SHREE LAXMI ESTATE P. LTD, MUMBAI V. ITO WD 15(3)(3), MUMBAI

ITA 5954/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7842 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Unexplained cash credit; Share purchase agreement; Opportunity of cross examination; Retrospective amendment; Accommodation entries; Bogus loan
• Section: 43B; 40A(3); 142(1); 133(6); 68; 10

Judgement Text

1 M/S SHREE LAXMI DEVELOPERS IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5954/MUM/2016) (ASSESSMENT YEAR: 2012-13) M/S SHREE LAXMI ESTATE PVT LTD, 407, GATEWAY PLAZA HIRANANDANI GARDENS, POWAI\MUMBAI-400 076 PAN : AAFCS5707A VS ITO, WD.15(3)(3), MUMBAI APPELLANT RESPONDEDNT I.T.A NO.2562/MUM/2017 (ASSESSMENT YEAR: 2012-13) M/S SHREE LAXMI DEVELOPERS, 407, GATEWAY PLAZA, HIRANANDANI GARDENS, POWAI\MUMBAI-400 076 PAN : ABEFS7370 VS ITO, WD.26(3)(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI NEELKANTH KHANDELWAL RESPONDENT BY SHRI RAM TIWARI DATE OF HEARING 10-11-2017 DATE OF PRONOUNCEMENT 29-12-2017 O R D E R PER G MANJUNATHA, AM : THESE TWO APPEALS FILED BY SEPARATE ASSESSEES ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A)-38, MUMBAI & CIT(A)-24, MUMBAI DT 13-04-2015 AND 28-07-2016 AND THEY PERTAIN TO AY 2012-13. SINCE C OMMON FACTS AND ISSUES 2 M/S SHREE LAXMI DEVELOPERS ARE INVOLVED, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO.2 562/MUM/2017 ARE THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF BUILDE RS AND DEVELOPERS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 29-09-2012 DECLARING TOTAL INCOME AT RS.21,572. THE CASE HAS BEEN SELECTED FO R SCRUTINY UNDER CASS AND NOTICES U/S 143(2) AND 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAILS, AS CAL LED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT INFORMA TION RECEIVED FROM OFFICE OF DIRECTOR OF INCOME-TAX (INV), MUMBAI IN THE CASE OF BENEFICIARIES OF ACCOMMODATION ENTRIES OBTAINED FROM PRAVINKUMAR JA IN. ON GOING THROUGH THE LIST FURNISHED BY THE INVESTIGATION WING, IT WAS SE EN THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES OF LOAN BEING TAKEN FROM GROUP COMPANIES OF PRAVINKUMAR JAIN. THEREFORE, THE AO C ALLED UPON THE ASSESSEE TO FURNISH DETAILS OF LOANS TAKEN FROM JOSH TRADING CO MPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ALONGWITH CONFIRMATION LETTERS A ND THEIR FINANCIAL STATEMENTS. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FURNISHED DETAILS OF UNSECURED LOANS TAKEN FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ALONGWITH CONFIRMATION LETTERS, BANK STATEMENTS AND FINANCIAL STATEMENTS OF THE PARTIES TO PROVE IDENTI TY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE AO, AFTER CONSIDERING RELEVANT 3 M/S SHREE LAXMI DEVELOPERS SUBMISSIONS OF THE ASSESSEE AND ALSO TAKING INTO AC COUNT INFORMATION RECEIVED FROM INVESTIGATION WING, OBSERVED THAT THE ASSESSEE IS BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED BY GROUP COMPANIES O F SHRI PRAVINKUMAR JAIN WHICH IS EVIDENT FROM THE FACT THAT SHRI PRAVINKUMA R JAIN WAS INVOLVED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES. THE A O FURTHER OBSERVED THAT SHRIDINESH CHOUDHARY A BROKER INVOLVED IN ARRANGING ACCOMMODATION ENTRIES FROM GROUP COMPANIES OF SHRI PRAVINKUMAR JAIN ADMIT TED IN HIS STATEMENT THAT SHRI PRAVINKUMAR JAIN WAS INDULGING IN PROVIDING AC COMMODATION ENTRIES THROUGH HIS VARIOUS CONCERNS AND NOT CARRYING OUT A NY GENUINE BUSINESS ACTIVITIES. THEREFORE, BASED ON THE INFORMATION RE CEIVED FROM INVESTIGATION WING, THE AO OPINED THAT THOUGH THE ASSESSEE HAS FU RNISHED VARIOUS DETAILS TO PROVE IDENTITY, THE LOAN TRANSACTIONS ARE NOT GENUI NE AND ACCORDINGLY MADE ADDITION U/S 68 OF THE INCOME-TAX ACT, 1961. BESID ES, THE AO ALSO DISALLOWED INTEREST PAID AGAINST THE SAID BOGUS LOANS. THE AO ALSO MADE ADDITIONS TOWARDS ESTIMATION OF NET PROFIT FROM BUSINESS ACTIVITY OF CONSTRUCTION OF ZOOM PLAZA AND AURM PARK. BESIDES, THE AO MADE ADDITION TOWAR DS DISALLOWANCE OF MVAT U/S 43B AND DISALLOWANCE OF CASH PAYMENT U/S 4 0A(3) OF THE INCOME-TAX ACT, 1961. 3 AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE THE CIT(A). BEFORE CIT(A), ASSESSEE FILED ELABORAT E WRITTEN SUBMISSIONS TO ARGUE THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDIT IONS IN RESPECT OF LOANS RECEIVED FROM JOSH TRADING COMPANY PVT LTD AND VIRA J MERCANTILE PVT LTD 4 M/S SHREE LAXMI DEVELOPERS DESPITE FURNISHING CONFIRMATION LETTERS ALONGWITH T HE FINANCIAL STATEMENTS OF THE PARTIES TO PROVE IDENTITY, GENUINENESS OF TRANSACTI ONS AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE FURTHER SUBMITTED THAT IN RE SPONSE TO NOTICE ISSUED U/S 133(6), THE ABOVE PARTIES FILED THEIR REPLIES ALONG WITH REQUIRED DOCUMENTS BEFORE THE AO, THEREFORE, THE AO WAS TOTALLY INCORR ECT IN COMING TO THE CONCLUSION THAT THE LOAN TRANSACTIONS ARE BOGUS ACC OMMODATION ENTRIES ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATIO N WING. AS REGARDS ADDITION MADE BY THE AO TOWARDS ESTIMATION OF NET PROFIT FRO M BUSINESS ACTIVITY OF CONSTRUCTION OF AURM PARK AND ZOOM PLAZA, THE ASSES SEE SUBMITTED THAT IT IS FOLLOWING PROJECT COMPLETION METHOD FOR ZOOM PLAZA AND PROFIT METHOD FOR AURM PARK AND MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR BOTH PROJECTS. THE AO, IGNORING ABOVE FACT HAS ESTIMATED NET PROFIT AT 10% ON EXPENDITURE INCURRED FOR BOTH THE PROJECTS. INSOFAR AS ADDITION TOWARDS CASH EXPENDITURE U/S 40A(3), THE ASSESSEE SUBMITTED THAT IT HAS MADE PURCHASE AT CONSTRUCTION SITE ON URGENT BASIS, THEREFORE, THE AO WAS ERRED IN DISALLOWING T HE SAME WITHOUT CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE. AS REGARDS DIS ALLOWANCE OF MVAT U/S 43B, ASSESSEE SUBMITTED THAT IT IS FOLLOWING PROJECT COM PLETION METHOD AND SAID MVAT HAS BEEN CONSIDERED IN AY 2014-15, THEREFORE, THE AO WAS ERRED IN DISALLOWING MVAT U/S 43B OF THE ACT. THE CIT(A), A FTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON PLETHORA OF JUDGEMENTS CONFIRMED ADDITIONS MADE BY THE AO TOWARDS UNSECURE D LOAN FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD. THE CIT(A) ALSO CONFIRMED 5 M/S SHREE LAXMI DEVELOPERS ADDITION MADE BY THE AO TOWARDS ESTIMATION OF NET P ROFIT FROM ZOOM PLAZA AND AURM PARK AND ALSO ADDITION MADE TOWARDS CASH PURCH ASES U/S 40A(3) OF THE ACT; HOWEVER, DELETED ADDITION MADE BY THE AO TOWAR DS MVAT U/S 43B OF THE ACT. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSE E IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS ADDITION MADE BY THE AO TOWARDS UNSECURED LOAN U/S 68 OF THE ACT. THE A O MADE ADDITION TOWARDS UNSECURED LOANS ALONGWITH INTEREST THEREON RECEIVED FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ON THE GROUND THAT THESE ARE BOGUS ACCOMMODATION ENTRIES RECEIVED FROM GROUP COM PANIES OF SHRI PRAVINKUMAR JAIN. ACCORDING TO THE AO, THE ASSESSE E IS THE BENEFICIARY OF ACCOMMODATION ENTRIES PROVIDED BY SHRI PRAVINKUMAR JAIN FROM HIS BOGUS COMPANIES. THE AO FURTHER OBSERVED THAT THOUGH THE ASSESSEE HAS FURNISHED DETAILS OF IDENTITY, FAILED TO PROVE GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES IN THE BACKDROP OF CLEAR FINDINGS OF INVESTIGATION WING THAT SHRI PRAVINKUMAR JAIN HAS ADMITTED THAT H E WAS INDULGING IN PROVIDING ACCOMMODATION ENTRIES. THIS FACT HAS BEE N FURTHER CONFIRMED BY SHRI DINESH CHOUDHARY, BROKER INVOLVED IN ARRANGING ACCO MMODATION ENTRIES WITH SHRI PRAVINKUMAR JAIN, WHO STATED THAT SHRI PRAVINK UMAR JAIN IS INDULGING IN PROVIDING ACCOMMODATION ENTRIES, THEREFORE, THE AO OPINED THAT UNSECURED LOANS STATED TO BE RECEIVED FROM THOSE COMPANIES AR E UNEXPLAINED CREDIT AND HENCE MADE ADDITION U/S 68 OF THE ACT. IT IS THE C ONTENTION OF THE ASSESSEE THAT LOANS RECEIVED FROM JOSH TRADING COMPANY PVT LTD AN D VIRAJ MERCANTILE PVT 6 M/S SHREE LAXMI DEVELOPERS LTD ARE SUPPORTED BY VALID DOCUMENTS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED CONFIRMATION LETTERS ALONGWITH COPIES OF THEIR BANK STATEMENT AND ACKNOWLEDGEMENT OF IT RETURNS SHOWING THE ABOVE TR ANSACTIONS. THE ASSESSEE FURTHER CONTENDED THAT IN RESPONSE TO NOTICES U/S 1 33(6) ISSUED BY AO, THE ABOVE PARTIES REPLIED ALONGWITH DOCUMENTS MENTIONED IN TH E NOTICE, THEREFORE, THERE IS NO REASON FOR THE AO TO DOUBT THE TRANSACTIONS ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING THAT TOO, WITHOUT PROVIDING ANY OPPORTUNITY OF CROSS EXAMINATION OF THE PARTIES. IN THIS REGARD, HE RELIED UPON PLETHORA OF JUDGEMENTS INCLUDING THE JUDGEMENT OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD 349 ITR 680 (BOM) AND HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PVT LTD VS CIT 216 CTR 295(SC). 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADDITION TOWARDS UNSECURED LOANS RECEIVED FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD ON THE BASIS OF INFORMATIO N RECEIVED FROM INVESTIGATION WING WHICH REVEALED THAT THE ASSESSEE IS THE BENEFI CIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED BY SHRI PRAVEENKUMAR JAIN THROUGH HIS BOGUS COMPANIES. THE AO HAS MADE ADDITIONS U/S 68 OF THE INCOME-TAX ACT, 1961 ON THE GROUND THAT THOUGH THE ASSESSEE HAS FURNISHED N ECESSARY EVIDENCES TO PROVE IDENTITY OF THE PARTIES, BUT FAILED TO ESTABLISH GE NUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF PARTIES IN THE BACKDROP OF CLEA R FINDINGS OF INVESTIGATION WING THAT THOSE COMPANIES ARE HAWALA COMPANIES INVO LVED IN PROVIDING 7 M/S SHREE LAXMI DEVELOPERS ACCOMMODATION ENTRIES. THE AO HAS BROUGHT OUT FACT S IN THE LIGHT OF STATEMENT OF SHRI PRAVINKUMAR JAIN DEPOSED BEFORE THE INVESTI GATION WING TO MAKE ADDITION. EXCEPT THIS, THERE IS NO CONTRARY EVIDEN CE IN THE POSSESSION OF THE AO TO DISPROVE THE LOAN TRANSACTIONS FROM JOSH TRADING COMPANY PVT LTD AND VIRAJ MERCANTILE PVT LTD. ON THE OTHER HAND, THE ASSESSE E HAS FURISHED VARIOUS DETAILS INCLUDING CONFIRMATION LETTERS FROM THE PARTIES, TH EIR BANK STATEMENTS ALONGWITH THEIR FINANCIAL STATEMENTS TO PROVE IDENTITY, GENUI NENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE ALS O FURNISHED EVIDENCES TO PROVE THAT THE PARTIES HAVE RESPONDED TO THE NOTICES ISSU ED U/S 133(6) BY AO BY FILING VARIOUS DETAILS. THE ASSESSEE ALSO FILED BANK STAT EMENTS TO PROVE THAT THE SAID UNSECURED LOANS HAVE BEEN REPAID IN THE SUBSEQUENT FINANCIAL YEARS. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO REASON FOR THE AO TO DOUBT THE GENUINENESS OF TRANSACTIONS DESPITE FURNISHING NECESSARY EVIDEN CES INCLUDING THEIR FINANCIAL STATEMENTS, BANK STATEMENTS AND IT RETURNS. 6. THE AO HAS MADE ADDITION U/S 68 OF THE ACT, ON THE GROUND THAT THE UNSECURED LOANS ARE BOGUS ACCOMMODATION ENTRIES PRO VIDED BY SHRI PRAVINKUMAR JAIN THROUGH HIS HAWALA COMPANIES. THE PROVISIONS OF SECTION 68 DEAL WITH CASES WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN ANY FINANCIAL YEAR AND THE ASSESSEE OFF ERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THEN SUM SO CREDIT ED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. A PLAIN READING 8 M/S SHREE LAXMI DEVELOPERS OF SECTION 68 MAKES IT CLEAR THAT THE INITIAL BURDE N OF PROOF LIES ON THE ASSESSEE. IT IS WELL SETTLED LEGAL POSITION THAT THE ASSESSEE HAS TO DISCHARGE 3 MAIN INGREDIENTS IN ORDER TO DISCHARGE THE INITIAL BURDE N OF PROOF, I.E. THE IDENTITY OF THE CREDITOR, THE GENUINENESS OF TRANSACTION AND CR EDITWORTHINESS OF THE CREDITORS. ONCE THE ASSESSEE DISCHARGES INITIAL BU RDEN PLACED UPON HIM, THEN THE BURDEN TODIS PROVE THE SAID CLAIM SHIFTS UPON THE A O. IN THIS CASE, THE ASSESSEE HAS DISCHARGED HIS ONUS CAST U/S 68 BY FILING IDENT ITY OF THE CREDITORS, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS FURNISHED FINAN CIAL STATEMENTS OF THE CREDITORS WHEREIN THE SAID TRANSACTION HAS BEEN DISCLOSED IN THE RELEVANT FINANCIAL YEARS. WE FURTHER NOTICE THAT THE ASSESSEE ALSO FILED FINA NCIAL STATEMENTS OF THE CREDITORS WHICH ARE ENCLOSED IN PAPER BOOK FILED. ON PERUSAL OF THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE, WE FIND THAT BOTH THE COMPANIES ARE ACTIVE IN THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS. THIS FACT HAS BEEN FURTHER SUPPORTED BY THE LETTER OF AO WHEREIN THE AO HAS AC CEPTED THAT BOTH COMPANIES, VIZ. JOSH TRADING COMPANY PVT LTD AND VI RAJ MERCANTILE PVT LTD ARE ACTIVE IN MCA WEBSITE. WE FURTHER NOTICE THAT BOTH THE COMPANIES HAVE FILED FINANCIAL STATEMENTS FOR THE YEAR ENDING 31-0 3-2006. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGE D ITS INITIAL BURDEN CAST U/S 68 BY FILING IDENTITY, GENUINENESS OF TRANSACTION A ND CREDITWORTHINESS OF THE PARTIES. ONCE, THE ASSESSEE HAS DISCHARGED ITS INI TIAL BURDEN, THE BURDEN SHIFTS TO THE AO TO PROVE OTHERWISE. IN THIS CASE, THE AO MA DE ADDITION ONLY ON THE BASIS 9 M/S SHREE LAXMI DEVELOPERS OF INFORMATION RECEIVED FROM INVESTIGATION WING, BU T NOT BASED ON ANY EVIDENCE TO DISPROVE THE LOAN TRANSACTION FROM ABOVE COMPANI ES ARE INGENUINE. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO REAS ON FOR THE AO TO TREAT LOANS FROM ABOVE 2 COMPANIES AS UNEXPLAINED CREDITS U/S 6 8 OF THE ACT. 7. COMING TO THE CASE LAWS RELIED UPON BY THE ASSES SEE, THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD (2017) 394 ITR 680 (BOM). WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE I N THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE HONBLE HIGH COURT C ATEGORICALLY OBSERVED THAT THE PROVISO TO SECTION 68 HAS BEEN INSERTED BY THE FINANCE ACT, 2012 WEF 01-04- 2013 IS APPLICABLE FROM AY 2013-14 ONWARDS. THE CO URT FURTHER OBSERVED THAT THE PARLIAMENT DID NOT INTRODUCE THE PROVISO TO SEC TION 68 WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO INTRODUCED STATES THAT IT WAS INTRODUCED FOR REMOVAL OF DOUBTS. THEREFORE, IT IS NOT OPEN TO GIVE RETRO SPECTIVE EFFECT. THE RELEVANT PORTION OF THE ORDER OF HIGH COURT IS EXTRACTED BEL OW:- THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED BY T HE FINANCE ACT, 2012 WITH EFFECT FROM 1-4-2013. THUS, IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14 ONWARDS AND N OT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUN AL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH T HE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1-42013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCED TO PROVI SO OF SECTION 68, WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO TO INTRODUCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR T HAT IT IS 'DECLARATORY'. THEREFORE, IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68IS 10 M/S SHREE LAXMI DEVELOPERS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION O F SECTION 68 BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHI LE CONFIRMING THE SECTION 68 LAID DOWN BY THE COURT NAMELY THE GENUIN ENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVES TOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACT IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEH ALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIV ES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAR EHOLDERS, I.E., THEY ARE BOGUS. THE APEX COURT IN A CASE IN THIS CONTEXT TO THE PRE- AMENDED SECTION 68 HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME-TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHOLDER AND AS SESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CA SH CREDIT. [PARA 3] 8. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ARCHID INDUSTRIES PVT L TD IN ITA NO1433/MUM/2014 DATED 5 TH JULY, 2017. THE HONBLE BOMBAY HIGH COURT, AFTER CONSIDERING RELEVANT FACTS AND ALSO BY FOLLOW ING JUDGEMENT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE PVT LTD (SUPRA) HEL D AS UNDER:_ 6] THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HA S PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS O F THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH THE CONFIRMATIO N, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MON EY. IT WAS ALSO OBSERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECORD REGARDING ISSUANCE OF SHARE I.E. ALLO TMENT OF SHARES TO THESE PARTIES, THEIR SHARE APPLICATION FORMS, ALLOT MENT LETTERS AND SHARE CERTIFICATES, SO ALSO THE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLO SES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOU S DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSONS HAD NOT APPEAR ED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE. THE JUDGMENT IN CASE OF GAGANDEEP INFRASTRUCTURE (P) LT D (SUPRA) WOULD 11 M/S SHREE LAXMI DEVELOPERS BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 9. THE ASSESSEE HAS ALSO RELIED UPO THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS PVT LTD (2008) 21 6 CTR 195 (SC). THE HONBLE APEX COURT WHILE DELETING THE ADDITION MADE U/S 68 OBSERVED THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW, BUT THIS AMOUNT OF SHARE APPLICATION MONEY CANNOT B E REGARDED AS UNDISCLOSED INCOME U/S 68 OF THE INCOME-TAX ACT, 1961. 10. COMING TO THE CASE LAWS RELIED UPON BY THE LD.DR. T HE LD.DR RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF PRINCIPAL CIT VS BIKRAM SINGH IN ITA NO.55/DEL/2017 DATED 25-03-2017 . WE HAVE GONE THROUGH THE CASE LAW RELIED BY THE LD.DR IN THE LIG HT OF FACTS OF THE PRESENT CASE AND FIND THAT THE FACTS OF CASE BEFORE HONBLE DELH I HIGH COURT ARE ENTIRELY DIFFERENT FROM FACTS OF THE PRESENT CASE. THE HON BLE DELHI HIGH COURT, HAS CONSIDERED THE FACT THAT THE INDIVIDUALS, WHO ADVAN CED LOANS HAD NO FINANCIAL STRENGTH TO LEND SUCH HUGE SUM OF MONEY TO THE ASSE SSEE, THAT TOO, WITHOUT ANY COLLATERAL SECURITY WITHOUT INTEREST AND WITHOUT A LENDER AGREEMENT. UNDER THESE FACTS, THE HONBLE COURT HELD THAT MERE ESTABLISHIN G OF THEIR IDENTITY AND THE FACT THAT THE AMOUNTS HAVE BEEN TRANSFERRED THROUGH CHEQ UE PAYMENT DOES NOT BY ITSELF MEAN THAT THE TRANSACTIONS ARE GENUINE. IN THIS CASE, THE ASSESSEE HAS FURNISHED ALL EVIDENCES AND ALSO THE PARTIES PERSON ALLY RESPONDED TO THE NOTICES 12 M/S SHREE LAXMI DEVELOPERS ISSUED BY THE AO U/S 133(6) BY FILING VARIOUS DETAI LS, THEREFORE, CASE LAW RELIED UPON BY THE LD.DR CANNOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATI O OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWOR THINESS OF THE PARTIES. THEREFORE, THERE IS NO REASON FOR THE AO TO MAKE AD DITION TOWARDS LOAN U/S 68 OF THE ACT. HENCE, WE DIRECT THE AO TO DELETE ADDITIO N MADE TOWARDS LOANS ALONGWITH INTEREST U/S 68 OF THE ACT. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S ESTIMATION OF NET PROFIT FROM ZOOM PLAZA AND AURM PARK. THE AO HAS ESTIMATE D NET PROFIT FROM ZOOM PLAZA AND AURM PARK ON THE GROUND THAT THE ASSESSEE IS FOLLOWING DIFFERENT METHODS OF ACCOUNTING FOR DIFFERENT PROJECTS. THE AO FURTHER OBSERVED THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD FOR NEW PROJECT AURM PARK, WHEREAS FOR THE EARLIER PROJECT ZOOM PLAZA IT HAS F OLLOWED PROFIT METHOD. ACCORDING TO THE AO ASSESSEE CAN FOLLOW ONLY ONE ME THOD OF ACCOUNTING AND NOT MANY METHODS OF ACCOUNTING FOR ITS CONVENIENCE. THE ASSESSEE HAS NOT MAINTAINED SEPARATE ACCOUNTS FOR BOTH PROJECTS. AC CORDINGLY, THE AO WORKED OUT NET PROFIT OF 10% ON TOTAL EXPENDITURE INCURRED TOWARDS BOTH THE PROJECTS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT IS CONSIS TENTLY FOLLOWING PROJECT COMPLETION METHOD FOR AURM PARK AS THE SAME IS ITS OWN PROJECT WHEREAS IT IS FOLLOWING PROFIT METHOD FOR ZOOM PLAZA FOR SEVERAL YEARS. THE ASSESSEE FURTHER CONTENDED THAT IT IS MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR BOTH THE PROJECT 13 M/S SHREE LAXMI DEVELOPERS AND THE SAME HAS BEEN FURNISHED BEFORE THE AO. THE AO WITHOUT ASSIGNING ANY REASONS, ESTIMATED NET PROFIT OF 10% ON TOTAL EXPEN DITURE INCURRED ON BOTH THE PROJECTS. 13. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL AVAILABLE ON RECORD WE FIND THAT THE AO HAS ESTIMATED 10% NET PROFIT ON BOTH THE PROJECTS WITHOUT ASSIGNING ANY REASONS FOR INCORRECTNESS IN BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR BOTH THE PROJECTS. WE FURTHER NOTICE THAT THE AO IS ONLY ON THE POINT THAT THE ASSESSEE CAN FOLLOW ONLY ONE METHOD OF ACCOUNTING FOR BOTH THE PROJECTS. WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO THAT WHEN ASSESSEE IS FOLLOWING DIFFERENT METHOD OF ACCOUNTING FOR DIF FERENT PROJECTS, THAT TOO, CONSISTENTLY FOR MANY YEARS, THERE IS NO REASON FOR THE AO TO REJECT THOSE BOOKS OF ACCOUNT AND ESTIMATE NET PROFIT. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN ESTIMATING NET PROFIT OF 10% ON BOTH T HE PROJECTS. HENCE, WE DIRECT THE AO TO ADOPT NET PROFIT AS DECLARED BY THE ASSE SSEE FOR BOTH THE PROJECTS. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S DISALLOWANCE OF PURCHASES U/S 40A(3). THE AO DISALLOWED PURCHASES OF RS.57,705 U/S 40A(3) ON THE GROUND THAT THE ASSESSEE HAS MADE CASH PURCH ASES IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THAT CASH PURCHASES ARE MADE AT CONSTRUCTION SITE O N AN URGENT BASIS. THEREFORE, THE AO WAS INCORRECT IN DISALLOWING CASH PURCHASES WITHOUT CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE. 15. HAVING HEARD BOTH THE SIDES, WE DO NOT FIND ANY MER IT IN THE ARGUMENTS OF 14 M/S SHREE LAXMI DEVELOPERS THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS N OT ASSIGNED ANY REASONS FOR CASH PAYMENTS FOR PURCHASES IN CONTRAVENTION OF SEC TION 40A(3) OF THE ACT. THOUGH THE ASSESSEE CLAIMS TO HAVE MADE PURCHASES A T CONSTRUCTION SITE ON URGENT BASIS, THE REASONS GIVEN BY THE ASSESSEE ARE NOT COMING WITHIN THE EXCLUSION PROVIDED UNDER RULE 6DD OF I.T. RULES, 19 62. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS RIGHT IN DISALL OWING CASH PURCHASES U/S 40A(3) OF THE ACT; HENCE, WE UPHOLD THE ADDITION MA DE BY THE AO AND REJECT GROUND RAISED BY THE ASSESSEE. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ITA 5954/MUM/2016 17. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION FROM GROUNDS 1 & 2 IS ADDITION TOWARDS UNSECURED LOAN RECEIVED FROM ATHAR VA BUSINESS PVT LTD & JOSH TRADING CO. PVT LTD. THE FACTS RELATING TO TH E IMPUGNED ADDITION ARE SIMILAR TO THE FACTS DISCUSSED IN PRECEDING PARAGRA PHS IN ITA NO.2562/MUM/2017. IN THIS CASE, THE ASSESSEE HAS R ECEIVED LOANS FROM ATHARVA BUSINESS PVT LTD AND JOSH TRADING CO. PVT LTD. THE AO MADE ADDITION ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATIO N WING BY STATING THAT THESE COMPANIES ARE HAWALA COMPANIES OF SHRI PRAVINKUMAR JAIN, WHO IS INDULGING IN PROVIDING ACCOMMODATION BILLS. ON THE OTHER HAND, THE ASSESSEE HAS FURNISHED ALL THE DETAILS TO PROVE IDENTITY, GENUINENESS OF T RANSACTIONS, CREDITWORTHINESS OF THE PARTIES. THEREFORE, WE ARE OF THE CONSIDERED V IEW THAT THE REASONS GIVEN BY US IN THE PRECEDING PARAGRAPHS, WHILE DEALING WITH SIMILAR ADDITION IN ITA 15 M/S SHREE LAXMI DEVELOPERS NO.2562/MUM/2017 SHALL MUTATIS MUTANDIS APPLY IN TH IS CASE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN MAKING ADDITION TOWARDS UNSECURED LOANS U/S 68 OF THE ACT. HENCE, WE DELET E THE ADDITION MADE BY THE AO TOWARDS UNSECURED LOANS U/S 68 OF THE ACT. 18. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S DISALLOWANCE OF INTEREST OF RS.4,27,649 U/S 40(A)(IA) OF THE ACT. THE AO DISALLOWED INTEREST PAID TO FINANCIAL INSTITUTIONS U/S 40(A)(IA) FOR FA ILURE TO DEDUCT TAX U/S 194A OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS PAID INTEREST TO FINANCIAL INSTITUTIONS BY WAY OF POST DATED CHEQUES IN ADVANCE BASED ON THE INSTALMENTS GRANTED BY THEM AND HENCE, THERE IS NO OCCASION FOR THE ASSESSEE TO WITHHOLD TAX U/S 194A OF THE ACT. THE AO, WITHOUT APPRECIATING THE FACT HAS DISALLOWED INTEREST U/S 40(A)(IA) WHICH IS INCORREC T. 19. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURC E U/S 194A IN RESPECT OF INTEREST PAYMENT TO FINANCIAL INSTITUTION THOUGH IT REQUIRES TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194A OF THE ACT. THE REA SONS GIVEN BY THE ASSESSEE THAT IT HAS PAID INTEREST THROUGH POST DATED CHEQUE S IN ADVANCE BASED ON THE INSTALMENTS GRANTED BY THE BANKS CANNOT ABSOLVE THE ASSESSEE OF HIS RESPONSIBILITY OF DEDUCTING TAX AT SOURCE AS PER TH E PROVISIONS OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON INTEREST PAYMENT, THE AO HAS RIGHTLY DISALLOWED INTEREST U/S 40(A)(IA) OF THE AC T. THE CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY UPHELD THE A DDITION MADE BY THE AO. WE 16 M/S SHREE LAXMI DEVELOPERS DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A); H ENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE CIT(A) AND REJECT GROUND RAISED BY THE ASSESSEE. 20. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. 21. AS A RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH DECEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 17 M/S SHREE LAXMI DEVELOPERS DATE INITIAL 1. DRAFT DICTATED ON 07.12 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26.12 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DRAFT DICTATION SHEETS ARE ATTACHED SR.PS