical to the facts and circumstances and arguments taken in the appeal of assessee for assessment year 2009-10, thus following our finding in assessment at 2009-10, the findings of the Ld. CIT(A) on the issue-in-dispute are uphold. The grounds raised by the assessee are accordingly dismissed. 18. In the result, both the appeal of the assessee are dismissed. Order pronounced in the open Court on 28/02/2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 28/02/2022 Rahul Sharma, Sr. P.S. 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// (Sr. Private Secretary) ITAT, Mumbai