ACIT, 32(1), MUMBAI V. DHANPAL B. SHAH, MUMBAI

ITA 4000/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4842 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: HITESH M SHAH
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries; Retraction; Bogus loan; TDS
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM ITA NO. 4000 /MUM/ 2017 (ASSESSMENT YEAR: 2013 - 14) ACIT - 32(1) MUMBAI VS. SHRI DHANPAL B. SHAH A - 303, ADITYA TOWER, CHANDAVARKAR ROAD, BORIVALI (W), MUMBAI - 400 092 PAN/GIR NO. AAZPS 9101 M ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI CHAITANYA ANJARIA RESPONDENT BY : SHRI HITESH M. SHAH DATE OF HEARING : 06.12.2018 DATE OF PRONOUNCEMENT : 12.02 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 44, MUMBAI (LD.CIT(A) FOR SHORT) DATED 15.03.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2013 - 14. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,18,49,567/ - MADE U/S. 68 OF THE I.T. ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT AS THE ASSESSEE FAILED TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE SAID LOAN.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION U/S. 68 OF THE I.T. ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT DESPITE THE FACT THAT THE PARTY FR OM WHOM THE ALLEGED LOAN WAS RECEIVED BY THE ASSESSEE WAS LISTED AS HAWALA ENTRY PROVIDER WHO INDULGED IN PROVIDING ACCOMMODATION ENTRY OF UNSECURED LOANS AND RELATED TO RAJENDRA JAIN AND HIS GROUP.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE FINDING OF LD. CIT(A| THAT THE AO HAS ONLY DISCUSSED THE FACTS OF RAJENDRA JAIN GROUP AND THE AO HAS NOT APPRECIATED THE FACT THAT HE WAS NOT MAKING THE ASSESSMENT OF RAJENDRA JAIN. THIS FINDING IS PERVERSE ON FACTS AS THE ASSESSEE HAS INTRODUCED THE A CCOMMODATION ENTRIES OF LOAN FROM THE GROUP CONCERNS CONTROLLED BY RAJENDRA JAIN AS SUCH THE AO'S FINDING AND RELIANCE PLACED ON THE INVESTIGATION MADE BY THE INVESTIGATION WING WAS RIGHT.' 2 ITA NO.4000/MUM/2017 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE FINDIN G OF LD. CIT(A) THAT THE ASSESSEE HAS PROVED IDENTITY, CREDITWORTHINESS AND GENUINENESS OF LOAN IS PERVERSE ON FACTS AS THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO JUSTIFY THE CREDITWORTHINESS AND GENUINENESS OF THE LOAN.' 5. 'THE APPELLANT CRAVES LEA VE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND.' 3. BRIEF FACTS OF THE CASE ARE AS UNDER: THE RETURN OF IN COME WAS FILED ON 30.09.2013 DECLARING TOTAL INCOME OF RS.2,09,57,060 / - . THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN BUSINESS OF CIVIL CONTRACTOR S THROUGH HIS PROPRIETARY CONCERN NAMED M/S OMKAR ENGINEERS AND CONTRACTORS. A SEARCH & SEIZURE ACTION WAS CONDUCTED IN THE RAJENDRA JAIN GROUP OF CASES BY INVESTIGATION WING , MUMBAI . AS A RESULT OF SEARCH , IT WAS FOUND BY THE INVESTIGATION WING T HAT THIS GROUP IS A LEADING ENTRY PROVIDER OF MUMBAI . THERE ARE MANY CONCERNS FLOATED BY THE GROUP WHO PROVIDE ACCOMMODATION ENTRIES OF BOGUS LOAN. THE AO RECEIVED AN INFORMATION THAT THE ASSESSEE HAS ALSO TAKEN LOAN FROM A CONCERN FOUND IN THE LIST OF ENTRY PR OVIDERS RELATED WITH RAJENDR A JAIN GROUP OF CASES NAMELY M/S ARI HANT EXPORTS. THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY LOAN TAKEN FROM M/S ARIHANT EXPORTS SHOUL D NOT BE DISALLOWED AND ADDED T O THE TOTAL INCOME. AS PER THE ASSESSMENT ORDER THE ASSESSEE FILED HIS REPLY ALONG WITH THE BANK STATEMENT, COPY OF LEDGER, AFFIDAVIT OF M/S ARIHANT EXPORTS AND CONFIRMATION OF THE LOAN PROVIDER. THE AO HOWEVER, DISCUSSED IN DETAIL THE MODUS OPERAND I OF GI VING ACCOMMODATION ENTRIES EMPLOYED BY THE RAJENDRA JAIN GROUP OF CASES. THE AO THEREAFTER MENTIONED THAT IT HAS BEEN CONCLUSIVELY ESTABLISHED THAT THE ASSESSEE HAD TAKEN ACCOMMOD ATION ENTRY OF UNSECURED LOAN. THE AO ADDED THE AMOUNT OF LOAN AS WELL AS INT EREST PAID ON SUCH LOAN TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. IN THIS WAY, ADDITION OF RS .1 ,18,49,567/ - WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO.4000/MUM/2017 4. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 5. THE LD. CIT(A) HELD THAT THE ASSESSEE HAD GIVEN ALL THE REQUIRED DOCUMENTARY EVIDENCE. HENCE, NO ADDITION U/S. 68 IS REQUIRED. HE OBSERVED AS UNDER: 4.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE FOLLOWING DETAILS WERE FILED BEFORE THE AO. 1. LOAN CONFIRMATION FROM THE LENDER. 2. PAN NO. OF THE LENDER. 3. COPY OF THE RETURN OF INCOME OF THE LENDER WHICH ADVANCED THE LOAN. 4. COPY OF BANK ACCOUNT OF (HE LENDER. 5. COPY OF BANK A/C OF THE ASSESSEE. 6. AFFIDAVIT OF THE LENDER. 4.5 IF THE ABOVE REFERRED PRINCIPLES ARE APPLIED TO THE FACTS OF THE CASE UNDER CONSIDERATION IT CAN BE SEEN THAT THE IDENTITY OF THE CREDITOR HAS BEEN ESTABLISHED AS THEY ARE HAVING PAN AND THEY ARE FILING RETURN OF INCOME, KJHE GENUINENESS OF THE TRANSACTION IS ESTABLISHED FROM THE FACT THAT BOTH THE ACCEPTANCE AND REPAYMENT OF LOAN HAS BEEN THROUGH BANKING CHANNELS. FURTHER THE INTEREST PAID AGAINST SUCH LOAN HAS BEEN SUBJECT TO TDS. THE CREDITWORTHINESS OF THE LENDER CAN BE ESTABLISHED FROM BANK STATEMENT AND BALANCE SHEET OF T HE LENDER WHICH WERE FILED BEFORE THE AO. ) 4.6 FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO HAD ISSUED NOTICE U/S.133(6) TO THE LENDER TO VERIFY THE GENUINENESS OF THE LOANS. FROM A PERUSAL OF ASSESSMENT ORDER, IT APPEARS THAT THE LENDER HAS FILED CO PY OF LEDGER A/C OF THE APPELLANT, COPY OF ITR V, COPY OF HIS BALANCE SHEET AS WELL AS COPY OF HIS BANK STATEMENT REFLECTING LOAN GIVEN TO THE APPELLANT. IN ORDER TO MAKE ADDITION U/S 68 AO HAD TO ESTABLISH THAT EITHER THE TRANSACTION WAS NOT GENUINE OR TH E LENDER DID NOT HAVE CREDIT WORTHINESS OR HIS IDENTITY WAS NOT ESTABLISHED. AS MENTIONED IN PARA 4.5 ABOVE, THE GENUINENESS OF TRANSACTION AND THE IDENTITY AS WELL AS THE CREDITWORTHINESS OF THE LENDER HAVE BEEN ESTABLISHED. IT CAN BE SEEN FROM THE ASSESS MENT ORDER THAT THE ENTIRE FOCUS OF THE AO WAS ON THE MODUS OPERANDS ADOPTED BY RAJENDRA JAIN GROUP OF CASES TO PROVIDE BOGUS ACCOMMODATION ENTRY OF LOAN. THE MAIN REASON FOR MAKING ADDITION U/S 68 WAS ON THE BASIS OF INFORMATION PROVIDED BY THE INVESTIGAT ION WING. (WHILE THE INFORMATION PROVIDED BY THE INVESTIGATION WING CAN BE A STARTING POINT OF AN ENQUIRY, IT CANNOT BE A CONCLUSION REACHED BY THE AO. THE MOOT POINT BEFORE THE AO WAS TO EXAMINE THE APPLICATION OF SECTION 68 IN THE CASE OF THE APPELLANT INSTEAD OF ESTABLISHING THAT THE EXPLANATION OFFERED REGARDING THE NATURE AND SOURCE OF CREDIT IN THE BOOKS OF THE APPELLANT IS NOT SATISFACTORY THE AO WENT TO DISCUSS IN DETAIL THE FACTS RELATED WITH RAJENDRA JAIN GROUP OF CASES. THE AO HAS NOT APPRECIATE D THE FACT THAT HE WAS NOT MAKING ASSESSMENT OF RAJENDRA JAIN GROUP OF CASES. ON THE OTHER HAND , THE APPELLANT WAS ABLE TO ESTABLISH THE IDENTITY AND THE CR EDITWORTHINESS OF THE CREDITOR AS WELL AS THE GENUINENESS OF TRANSACTION. 4 .7 RECENTLY THE HON'BLE BOMBAY HIGH COURT HAS PASSED AN ORDER IN WP NO. 167 OF 2015 DATED 15.04.2015 IN THE CASE OF M/S RUSHABH ENTERPRISES VS ACIT 24(3) AND ORS. FACTS OF THIS CASE ARE SIMILAR TO THE CASE OF THE APPELLANT, IN THIS CASE THE ASSESSEE HAD T AKEN LOAN FROM CONCERNS RELATED WITH BHANWARLALJAIN GROUP OF CASES. IN ITS ORDER THE HON'BLE BOMBAY HIGH COURT IN ADDITION TO DECIDING THE LEGAL VALIDITY OF REOPENING OF ASSESSMENT ALSO DISCUSSED THE FACTS OF THE CASE. THE HON'BLE BOMBAY HIGH COURT IN PARA 8 OF ITS ORDER STATED '......ACCORDING TO HER (AO) THE REVENUE HAS RECEIVED INFORMATION 4 ITA NO.4000/MUM/2017 FROM THE DGIT (INV) THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS FROM THE ABOVE PARTIES BY WAY OF UNACCOUNTED CASH/ACCOMMODATION ENTRIES. WE ARE UNABLE TO AGREE SINCE THE PETITIONER HAS CLEARLY STATED THAT ALL THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES WHICH WERE ENCASHED IN THE BANK ACCOUNT OF THE PETITIONER IN THE REGULAR COURSE OF BUSINESS. WE FIND THAT THE PETITIONER HAS ALSO PAID INTEREST ON THIS LOANS AFTER DEDU CTION OF TAX AT SOURCE AND TDS RETURNS ARE ALSO ACCORDINGLY FILED. THERE IS NO DISPUTE IN REGARD TO THE ABOVE. WE FIND NOTHING TO SUPPORT THE SAID CONTENTIONS OF THE REVENUE. THE REVENUE 'S CONTENTION IN THE AFFIDAVIT IN REPLY HAS NO MERIT. ON THE OTHER HA ND, THE LOANS APPEAR TO BE TAKEN IN THE REGULAR COURSE OF BUSINESS .. 4.8 AFTER CONSIDERING THE TOTALITY OF FACTS, THE RIVAL SUBMISSIONS, APPLICABLE LAW AND ON THE BASIS OF DISCUSSIONS MENTIONED ABOVE I HAVE COME TO A CONCLUSION THAT NATURE AND SOURCE OF CREDIT IN THE BOOKS OF ACCOUNTS OF THE APPELLANT STANDS EXPLAINED. CONSEQUENTLY, ADDITION U/S 68 CANNOT BE SUSTAINED. THE GROUNDS OF APPEAL 1,4,5,6,7,8,9,10 &11 ARE ACCORDINGLY ALLOWED AND ADDITION OF RS .1, 18 , 49 , 567/ - IS DELETED. 6. AGAINST THE ABOVE O RDER, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) RELIED UPON THE ORDER OF THE A.O. THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). HE FURTHER SUBMITTED THAT THE COPY OF ANNUAL AUDITED FINANCIAL STATEMENT OF M/S. ARIHANT EXPORTS FOR THE YEAR ENDED 31.03.2013 IN SUPPORT OF CREDITWORTHINESS OF THE LENDER . HE FURTHER SUBMITTED THAT FROM THE COMPUTATI ON OF INCOME IT IS EVIDENT THAT THE LOAN CREDITORS HAVE ACCOUNTED FOR INTEREST PAID BY THE ASSESSEE AND HAS ALSO CLAIMED TDS THEREON. MOREOVER, IT HAS AN ANNUAL TURNOVER OF RS.182 CRORES. THE INTEREST INCOME ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT IS AT RS.79,90,897/ - AND THERE IS NO EVIDENCE OF CASH DEPOSIT ON OR BEFORE THE LOAN DEPOSIT CHEQUE ISSUED TO THE ASSESSEE. IT WAS SUBMITTED THAT THEY HAVE ALSO FILED THE RETRACTION STATEMENT AFFIDAVIT DATED 09.01.2014 FILED BY RAJENDRA JAIN WHOSE STATEMENT ON OATH WAS MERELY RELIED UPON. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT THE A.O. HAS TREATED THE IMPUGNED LOAN TRANSACTION AS BOGUS CREDITED ONLY ON THE GROUND THAT THE ENQUIRY WAS CONDUCTED IN 5 ITA NO.4000/MUM/2017 RAJENDRA JAIN GROUP OF COMPANIES. THE A.O. HAS GIVEN IN DE TAIL THE MODUS OPERANDI OF ACCOMMODATION ENTRIES BY RAJENDRA JAIN GROUP. IT IS FURTHER NOTED THAT THE A.O. HAS NOT MADE ANY INDEPENDENT ENQUIRY OF HIS OWN TO PROVE THAT THE IMPUGNED TRANSACTION IS BOGUS. THE LD. CIT(A) HAS GIVEN A FINDING THAT DURING THE A SSESSMENT PROCEEDINGS FOLLOWING DETAILS WERE SUBMITTED: 1. LOAN CONFIRMATION FROM THE LENDER. 2. PAN NO. OF THE LENDER. 3. COPY OF THE RETURN OF INCOME OF THE LENDER WHICH ADVANCED THE LOAN. 4. COPY OF BANK ACCOUNT OF (HE LENDER. 5. COPY OF BANK A/C OF T HE ASSESSEE. 6. AFFIDAVIT OF THE LENDER. THESE HAVE NOT BEEN DISPUTED BY THE REVENUE. 9. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS DISCHARGED ITS ONUS. FROM THE BALANCE SHEET OF THE LENDER, IT IS NOTED THAT IT HAS SUBSTANTIAL SOURCE S INCLUDING TURNOVER OF RS.182 CRORES. THE L ENDER H AS ALSO DEDUCTED TDS ON THE LOAN AMOUNT GIVEN. FURTHERMORE, ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNEL. IN THESE CIRCUMSTANCES, THE CASE LAW FROM THE HON'BLE BOMBAY HIGH COURT REFERRED BY THE LD. CIT(A ) IN HIS ORDER AS REPRODUCED ABOVE IS FULLY APPLICABLE. THE LOAN IN THIS CASE SATISFIES THE CRITERIA OF LOAN TAKEN IN THE REGULAR COURSE OF BUSINESS AND THE REVENUE HAS NOT BROUGHT ON RECORD ANY COGENT EVIDENCE TO TREAT THE SAME AS BOGUS. IN THESE CIRCUMST ANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 10. IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 2 . 0 2 . 2 0 1 9 S D / - S D / - ( SANDEEP GOSAIN ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1 2 . 0 2 . 2 0 1 9 ROSHANI , SR. PS 6 ITA NO.4000/MUM/2017 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 FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI