ASSISTANT COMMISSIONER OF INCOME TAX, 32(1), MUMBAI V. GOPALJI K DWIVEDI, MUMBAI

ITA 4544/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6572 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 21-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Accommodation entries; Bogus loan; TDS
• Section: 133(6); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 4 544 / MUM/ 2017 ( / ASSESSMENT YEARS: 2013 - 14 ) ASSISTANT COMMISSIONER OF INCOME TAX 32(1) PRATYAKSHA KAR BH AVAN, ROOM NO.202, 2 ND FLOOR, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400051 / VS. SHRI GOPALJI K. DWIVEDI A/501/502, VINI GARDEN BLDG NO.1, MANDPESHWAR ROAD, NEAR MARY IMMACULATE SCHOOL, BORIVALI (W), MUMBAI - 400103 ./ ./ PAN/GIR NO. : AAHPD 4079 M ( / APPELLANT ) .. ( / RESPONDENT ) / DAT E OF HEARING: 09 .01.2019 /DATE OF PRONOUNCEMENT: 20. 0 2 .2019 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 21.04.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 4 , MUMBAI [HEREINAFTER REFE RRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2013 - 14 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,00,00,000/ - MADE U/S.68 O F THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT AS THE ASSESSEE FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS 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 FROM WHOM THE ALLEGED LOAN WAS RECEIVED BY THE ASSESSEE WAS LISTED AS HAWALA ENTRY PROVIDER WHO INDULGED IN REVENUE BY: CHAUDHARY ARUNKUMAR SINGH ASSESSEE BY : BHUPENDRA SHAH ITA NO. 4544 /M/2017 A. Y. 2013 - 14 2 PROVIDING ACCOMMODATION ENTRY OF UNSECURED LOANS AND RE LATED TO PRAVIN KUMAR 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 PRAVIN KUMAR JAIN GROUP AND THE AO HAS NOT APPRECIATED THE FACT THAT HE WAS NOT MAKING THE ASSESSMENT OF PRAVEEN KUMAR JAIN. THIS FINDING IS PERVERSE ON FACTS AS THE ASSESSEE HAS INTRODUCED THE ACCOMMODATION ENTRIES OF LOAN FROM THE GROUP CONCERNS CONTROLLED BY PRAVEEN KUMAR JAIN AS SUCH THE AOS FINDING AND RELIANCE PLACED ON THE INVESTIGATION MADE BY THE INVESTIGATION WING WAS RIGHT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE FINDING 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. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.2013 DECLARING TOTAL INCOME OF RS.33,12,560/ - . THE ASSESSEE IS A FIRM ENGAGED IN THE BUS INESS OF CONSTRUCTION. THE SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE PRAVEEN KUMAR JAIN GROUP CASES BY INVESTIGATION WING, MUMBAI. IT WAS FOUND THAT THIS GROUP WAS A LEADING ENTRY PROVIDER OF MUMBAI. THERE ARE MANY CONCERNS FLOATED BY THE GROUP WHO PROVIDE ACCOMMODATION ENTRIES OF BOGUS LOAN. THE ASSESSING OFFICER RECEIVED AN INFORMATION THAT THE ASSESSEE HAS ALSO TAKEN LOAN FROM A CONCERN FOUND IN THE LIST OF ENTRY PROVIDERS RELATED WITH PRAVEEN KUMAR JAIN GROUP OF CASES NAMELY M/S.FALAK TRADING C O. LTD. THE ASSESSEE TOOK THE LOAN OF SUM OF RS.1,00,00,000/ - FROM M/S. FALAK TRADING CO. PVT. LTD.. A NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE THE AMOUNT OF RS.1,00,00,000/ - WAS ADDED IN THE INCOME OF THE ASSESSEE. FEELING AGGRIEVED THE ASS ESSEE ITA NO. 4544 /M/2017 A. Y. 2013 - 14 3 FILED THE PRESENT APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 TO 4: - 5. ALL THE ISSUES ARE IN CONNECTION WITH THE DELETION OF THE ADDITION IN SUM OF RS.1,00 ,00,000/ - MADE BY THE ASSESSING OFFICER U/S.68 O F THE INCOME TAX ACT, 1961 . THE SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CONDUCTED IN THE CASE OF SHRI PRAVEEN KUMAR JAIN GROUP ON 03.10.2013 BY DGIT (INV.) MUMBAI. THE ASSESSING OFFICER RECEIVED AN INFORMATION THAT ASSESSEE HAS TAKEN BOGUS ENTRY BY WAY OF LOAN OF RS.1,00,00,000/ - FROM M/S. FALAK TRADING CO. PVT. LTD.. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF ASSESSEE, THEREFORE, RAISED THE ADDITION IN SUM OF RS.1,00,00,000/ - U /S.68 OF THE ACT. HOWEVER, THE CIT(A) HAS DELETED THE SAID ADDITION. BEFORE GOING FURTHER WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD WHICH IS AS UNDER: - 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTE N SUBMISSION OF THE AR. I HAVE ALSO PERUSED THE DETAILS FILED BY THE AR. THE AO HAS MADE ADDITION U/S 68 OF THE ACT. IT IS THEREFORE IMPORTANT TO UNDERSTAND THE POSITION OF LAW WHICH HAS EVOLVED FROM A CATENA OF JUDGMENTS DELIVERED BY HIGH COURTS AND TR IBUNALS ON THIS ISSUE. THE HONBLE ITAT MUMBAI IN THE CASE OF ITO VS ANANT SHELTER PVT. LTD. (2012) 20 TAXMANN.COM 153 HAS ENUMERATED CERTAIN PRINCIPLES WHICH WOULD BE EXTREMELY USEFUL IN UNDERSTANDING THE ISSUE IN HAND. IT HAS BEEN STATED IN THE SAID JUD GMENT THAT OVER THE YEARS, LAW REGARDING CASH CREDITS HAVE EVOLVED AND HAS TAKEN A DEFINITE SHAPE. A FEW ASPECTS OF LAW U/S.68 CAN BE ENUMERATED. 1. SEC. 68 CAN BE INVOKED WHEN THERE IS A CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE, SUCH CRE DIT IS A SUM OF MONEY DURING THE PREVIOUS YEAR AND EITHER THE ASSESSEE OFFERS NO ITA NO. 4544 /M/2017 A. Y. 2013 - 14 4 EXPLANATION BY THE ASSESSEE IN THE OPINION OF THE AO IS NOT SATISFACTORY. 2. THE OPINION OF THE AO FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTOR Y IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. 3. COURTS ARE OF THE FIRM VIEW THAT THE EVIDENCE PRODUCED BY THE ASSESSEE CANNOT BE BRUSHED ASIDE IN A CASUAL MANNER. 4. THE ONUS OF PROOF IS NOT STATIC. THE INITIAL BURDEN L IES ON THE ASSESSEE TO ESTABLISH THE IDENTITY AND THE CREDIT WORTHINESS OF THE CREDITOR AS WELL AS THE GENUINENESS OF TRANSACTION. 5. THE IDENTITY OF CREDITORS CAN BE ESTABLISHED BY EITHER FURNISHING THEIR PANS OR ASSESSMENT ORDERS. THE GENUINENESS OF T HE TRANSACTION CAN BE PROVED IF IT WAS SHOWN THAT THE MONEY WAS RECEIVED BY A/C PAYEE CHEQUE. CREDITWORTHINESS OF THE LENDER CAN BE ESTABLISHED BY ATTENDING CIRCUMSTANCES. 3.4 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 THE LENDER. 5. COPY OF BANK A/C OF THE ASSESSEE. 6. DETAILS OF INTERE ST PAID BY THE APPELLANT. 3.5 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 FILLING RETURN OF INCOME. THE 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 STATEMENTS AND BALANCE SHEET OF THE LENDER WHICH WERE FILED BEFORE THE AO. 3.6 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 ASS ESSMENT ORDER, IT IS SEEN THAT THE LENDER FILED ITS SUBMISSION IN RESPONSE TO NOTICE U/S.133(6) VIDE ITS LETTER DATED 03.12.2015. THE AO DID NOT MAKE ANY REFERENCE TO THE CONTENT OF THE SUBMISSION IN HIS ASSESSMENT ORDER. HOWEVER, IT IS SEEN FROM RECORD THAT IN THE LETTER DATED 03.12.2015 THE LENDER HAS FILED CONFIRMATION, COPY OF ITR AND BALANCE SHEET AND COPY OF HIS BANK STATEMENT. IN ORDER TO MAKE ADDITION U/S.68 AO HAD TO ESTABLISH THAT EITHER THE TRANSACTION WAS NOT GENUINE OR THE LENDER DID NOT HAV E CREDIT ITA NO. 4544 /M/2017 A. Y. 2013 - 14 5 WORTHINESS OR HIS IDENTITY WAS NOT ESTABLISHED. AS MENTIONED IN PARA 3.5 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 ASSESSMENT ORDER THAT TH E ENTIRE FOCUS OF THE AO WAS ON THE MODUS OPERANDI ADOPTED BY PRAVEEN KUMAR 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 INVESTIGATION WING. W HILE THE INFORMATION PROVIDED BY THE INVESTIGATION WING CAN BE 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 SECTION68 IN THE CASE OF THE APPELLANT. INSTEAD OF EST ABLISHING THAT THE EXPLANATION OFFERED THE NATURE OF SOURCE OF CREDIT IN THE BOOKS OF THE APPELLANT IS NOT SATISFACTORY THE AO WENT TO DISCUSS IN DETAIL THE FACTS RELATED WITH PRAVEEN KUMAR JAIN GROUP OF CASES. THE AO HAS NOT APPRECIATED THE FACT THAT HE WAS NOT MAKING ASSESSMENT OF PRAVEEN KUMAR JAIN GROUP OF CASES. ON THE OTHER HAND, THE APPELLANT WAS ABLE TO ESTABLISH THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITOR AS WELL AS THE GENUINENESS OF TRANSACTION. 3.7 RECENTLY, THE HONBLE BOMBAY HIGH C OURT HAS PASSED AN ORDER ON SIMILAR ISSUE IN WP NO.167 OF 2015 DATED 15.04.2015 IN THE CASE OF M/S. RUSHABH ENTERPRISES VS. ACIT 24(3) AND ORS. IN THIS CASE, THE ASSESSEE HAD TAKEN LOAN FROM CONCERNS RELATED WITH BHANWARLAL JAIN GROUP OF CASES. IN ITS OR DER THE HONBLE BOMBAY HIGH COURT IN ADDITION TO DECIDING THE LEGAL VALIDITY OF REOPENING OF ASSESSMENT ALSO DISCUSSED THE FACTS OF THE CASE. THE HONBLE BOMBAY HIGH COURT IN PARA 8 OF ITS ORDER STATED ACCORDING TO HER (AO) THE REVENUE HAS RECEIVED I NFORMATION 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. PA YEE 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 DEDUCTION OF TAX AT SOURCE AND TDS RETURNS ARE ALSO ACCORDINGLY FILED. THERE I S NO DISPUTE IN REGARD TO THE ABOVE. WE FIND NOTHING TO SUPPORT THE SAID CONTENTIONS OF THE REVENUE. THE REVENUES CONTENTION IN THE AFFIDAVIT IN REPLY HAS NO MERIT. ON THE OTHER HAND, THE LOANS APPEAR TO BE TAKEN IN THE REGULAR COURSE OF BUSINESS 3. 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. CONSE QUENTLY, ITA NO. 4544 /M/2017 A. Y. 2013 - 14 6 ADDITION U/S.68 CANNOT BE SUSTAINED. THE GROUNDS OF APPEAL NOS.1 TO 7 ARE ACCORDINGLY ALLOWED AND ADDITION OF RS.1,00,00,000/ - IS DELETED. 6. ON APPRAISAL OF THE ABOVE MENTIONED FINDING , WE NOTICED THAT THE ASSESSING OFFICER NOWHERE CONSIDERED T HE REPLY OF THE ASSESSEE IN HIS ORDER. THE CIT(A) HAS TOOK INTO THE NOTE OF THE REPLY OF THE ASSESSEE IN WHICH IT WAS FOUND THAT IN RESPONSE TO THE NOTICE U/S.133(6) OF THE ACT, THE ASSESSEE FILED THE EXPLANATION IN VIEW OF THE LETTER DATED 03.12.2015 IN WHICH IT WAS CERTAIN EVIDENCE WAS FILED SUCH AS THE LENDER S CONFIRMATION, COPY OF ITR AND BALANCE SHEET AND COPY OF HIS BANK STATEMENT. THE CASE OF THE ASSESSEE WAS EXAMINE D ON THE BASIS OF GENUINENESS OF THE CLAIM, IDENTITY AND CREDITWORTHINESS OF THE L ENDER. THE ASSESSING OFFICER RAISED THE ADDITION ONLY ON THE BASIS OF THE INFORMATION GIVEN BY THE INVESTIGATION WING. THE ASSESSING OFFICER NOWHERE CONDUCTED THE INQUIRY ON THE BASIS OF THE INFORMATION GIVEN BY THE INVESTIGATION WING. MOREOVER , WE NOTIC ED THAT THE LOAN WAS REPAID TO M/S. FALAK TRADING CO. PVT. LTD. AND IN THIS REGARD THE EVIDENCE LIES AT PAGE 18 AND 19 OF THE PAPER BOOK . AT THE TIME OF ARGUMENT THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS PLACED RELIANCE ON THE LAW SETTLED BY HONB LE BOMBAY HIGH COURT IN CASE TITLED AS KONARK STRUCTURAL ENGINEERING (P) LTD. VS. DY. COMMISSIONER OF INCOME TAX 9(2) [2018] 90 TAXMANN.COM 56(BOMBAY) AND DECISION OF HONBLE HIGH OF DELHI IN CASE TITLED AS COMMISSIONER OF INCOME TAX VS. NOVA PROMOTERS & F INLEASE (P) LTD. [2012] 18 TAXMANN.COM 217 (DELHI) AND ETC. THE LAW RELIED BY THE ITA NO. 4544 /M/2017 A. Y. 2013 - 14 7 REPRESENTATIVE OF THE PARTIES NO DOUBT IS LIABLE TO BE APPLICABLE TO THE CASE WHICH IS HAVING IDENTICAL FACTS BUT THE FACTS OF THE PRESENT CASE IS QUITE DISTINGUISHABLE , THE REFORE, THE LAW RELIED BY THE LEARNED REPRESENTATIVE OF THE DEPARTMENT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. TAKING INTO ACCOUNT OF ALL THE FACTS WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIALLY AND CORRECT LY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. THEREFORE, WE AFFIRMED THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 7 . IN THE RESULT, THE APPEA L OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20. 02 .2019 . SD/ - ( SHAMIM YAHYA ) SD/ - (AMARJIT SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : DATED 20. 0 2 .2019 MP COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//