ITO - 18(1)(2), MUMBAI V. BHAVANA METAL COMPANY, MUMBAI

ITA 5973/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5627 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: SHAILESH PARMARAR
• Keywords: Bogus purchase; Search and seizure; Reasonable cause; Accommodation entries; Onus to prove; Bogus loan; Reassessment proceedings
• Section: 143(3); 131; 68; 148; 132

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -DBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./5973/MUM/2016, /ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER-18(1)(2) ROOM NO.204, 2ND FLOOR EARNEST HOUSE, NARIMAN POINT MUMBAI-400 021. VS. M/S. BHAVANA METAL COMPANY SHOP NO.7, NATHURAM PODDAR MARG 111/119, THAKURDWAR ROAD, MUMBAI-400 002. PAN:AAAFB 5010 H ( /APPELLANT) ( / RESPONDENT) C.O. NO.70/MUM/2018 (ARISING OUT OF ./I.T.A./5973/MUM/2016) /ASSESSMENT YEAR: 2007-08 M/S. BHAVANA METAL COMPANY MUMBAI-400 002. VS. INCOME TAX OFFICER-18(1)(2) MUMBAI-400 021. ( /CROSS PBJECTOR) ( / RESPONDENT) / REVENUE BY: SHRI RAM TIWARI-CIT-DR /ASSESSEE BY: SHRI SHAILESH PARMAR-AR / DATE OF HEARING: 12/06/2018 / DATE OF PRONOUNCEMENT: 04/07/2018 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 28/07/2016 OF THE CIT( A)- 29,MUMBAI,THE ASSESSING OFFICER (AO)HAS FILED PRESENT APPEAL.THE ASSESSEE HAS RAISE D CROSS OBJECTION.THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN NON FERROUS METALS.IT FILED ITS RETURN OF INCOME ON 30/10/2007, DECLARING TOTAL INCOME AT RS. NIL.THE ASSESSMENT WA S COMPLETED, U/S. 143(3) (II) R.W.S. 147 OF THE ACT,ON 18 TH MARCH, 2015, DETERMINING THE INCOME OF THE ASSESSE E AT RS.50 LAKHS. ITA/5973/MUM/2016 2. FIRST EFFECTIVE GROUND OF APPEAL, RAISED BY THE AO, IS ABOUT DELETING THE ADDITION MADE BY HIM U/S. 68 OF THE ACT . DURING THE ASSESSMENT PROCEEDINGS, HE OBSERVED THAT THERE WERE REASONS TO BELIEVE THAT THE ASSESSEE HAD AVAILED OF ACCOMMODATION ENTRIES FOR U NSECURED LOANS.HE HAD RECEIVED INFORMA -TION IN THAT REGARD FROM THE OFFICE OF THE DIRECTO R-GENERAL OF INCOME TAX (INV.). HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKING IT AS TO W HY AN AMOUNT OF RS. 50 LAKHS, SHOWN AS LOANS, SHOULD NOT BE ADDED TO ITS INCOME.THE ASSESS EE FILED AN EXPLANATION ALONG WITH CERTAIN DOCUMENTS,INCLUDING THE LOAN CONFIRMATIONS OF THE L ENDERS. HOWEVER,THE AO WAS NOT SATISFIED WITH THE REPLY AND OBSERVED THAT DURING THE SEARCH AND SEIZURE PROCEEDINGS CARRIED OUT IN THE ITA NO.5973/M/16 & C.O. NO.70/M/18 M/S. BHAVANA METAL COMPANY 2 CASE OF BHANVAR LAL JAIN(BLJ) STATEMENTS UNDER OATH WERE RECORDED OF RITESH SIROYA(RS) PROPRIETOR OF A2 JEWELS AND GHANSHAYAM VASHISHTH(GV ) PROPRIETOR OF JEWEL DIAM, THAT RS AND GV HAD ADMITTED THAT THEY HAD ISSUED ACCOMMODAT ION ENTRIES ONLY IN THE FORM OF UN - SECURED LOANS TO THE BENEFICIARIES, THAT THE ASSESS EE HAD SOUGHT SUCH ENTRIES FROM RS AND GV. FINALLY,HE MADE A DISALLOWANCE OF RS. 50 LAKHS, INV OKING THE PROVISIONS OF SECTION 68 OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE DETAILED SUBMISSI ONS. TAKING INTO CONSIDERATION CLAIM OF THE ASSESSEE THAT LOANS WERE REPAID THROUGH ACCO UNT PAYEE CHEQUES TO BOTH THE LENDERS AND THE DOCUMENTS SUBMITTED BY IT,THE FAA CALLED FOR A REMAND REPORT FROM THE AO.VIDE HIS LETTER,DATED 25/07/2006, THE AO FORWARDED THE COPIE S OF STATEMENTS OF BLJ AND RS. HE DID NOT SUBMIT THE STATEMENTS OF GV. AFTER GOING THROUGH THE STATEMENTS OF BLJ AND RS,TH E FAA OBSERVED THAT THERE WAS NO ADMISSION ANYWHERE BY THE LENDERS,THAT THEY HAD PRO VIDED ACCOMMODATION ENTRIES TO THE ASSESSEE,THAT THE CONCLUSION DRAWN BY THE AO WAS A MERE PRESUMPTION,THAT HE HAD NOT SUBSTANTIATED HIS STAND WITH ANY DOCUMENTARY EVIDEN CE, THAT BLJ HAD NEVER ACCEPTED THAT HE WAS PROVIDING ACCOMMODATION ENTRIES FOR UNSECURED L OANS, THAT HE HAD ADMITTED OF ISSUING SOME PAPER ENTRIES FOR PURCHASES, THAT ALL THE ENTR IES FOR PURCHASES WERE NOT ACCOMMODATION ENTRIES, THAT HE HAD NOT ADMITTED ANYWHERE THAT ACC OMMODATION ENTRIES FOR SECURED LOANS WERE GIVEN BY HIM,THAT RS HAD ALSO NOT ADMITTED THAT HE WAS IN THE BUSINESS OF PROVIDING ACCOMMO -DATION ENTRIES FOR UNSECURED LOANS, THAT THE NAME OF THE ASSESSEE WAS NOT FIGURING ANYWHERE. HE FURTHER OBSERVED THAT BOTH THE LENDERS WERE REGU LAR INCOME TAX ASSESSEES, THAT THE LOANS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES, THAT L OAN CONFIRMATION AND AFFIDAVITS FROM RS AND GV WERE SUBMITTED DURING THE ASSESSMENT PROCEED INGS, THAT THE ASSESSEE HAD FILED THE BANK ACCOUNT DETAILS OF THE LENDERS, THAT IT HAD RE CEIVED A LOAN OF RS. 25 LAKHS ON 12/05/2006 FROM RS OF A 2 JEWELS, THAT SAME WAS REPAID THROUGH ACCOUNT PAYEE CHEQUE ON 11/05/2007, THAT THE LOAN TAKEN FROM GV WAS ALSO PAID THROUGH B ANKING CHANNELS IN THE MONTH OF MAY 2007, THAT THE LOANS WERE REFLECTED UNDER THE HEAD LOANS AND ADVANCES IN THE BALANCE SHEETS FOR THE AY. 2007-08, THAT THERE WERE NO CASH DEPOSI TS OR WITHDRAWALS IN ANY OF THE BANK ACCOUNTS TO SUPPORT THE VIEW OF THE AO THAT THE TRA NSACTION IN QUESTION REPRESENTED ACCOMMODATION ENTRIES.FINALLY, ALLOWING THE APPEAL OF THE ASSESSEE, HE HELD THAT LOANS TAKEN BY IT WERE GENUINE. ITA NO.5973/M/16 & C.O. NO.70/M/18 M/S. BHAVANA METAL COMPANY 3 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND STATED THAT IT WAS A SIMPLE CASE OF TAKING ACCOMMODATION ENTRIES, THAT BLJ, GV AND RS WERE ENGAGED IN ISSUING NON-GENUINE ENTRIES. HE RELIED UPON THE CASE OF SURESH L. SATYANI (ITA 3452/MUMBAI/2016,AY.2010-11, DATED 08/03/2017).THE AUTHORISED REPRESENTATIVE(AR) CONTENDED THAT LOAN CONFIRMATION LETTERS FROM THE LENDERS WERE SUBMITTED BEFORE THE AO ALONG WITH THE INCOME TAX RETURNS, BA NK STATEMENTS AND FINANCIALS, THAT GV AND RS HAD MADE SUBMISSIONS ABOUT THE TRANSACTION DURIN G THE ASSESSMENT PROCEEDINGS, THAT AFFIDAVITS OF THE LENDERS WERE FILED BY THE ASSESSE E,THAT IT HAD REPAID THE LOAN IN THE SUBSEQUE - NT YEARS,THAT THE ASSESSEE HAD REQUESTED THE AO TO DEPOSE THE LENDERS FOR VERIFICATION OF TRANSACTION,THAT THE COPY OF THE STATEMENT OF GV WA S NOT SUPPLIED EVEN TO THE FAA, THAT THE LENDERS HAD NOWHERE IMPLICATED THE ASSESSEE,THAT NO INCRIMINATING EVIDENCE WAS BROUGHT ON RECORD. HE RELIED UPON THE CASES OF VEEDHATA TOWER PVT. LTD. (ITA NO.819 OF 2015 DATED 17/ 04/2018);ALCON BIOSCIENCES PVT. LTD. (ITA NO.1946/MUM/2016 AY 2010 -11 DTD. 28/02/ 2018;INDUMATI M. BANSAL (ITA NO.3842/MUM/2017 AY 20 07-08 DTD.15/11/ 2017);VIKRAM MUKTILAL VORA (ITA NO.842/MUM/2017, AY2007-08 DTD.2 3/05/2017; ANIL CHAGGANLAL JAIN (ITA NO.369-70/MUM/2017,AY 2013-14 DTD.13/04/2017) . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER THE A O RECEIVED CERTAIN INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT, THAT SEARCH A ND SEIZURE PROCEEDINGS WERE CARRIED OUT IN CASE OF BLJ,THAT STATEMENTS OF RS, GV AND BLJ WERE RECORDED DURING THE SEARCH PROCEEDINGS, THAT THE AO HAD ISSUED A NOTICE UNDER SECTION 148 O F THE ACT, THAT THE ASSESSEE HAD FILED THE CONFIRMATIONS OF THE LENDERS AS WELL AS THE AFFIDAV ITS ABOUT THE GENUINENESS OF THE LOANS, THAT THE FAA HAD CALLED FOR A REMAND REPORT FROM THE AO, THAT AFTER CONSIDERING THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE HE HELD THAT IT WAS NOT A CASE OF ACCOMMODATION ENTRY. IT IS ALSO A FACT THAT THE LENDERS HAD NEVER ADMITTED THA T THE TRANSACTIONS ENTERED INTO WITH THE ASSESSEE WERE BOGUS. IN OUR OPINION, THE STATEMENT OF A PERSON HAS TO BE READ IN ENTIRETY- GENERAL OBSERVATION OF AN ASSESSEE, MADE DURING THE STATEMENTS RECORDED UNDER SECTION 131 OF SECTION 132 OF THE ACT, CANNOT BE MADE A BASE FOR M AKING ADDITION IN THE HANDS OF OTHER ENTITY.IN THE CASE BEFORE US,POSITIVE EVIDENCES WER E SUBMITTED BY THE ASSESSEE IN FORM OF BALANCE SHEETS, BANK DETAILS, INCOME TAX RETURNS DU RING THE ASSESSMENT PROCEEDINGS. IT WAS THE DUTY OF THE AO TO MAKE FURTHER ENQUIRIES INSTEAD OF JUST MAKING ADDITIONS ON THE BASIS OF REPORT OF THE INVESTIGATION WING. WE ARE OF THE OPI NION THAT THE ASSESSEE HAD DISCHARGED ITS ONUS AND THAT BURDEN OF PROOF WAS ON THE AO TO NEGA TE THE CLAIM MADE BY THE ASSESSEE ABOUT ITA NO.5973/M/16 & C.O. NO.70/M/18 M/S. BHAVANA METAL COMPANY 4 THE GENUINENESS OF THE LOAN TRANSACTIONS.THE ASSESS EE HAD DURING THE REASSESSMENT PROCEEDINGS INFORMED THE AO THAT IT WAS WILLING TO PRODUCE THE LENDERS BEFORE HIM FOR CROSS EXAMINATION.BUT,SURPRISINGLY HE DID NOT ASK THE ASS ESSEE TO PRODUCE THEM.IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY FACTUAL OR LEGAL INFIRMITY. 5.1. WE WOULD LIKE TO REFER TO THE CASE OF SURESH L. SA TYANI (SUPRA). IN THAT MATTER NOTICES UNDER SECTION 133 (6) OF THE ACT WERE ISSUED TO FOU R BENAMI CONCERNS FROM WHOM THE ASSESSEE HAD OBTAINED BOGUS BILLS OF PURCHASE, THAT THOSE PARTIES HAD GIVEN PART REPLIES, THAT THE ASSESSEE HAD FAILED TO PRODUCE THE PARTIES BEFO RE THE AO DESPITE BEING CALLED UPON TO PROVE THE GENUINENESS OF THE TRANSACTION. IN THE CA SE UNDER CONSIDERATION THE ASSESSEE HAD FILED ALL THE NECESSARY DETAILS LIKE AFFIDAVITS AND THE CONFIRMATIONS OF THE LENDERS ALONG WITH THE BANK DETAILS AND THE RETURNS OF INCOME TAX. THE AO HAD NOT MADE ANY COMMENTS ABOUT THESE DOCUMENTARY EVIDENCES. SECONDLY, THE CASE BEF ORE US IS ABOUT ACCOMMODATION ENTRIES AND NOT ABOUT BOGUS PURCHASES. 5.2. WE FIND THAT IN THE CASES OF VIKRAM MUKTI LAL VORA (SUPRA),THE TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE,THAT THAT IN THAT MATTER ISSUE OF ACCOMMODATION ENTRIES BY THE GROUP CONCERNS OF BLJ WAS DELIBERATED UPON. THE TRIBUNAL, IN THE SIMILAR CIRCUMSTANCES,HAD UPHELD THE ORDER OF THE FAA WHO HAD DELETED THE ADDITION M ADE BY THE AO UNDER THE HEAD ADDITION ON ACCOUNT OF ACCOMMODATION ENTRIES.CONSIDERING THE ABOVE,WE DECIDE THE FIRST EFFECTIVE GROUND AGAINST THE AO. 6. SECOND EFFECTIVE GROUND IS ABOUT DELETION OF ADDITI ON OF RS. 3.55 LAKHS ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE ON THE LOANS RECEIVED BY IT FROM RS AND GV.WE HAVE DECIDED THE FIRST EFFECTIVE GROUND OF APPEAL AGAINST THE AO AND THE INTEREST ISSUE IS DIRECTLY LINKED WITH THE LOAN TRANSACTIONS.SO,WE HOLD THAT THERE IS NEED TO INTERFERE WITH THE ORDER OF THE FAA.SECOND EFFECTIVE GROUND OF APPEAL IS DECIDED AG AINST THE AO. C.O. NO.70/MUM/2018 : 7. BEFORE US,THE AR STATED THAT THERE WAS DELAY OF 25 DAYS IN FILING THE CO,THAT THE PERSON CONCERNED DEALING WITH FILING OF APPEAL WAS NOT INF ORMED BY THE MEMBERS OF THE STAFF,THAT DELAY WAS NOT INTENTIONAL,THAT GROUND RAISED DEALT WITH LEGAL ISSUES ONLY.THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. ITA NO.5973/M/16 & C.O. NO.70/M/18 M/S. BHAVANA METAL COMPANY 5 WE HAVE GONE THROUGH THE APPLICATION FILED BY THE A SSESSEE FOR CONDONING THE DELAY ALONG WITH THE AFFIDAVIT.AFTER CONSIDERING THE AVAILABLE MATERIAL,WE ARE OF THE OPINION THAT DELAY WAS BECAUSE OF BY A REASONABLE CAUSE.HENCE,WE CONDO N THE DELAY. 8. IN ITS CO,THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REASSESSMENT PROCEEDINGS.BEFORE US,THE AR ARGUED THAT THE FAA HAD ERRED IN UPHOLDIN G THE REASSESSMENT PROCEEDINGS,THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DIS CLOSE TRUE AND FULL FACTS ABOUT THE TRANSACTION.HE RELIED UPON THE CASES OF ARCELI REA LITY LTD. (ITA NO.6492/MUM/2016, AY 2007-08 DTD.21/04/2017); SHRI SUNIL PRAKASH (ITA NO .6494/MUM/2014,AY 2005-06 DATED 08/03/2017; METRO DECORATIVE PVT.LTD. (ITA NO.450/D EL/2014 AY 2004-05,DTD.24/10/2017; ORACLE INDIA (P.) LTD. (83 TAXMANN.COM 368); CRESCE NT CONSTRUCTION CO.(82 TAXMANN.COM 468); META PLAST ENGINEERING PVT.LTD.(ITA NO.5780/D EL/2014 AY 2004-05 DTD.06/04/2018; VIRAT CREDIT & HOLDINGS PVT.LTD. (ITA NO.89/DEL/201 2 AND C.O. NO.57/DEL/2012 AY 2005- 06,DTD.09/02/2018) .THE DR SUPPORTED THE ORDER OF T HE FAA. IT IS FOUND THAT THE NOTICE UNDER 148 WAS ISSUED AF TER FOUR YEARS. THE ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 14.12.2009 A ND THE NOTICE FOR REASSESSMENT WAS ISSUED ON 26/03/2014.THEREFORE,THE PROVISO TO SECTI ON 147 WOULD BE APPLICABLE IN THE MATTER UNDER CONSIDERATION.WE ARE REPRODUCING THE REASONS RECORDED BY THE AO AND SAME READ AS UNDER: 1. INFORMATION HAS BEEN RECEIVED FROM THE OFFICE O F DIRECTOR GENERAL OF INCOME TAX, MUMBAI VIDE LETTER DGIT (INV.)/INFORMATION/BLJ/BOGU S SALES/2013-14 DATED 13 TH MARCH 2014 COMMUNICATED VIDE LETTER NO.CIT-14/INFORMATION BLJ/ BOGUS SALES/2013-14 DATED 24.3.2014 OF THE COMMISSIONER OF INCOME TAX-14, MUMBAI. THE I NFORMATION IS THAT, THERE WAS A SEARCH & SEIZURE ACTION WAS CARRIED OUT ON 3.10.2013 IN TH E CASE OF SHRI BHANWARLAL JAIN GROUP WHO IS ONE OF THE LEADING ENTRY PROVIDERS. EVIDENCE S COLLECTED AND THE STATEMENTS OF VARIOUS PERSONS RECORDED INCLUDING THAT OF SHRI BHANWARLAL JAIN DURING SEARCH ESTABLISHED THE MODUS OPERANDI AND LED TO DETECTION OF ACCOMMODATION ENTR IES TO CERTAIN BENEFICIARIES IN THE NATURE OF BOGUS LOANS AND ADVANCES, THE INVESTIGATION WING HAS EXERCISED DUE DILIGENCE WHICH REVEALED THAT THE ABOVE ASSESSEE , IS INVOLVED IN B OGUS LOANS AND ADVANCES FROM THE FOLLOWING PARTY: NAME OF THE FIRM PAN AMOUNT INVOLVED A2JEWELS AAMFA 7751 J RS.25,00,000/- JEWEL DIAM ABUPV 3494 J RS.25,00,000/- 2. SHRI BHANWARLAL JAIN HAVE ADMITTED UNDER OATH IN THE STATEMENTS RECORDED BY THE INCOME TAX DEPARTMENT THAT THEY HAVE NOT CARRIED OUT ACTUA L TRADING ACTIVITY AND HAVE ONLY ISSUED BOGUS LOANS AND ADVANCES. 3. IN VIEW OF THE ABOVE, I HAVE NO REASON TO BELIEV E THAT INCOME EXCEEDING RS. ONE LAKH HAS ESCAPED ASSESSMENT FOR AY 2007-08. ITA NO.5973/M/16 & C.O. NO.70/M/18 M/S. BHAVANA METAL COMPANY 6 8.1. A PERUSAL OF THE REASONS REVEAL THAT THE AO HAS NO WHERE ALLEGED THAT THERE WAS FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY TH E MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENT.IN OUR HUMBLE OPINION,THE ALLEGATION OF NOT DISCLOSING THE MATERIAL FACTS FULLY AND TRULY HAS TO BE PROVED I.E. AS TO HOW THE ASSESSEE DID NOT DISCLOSE THE MATERIAL FACTS.MERE REPETITION OF THE LANGUAGE OF THE SECTION IS NOT SU FFICIENT.IT HAS TO BE PROVED AS TO HOW AND WHICH MATERIAL FACTS WERE NOT DISCLOSED. IN THE CA SE UNDER CONSIDERATION, THE AO HAS NOT WHISPERED ANYTHING ABOUT THE FAILURE OF THE ASSESSE E.THEREFORE,WE ARE ALLOWING THE EFFECTIVE GROUND RAISED BY THE ASSESSEE IN ITS CO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED AND THE CO OF THE ASSESSEE IS ALLOWED. !' #$%& !' #$ %& ' . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY, 2018. ' ( 4 , 2018 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 04.07.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.