DCIT 12(1)(2), MUMBAI V. BUSINESS MATCH SERVICES (I) P. LTD., MUMBAI

ITA 6330/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5609 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LAKSHMI VARA PRASAD GUDE
• Keywords: Unexplained cash credit; Principle of natural justice; Earning of tax free income; Source of fund; Additional evidence; Accommodation entries; Onus to prove; Retraction; Revised return; TDS; Rule 8D; Set aside
• Section: 14A; 115JB; 133(6); 143(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6330/M/2017 ASSESSMENT YEAR: 2012-13 DCIT 12(1)(2), R.NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. M/S. BUSINESSMATCH SERVICES (I) PVT. LTD., 301, 306 TURNER ROAD, OPP. TAWA RESTAURANT, BANDRA (EAST), MUMBAI 400 050 PAN: AAACB6129N (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI LAKSHMI VARA PRASAD GUDE, A.R. REVENUE BY : SHRI JITENDRA JAIN, D.R. DATE OF HEARING : 16.04.2019 DATE OF PRONOUNCEMENT : 11.07.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 29.04.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.14,32,00,0 00/- & RS.2,50,00,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT. 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISALLOWANCE OF INTEREST OF RS.2,90,96,145 /- U/S 36(L)(III). 3. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISALLOWANCE OF INTEREST OF RS.46,90,257/- AS SAME RELATES TO UNSECURED LOAN. 4. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISALLOWANCE OF RS.4,87,52,408/- U/S14A. 5.THE APPELLANT PRAYS THAT FOR THESE AND OTHER REAS ONS IT IS SUBMITTED THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AN D THAT OF THE A.O. BE RESTORED. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 2 6. THE APPELLANT CRAVES LEAVE TO AMEND ADD, AMEND O R ALTER ALL OR ANY OF THE GROUNDS OF APPEAL' 3. THE ISSUE RAISED IN 1 ST GROUND OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.14,32,00,000/- & RS.2,50 ,00,000/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF THE UNEX PLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 29.09.2012 DECLARING LOSS OF RS.7,13,30,7 76/- UNDER THE NORMAL PROVISION OF THE ACT WHILE A BOOK PROFIT OF RS.23,79,302/- WAS DECLARED UNDER SECTION 115JB OF THE ACT. THE ASSESSEE E-FILED ITS REVISED RETURN OF INCOME O N 31.03.2014 DECLARING LOSS OF RS.8,52,55,660/- WHICH WAS PROCES SED UNDER SECTION 143(1) OF THE ACT. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AFTER ISSUING STATUTORY N OTICES WHICH WERE DULY SERVED UPON THE ASSESSEE. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOUND FROM THE PERUSAL O F THE TAX AUDIT REPORT THAT ASSESSEE HAS TAKEN LOANS FROM VAR IOUS PARTIES AGGREGATING TO RS.102,25,15,584/-. THE AO IN ORDER TO VERIFY THE GENUINENESS OF THE LOANS ISSUED NOTICE UNDER SECTIO N 133(6) OF THE ACT TO 19 PARTIES CALLING UPON THE LENDERS TO F ILE VARIOUS DETAILS SUCH AS COPIES OF ITRS FOR THREE YEARS, LED GER ACCOUNTS, BANK STATEMENTS, TDS DEDUCTED ON THE INTEREST, COLL ATERAL SECURITY IF ANY, SOURCE OF FUNDS AND FUNDS FLOW ST ATEMENT FOR THREE YEARS ETC. SINCE THE LENDERS TO WHOM THE NOTI CES WERE ISSUED HAVE RESPONDED PARTIALLY, THE AO ISSUED NOTI CE AGAIN UNDER SECTION 133(6) OF THE ACT TO 12 PARTIES AS ME NTIONED IN PARA 3.4 AS SOME OF THE PARTIES FAILED TO RESPOND. THEREAFTER THE AO CATEGORIZED THE TOTAL LOANS RAISED IN THREE CATE GORIES; ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 3 A) PERSONS TO WHOM THE NOTICES UNDER SECTION 133(6) OF THE ACT WERE ISSUED AND REPLIES WERE RECEIVED WHERE IN THE FINANCIAL STATEMENTS DID NOT PROVE THE CREDITWORTHI NESS OF THE LENDERS OR GENUINENESS OF THE TRANSACTIONS. B) PERSONS TO WHOM THE NOTICES UNDER SECTION 133(6) OF THE ACT REMAINED UNSERVED AND C) ACCOMMODATION ENTRIES 5. THE AO MADE ADDITION TO THE INCOME OF THE ASSESS EE TO THE TUNE OF RS.9,97,00,000/- IN RESPECT OF 7 PARTIES WH OSE CREDENTIALS ACCORDING TO THE AO WERE NOT SATISFACTO RY BY HOLDING THEM NON GENUINE TRANSACTIONS AS THE FINANCIAL STA TEMENTS FURNISHED BY THE SAID PARTIES DID NOT PROVE THE GEN UINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIE S DETAILS WHEREOF ARE AS UNDER. SI NO. NAME OF THE PARTY AMOUNT IN (RS) 1 CREATIVE DIAMOND PVT. LTD 14200000 2 AAKRUTI STONE 4300000 3 PADMAVATI CORPORATION 26500000 4 RAJGIRI EXPORTS PVT. LTD 26500000 5 R. RISHAB A CO 4700000 6 SAMRAT MERCHANDISE PVT. LTD 18500000 7 SHREE BHAIRAV STAR JEWELS PVT. LTD 5000000 TOTAL 9,97,00,000 6. THE AO ALSO ADDED RS.4,35,00,000/- IN RESPECT OF 4 PARTIES TO WHOM THE NOTICES REMAINED UNSERVED AS PER THE DE TAIL AS UNDER: ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 4 SR.NO . NAME OF THE PARTY LOAN TAKEN 1 LAKSHIKA DIAMOND PVT. LTD. 35,00,000 2 RAIKHABH TRADING PVT, LTD. 2,00,00,000 3 SHREE BHAIRAV DIAMOND PVT. LTD. 75,00,000 4 SHREE BHAIRAV GEMS 1,25,00,000 TOTAL 4,35,00,000 7. THE ABOVE TRANSACTIONS TOTALING TO RS.4,35,00,00 0/- REMAINED UNCONFIRMED. MOREOVER , THE ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS OF THE LENDERS AND GENUINENES S OF THE TRANSACTIONS AS REQUIRED UNDER SECTION 68 OF THE AC T. THE ADDITION OF RS.4,35,00,000 WAS MADE U/S.68 OF THE ACT BY THE AO BY TREATING THE LOANS OF RS.4,35,00,000 AS UNEXP LAINED CREDIT IN THE HANDS OF THE ASSESSEE. 8. THE AO ALSO ADDED RS.2,50,00,000/- RAISED BY THE ASSESSEE FROM DAKSH DIAMOND RS.1,00,00,000/- AND NAMAN EXPOR TS RS.1,50,00,000/- ON THE GROUND THAT THESE CONCERNS WERE GROUP CONCERNS OF M/S. BHANWARLAL JAIN GROUP AND REPRESEN TED HAWALA ENTRIES IN VIEW OF THE FACT THAT SHRI BHANW ARLAL JAIN DURING THE COURSE OF SEARCH ADMITTED THAT HE AND HI S ASSOCIATES WERE ENGAGED IN PROVIDING THE ACCOMMODATION ENTRIES OF PURCHASES, UNSECURED LOANS AND BOGUS SHARE CAPITAL. ACCORDING TO THE AO, THE SAID ENTRIES WERE OBTAINED BY THE AS SESSEE IN LIEU OF UNDECLARED CASH AND THUS FALL WITHIN THE AMBIT O F SECTION 68 OF THE ACT AS UNEXPLAINED CREDIT AND ACCORDINGLY T HESE TWO LOANS WERE ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 5 9. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO CONSIDERAT ION THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE. THE LD . CIT(A) HAS DELETED THE ADDITION OF RS.RS.14,32,000/- IN RESPEC T OF 11 PARTIES BY OBSERVING THAT THE ASSESSEE HAS DISCHARG ED ITS ONUS TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE L ENDERS AS WELL AS THE GENUINENESS OF THE LOAN TRANSACTIONS. THE L D. CIT(A) ALSO NOTICED THAT THE LENDERS HAVE CONFIRMED THE TRANSAC TION BY FILING REPLY TO THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT BY THE AO ACCEPTING THE LOANS GIVEN TO THE ASSESSEE, FURNI SHING FINANCIAL STATEMENTS, COPIES OF LEDGER ACCOUNTS, B ANK STATEMENTS AND TDS CERTIFICATES ISSUED BY THE ASSES SEE TO THE LENDERS BESIDES ITRS. THE LD. CIT(A) OBSERVED THAT ALL THESE LENDERS WERE EXISTING AND THEY HAVE GIVEN LOANS TO THE ASSESSEE AND THUS THE IDENTITY OF THE LENDERS IS VERY MUCH P ROVED. AS REGARDS CREDITWORTHINESS OF THE LENDERS THE LD. CIT (A) OBSERVED THAT ASSESSEE HAS FILED ITRS, PANS, BANK STATEMENTS , FINANCIAL STATEMENTS, CONFIRMATION FROM THE LENDERS AND THUS PROVED THAT THE LENDERS HAVE SUFFICIENT MONEY TO LEND TO THE AS SESSEE. EVEN THE SAID LOANS WERE DULY RECORDED IN THEIR RESPECTI VE BOOKS OF ACCOUNTS AND THUS THE CREDITWORTHINESS OF THE LENDE RS WAS DULY PROVED. IN RESPECT OF GENUINENESS OF THE TRANSACTI ONS, LD. CIT(A) NOTED THAT THE SAME WERE DONE THROUGH BANKING CHANN EL AND THERE WAS NO MOVEMENT OF CASH. EVEN THE LENDERS HA VE DEMONSTRATED THAT THEY HAVE BALANCES IN THEIR BANK ACCOUNTS IN THE SHAPE OF SUNDRY DEBTORS AS WELL AS LOANS AND AD VANCES AND THUS PROVED THE GENUINENESS OF THE TRANSACTIONS. T HE LD. CIT(A) OBSERVED THAT WHEN THE NOTICES ISSUED BY THE AO UND ER SECTION 133(6) OF THE ACT WERE DULY COMPLIED BY THE PARTIES ACCEPTING THE ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 6 LOAN TRANSACTIONS WITH THE ASSESSEE, THERE IS NO JU STIFICATION IN MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE. 10. IN RESPECT OF THE LOANS RAISED FROM TWO CONCERNS AGGREGATING TO RS.2,50,00,000/- COMPRISING RS.1,00, 00,000/- FROM DAKSH DIAMOND AND RS.1,50,00,000/- FROM NAMAN EXPORT, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE H AS FILED ALL THE NECESSARY DOCUMENTS WITH AO AND THUS DISCHARGED THE ONUS CAST UPON IT BY THE STATUTE AND THUS HELD THAT IDEN TITIES AND CREDITWORTHINESS OF THE LENDERS AND GENUINENESS OF THE TRANSACTIONS WERE DULY PROVED. THE LD. CIT(A) ALSO NOTED THAT THE AO HAS ONLY RELIED ON THE STATEMENT OF SHRI BHA NWARLAL JAIN RECORDED DURING THE COURSE OF SEARCH WHICH WAS SUBS EQUENTLY RETRACTED. THE LD CIT(A) HELD THAT THE CASE OF THE ASSESSEE WAS ALSO SUPPORTED BY THE CBDT CIRCULAR NO.14/1955 DATE D 11.04.1995 AND INSTRUCTION DATED 10.03.2003 F.NO.286/2/2003-IT (INV INVESTIGATION). THE LD. CIT (A) FURTHER OBSERVED THAT NO ADDITION CAN BE MADE SOLELY ON THE BASIS OF STATEMENT UNDER SECTION 132(4) OF THE ACT WHICH WAS SUBSEQUENTLY RETRACTED AS IT HAS NO EVIDENTIARY VAL UE AS THERE WAS NO CORROBORATING EVIDENCES FOUND. THE LD. CIT( A) ALSO NOTED THAT AO WAS SPECIFICALLY REQUESTED VIDE LETTER DATE D 26.03.2015 TO PROVIDE COPY OF STATEMENT RECORDED OF SHRI BHAN WARLAL JAIN WHOSE STATEMENT WAS MADE THE BASIS FOR THE ADDITION OF RS.2,50,00,000/-. HOWEVER, NO SUCH COPY OF THE STA TEMENT WAS EITHER SUPPLIED OR CROSS EXAMINATION WAS ALLOWED. THE LD. CIT(A) HELD THAT THE NON ALLOWING OF CROSS EXAMINAT ION TO THE ASSESSEE IS SUFFICIENT REASON TO DELETE THE ADDITIO N IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF ANDAMAN TIMBER INDUS TRIES (CIVIL APPEAL NO.4228/2006 SC). ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 7 11. THE LD. D.R. VEHEMENTLY ARGUED BEFORE US THAT T HE LD. CIT(A) HAS NOT APPRECIATED THE FACTS AS BROUGHT OUT BY THE AO TO THE EFFECT THAT ASSESSEE HAS FAILED TO PROVE THE GE NUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE LENDER S IN RESPECT OF FIRST ADDITION QUA WHICH NOTICES WERE ISSUED UND ER SECTION 133(6) OF THE ACT COMPRISING 7 PARTIES. THE LD. D. R. SUBMITTED THAT THOUGH THE ASSESSEE HAS FILED PAPERS COMPRISIN G FINANCIAL STATEMENTS OF THE LENDERS, PANS, BANK STATEMENTS, R OC MASTER DATA, ITRS, TDS CERTIFICATES ALONG WITH NAMES AND A DDRESSES OF THE LENDERS AND THE LENDERS RESPONDED TO THE NOTICE S ISSUE DU/S 133(6) OF THE ACT, HOWEVER, THE SAID RECORDS DID NO T PROVE THE CREDITWORTHINESS OF THE LENDERS AND GENUINENESS OF THE LENDERS AND THEREFORE THE ORDER OF LD. CIT(A) NEEDS TO BE REVERSED. 12. SO FAR AS THE ADDITION OF RS.4,35,00,000/- IS C ONCERNED, THE NOTICES UNDER SECTION 133(6) COULD NOT BE SERVED. HOWEVER DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CA LLED FOR A REMAND REPORT FROM THE AO ON THE ADDITIONAL EVIDENC ES PERTAINING TO THESE PARTIES FILED BY THE ASSESSEE. THE AO FILED THE REMAND REPORT VIDE LETTER DATED 21.06.2017 ACCE PTING THEREIN THAT THE SAID PARTIES HAVE FILED VARIOUS DOCUMENTS IN THE REMAND PROCEEDINGS. HOWEVER, IN PARA 2 OF THE REMAND REPO RT THE AO HAS STATED THAT ADDITIONAL EVIDENCES SUBMITTED BY T HE ASSESSEE SHOULD NOT BE ADMITTED DURING THE COURSE OF APPELLA TE PROCEEDINGS AS SAME WERE NOT GIVEN IN THE ASSESSMEN T PROCEEDINGS. THE LD. D.R. THEREFORE PRAYED THAT TH E ADDITION OF RS.4,35,00,000/- ALSO NEEDS TO BE CONFIRMED BY REVE RSING ORDER OF LD. CIT(A). AS REGARDS THE ADDITION OF RS.2,50, 00,000/- FROM TWO PARTIES CONNECTED TO M/S. BHANWARLAL JAIN GROUP , THE LD. D.R. SUBMITTED THAT IT WAS ADMITTED BY THE SHRI BHA NWARLAL JAIN ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 8 DURING THE COURSE OF SEARCH THAT HE AND HIS ASSOCIA TES WERE PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING ACC OMMODATION ENTRIES AND THEREFORE, THE SAME SHOULD BE SUFFICIEN T BASIS FOR MAKING THE ADDITION. THE SUBSEQUENT RETRACTION OF THE SAID STATEMENT IS IMMATERIAL AND ADDITION NEEDS TO BE AF FIRMED ON THIS SCORE ONLY. 13. THE LD. A.R. VEHEMENTLY OPPOSED THE ARGUMENTS O F THE LD. D.R. BY SUBMITTING THAT THE ASSESSEE HAS GENUINELY RAISED LOANS FROM VARIOUS PARTIES AS STATED HEREINABOVE. OUT OF THE TOTAL LOANS, RS.14,32,00,000/- WERE RAISED FROM 11 PARTIE S QUA WHICH THE AO MADE ADDITION ON TWO GROUNDS. AS REGARDS 7 PARTIES FROM WHOM THE LOANS TO THE TUNE OF RS.9,97,00,000/- WERE TAKEN, THE AO MADE THE ADDITION ON THE GROUND THAT THE FINANCIAL DOCUMENTS FILED BY THE LENDERS IN RESPONS E TO NOTICES ISSUED UNDER SECTION 133(6) REVEALED THAT THE LENDE RS DID NOT HAVE ANY CREDITWORTHINESS AND THUS THE TRANSACTIONS WERE NOT GENUINE. IN RESPECT OF REMAINING FOUR PARTIES FROM WHOM RS.4,35,00,000/- WERE BORROWED, THE AO HAD MADE THE ADDITION BY HOLDING THAT THE NOTICES ISSUED UNDER SECTION 13 3(6) OF THE ACT REMAINED UNSERVED AND THUS THE LOANS REMAINED UNEXPLAINED. THE LD. A.R. SUBMITTED THAT THE CONCLU SION DRAWN BY THE AO ON THE BASIS OF DOCUMENTS SUBMITTED BY TH E LENDERS IS FALLACIOUS AND WRONG IN VIEW OF THE FACT THAT THE L ENDERS HAVE SUFFICIENT RESOURCES IN THEIR BALANCE SHEETS. THE L D AR SUBMITTED THAT THESE TRANSACTIONS WERE DULY REFLECTED IN THEI R BOOKS OF ACCOUNTS OF THE LENDERS. THE LD. A.R. SUBMITTED TH AT THE SAID 7 PARTIES FROM WHOM RS.9,97,00,000/- WERE BORROWED HA VE CONFIRMED THE TRANSACTIONS AND THEREFORE THE ADDITI ON MADE BY THE AO IS WRONG AND HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 9 BY HOLDING THAT THE CREDITWORTHINESS OF THE LENDERS AND GENUINENESS WERE PROVED. IN RESPECT OF THE REMAINI NG FOUR PARTIES WHO DID NOT RESPOND TO THE NOTICE ISSUED UN DER SECTION 133(6) FROM WHOM THE ASSESSEE HAS BORROWED RS.4,35, 00,000/-, THE ASSESSEE FILED ADDITIONAL EVIDENCES IN THE COUR SE OF APPELLATE PROCEEDINGS. THESE ADDITIONAL EVIDENCES WERE FORWA RDED TO THE AO FOR VERIFICATION AND AO SUBMITTED THE REMAND REP ORT VIDE LETTER DATED 21.06.2017 WHICH WAS CONFRONTED TO TH E ASSESSEE AND ASSESSEE FILED DETAILED REPLY THERETO. IN THE REMAND REPORT THE AO INSTEAD OF CARRYING OUT THE VERIFICATION OF THE ADDITIONAL EVIDENCES STATED IN PARA 2 THAT ADDITIONAL EVIDENCE S SHOULD NOT BE ADMITTED AS THESE WERE NOT FILED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THE LD. A.R. SUBMITTED THA T IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS CONFRONTED WITH THE FACT THAT SOME PARTIES HAVE NOT RESPONDED TO THE NO TICES ISSUED UNDER SECTION 133(6) BUT THE TIME GIVEN WAS SO SHOR T THAT ASSESSEE COULD NOT FILE ALL THESE EVIDENCES BEFORE THE AO AND THEREFORE WERE PRODUCED BEFORE THE LD. CIT(A). THE LD. A.R. THUS SUBMITTED THAT THE ORDER OF LD. CIT(A) NEEDS TO BE AFFIRMED SO FAR AS THE ADDITION OF RS.14,32,00,000/- IS CONCERNED. IN RESPECT OF RS.2,50,00,000/- RAISED BY THE ASSESSEE FROM TWO PA RTIES M/S. DAKSH DIAMONDS AND NAMAN EXPORTS, WHICH WAS STATED TO BE ACCOMMODATION ENTRIES BY THE AO AS THESE ENTITIES W ERE RELATED TO BHANWARLAL JAIN, THE LD. A.R. SUBMITTED THAT THE AO HAS MADE THE ADDITION ON HYPOTHETICAL BASIS THAT BHANWR LAL JAIN HAS GIVEN A STATEMENT ON OATH DURING SEARCH THAT HE AND HIS RELATED CONCERNS WERE ENGAGED IN PROVIDING ACCOMMOD ATION ENTRIES AND THUS MADE THE ADDITION UNDER SECTION 68 AS UNEXPLAINED CASH CREDIT. THE LD. A.R. SUBMITTED TH AT THE LD. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 10 CIT(A) HAS RIGHTLY DELETED THE ADDITION BY OBSERVIN G THAT NO ADDITION CAN BE SUSTAINED WHICH IS MADE ON THE STAT EMENT RECORDED DURING THE COURSE OF SEARCH WHICH IS EVEN RETRACTED LATER ON AS THIS IS AGAINST THE INSTRUCTION OF CBDT CIRCULAR NO.14/1955 AND INSTRUCTION DATED 10.03.2003 BEARING NO.F.NO.286/2/2003-IT(INV) AND VARIOUS JUDICIAL PRONOUNCEMENTS. THE LD. A.R. SUBMITTED THAT EVEN THE REQUEST OF THE ASSESSEE AS MADE VIDE LETTER DATED 26.03.201 5 TO THE AO TO PROVIDE COPY OF STATEMENT RECORDED OF SHRI BHANW ARLAL JAIN WAS REJECTED AND ALSO DENIED OPPORTUNITY TO CROSS E XAMINATION. THE LD AR CONTENDED THAT THE ASSESSEE WAS DENIED OP PORTUNITIES TO DEFEND HIMSELF THROUGH LAWFUL MEANS. THE LD. AR CONTENDED THAT IT IS SETTLED POSITION THAT IF THE THIRD PARTY MATERIAL IS TO BE USED AGAINST THE ASSESSEE WHICH WAS COLLECTED BEHIN D THE BACK OF THE ASSESSEE, IT IS ESSENTIAL THAT ASSESSEE MUST BE CONFRONTED WITH THOSE MATERIALS OTHERWISE IT WOULD CAUSE GRAVE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THIS VIEW IS FORTIF IED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. KISHAN CHAND CHALLARAM 125 ITR 713 (SC) WHEREIN IT WAS CAT EGORICALLY HELD THAT UNLESS MATERIALS ARE CONFRONTED TO THE A SSESSEE, NO ADVERSE INFERENCE COULD BE DRAWN. THE LD. A.R. ALS O RELIED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF AC IT VS. M/S. GUJARAT ESTATES ITA NO.3184/M/2017 A.Y. 2008-09 VID E ORDER DATED 15.02.2019 WHEREIN THE CO-ORDINATE BENCH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT WHERE THE ASSESSEE HAS FILED ALL EVIDENCES QUA THE LENDERS AN D LENDERS HAVE DULY RESPONDED TO THE NOTICES UNDER SECTION 13 3(6), THEN NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT IN RESPECT OF LOANS TAKEN FROM SHRI BHANWARLAL JAIN AND RELATE D ENTITIES. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 11 THE LD. A.R. ALSO FILED A STATEMENT SHOWING REPAYME NT OF LOANS RAISED FROM VARIOUS PARTIES AND THUS SUBMITTED THAT ALL THESE LOANS STAND REPAID.FINALLY, THE LD. A.R. PRAYED BEF ORE THE BENCH THAT THE ORDER OF THE LD. CIT(A) HAS BEEN PASSED AF TER TAKING INTO CONSIDERATION THE LEGAL AS WELL AS FACTUAL ASPECTS OF THE MATTER AND THEREFORE DESERVED TO BE AFFIRMED ON THIS ISSUE . 14. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER PASSED BY THE F IRST APPELLATE AUTHORITY, WE FIND THAT THE AO HAS MADE A DDITION BY CATEGORIZING THE LENDERS UNDER THREE HEADS; 1) PARTIES TO WHOM PARTIES UNDER SECTION 133(6) WER E SERVED AND REPLIES WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RESPECT OF 7 PARTIES AGGR EGATING TO RS.9,97,00,000/-. 2) THE PERSONS TO WHOM NOTICES UNDER SECTION 133(6) REMAINED UNSERVED AMOUNTING TO RS.4,35,00,000/- CONSISTING OF 4 PARTIES AND (3) RS.2,50,00,000/- ON ACCOUNT OF ACCOMMODATION ENTRIES FROM 2 PARTIES RELATED TO M/S. BHANWARLAL G ROUP NAMELY DAKSH DIAMOND RS.1,00,00,000/- AND NAMAN EXPORT RS.1,50,00,000/-. AFTER PERUSING THE ORDER OF LD. CIT(A), WE OBSERVE THAT SO FAR AS THE ADDITION OF RS.9,97,00,000/- IS CONCERNE D, IT WAS CLEARLY OBSERVED BY THE LD. CIT(A) THAT ALL THE DET AILS COMPRISING FINANCIAL STATEMENTS, PAN, ITRS, BANK STATEMENTS AN D CONFIRMATION OF LOAN TRANSACTIONS WERE DULY FILED A ND EVEN RESPONSES WERE RECEIVED TO THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT BY THE AO. IN OUR OPINION, THE L D. CIT(A) HAS CORRECTLY PASSED THE ORDER DELETING THE SAID ADDITI ON BY TAKING INTO ACCOUNT VARIOUS DECISIONS OF VARIOUS JUDICIAL FORUMS. SO FAR AS THE ADDITION OF RS.4,35,00,000/- IS CONCERNED, T HOUGH THE NOTICES COULD NOT BE SERVED UNDER SECTION 133(6) OF THE ACT BUT ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 12 ASSESSEE HAS FILED THE ADDITIONAL EVIDENCES PERTAIN ING TO THESE PARTIES DURING THE COURSE OF APPELLATE PROCEEDINGS WHICH WERE FORWARDED TO THE AO FOR VERIFICATION AND THE AO FI LED REMAND REPORT DATED 21.06.2017. IN THE REMAND REPORT, THE AO ONLY STATED THAT THESE EVIDENCES SHOULD NOT BE ACCEPTED PRIMARILY ON THE GROUND THAT THESE WERE NOT FILED DURING THE ORI GINAL ASSESSMENT PROCEEDINGS. HOWEVER, LD. CIT(A) HAS TA KEN A VERY REASONED VIEW AFTER TAKING INTO ACCOUNT OF THE EVID ENCES ON RECORD AND REPLY OF THE ASSESSEE FILED IN RESPONSE TO THE REMAND REPORT. THEREFORE, WE DO NOT FIND ANY REASON TO DI STURB THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. SO FAR AS THE AD DITION OF RS.2,50,00,000/- IS CONCERNED REPRESENTING THE LOAN S RAISED FROM TWO PARTIES DAKSH DIAMOND AND NAMAN EXPORT WHO WERE RELATED TO M/S. BHANWARLAL GROUP, WE OBSERVE THAT T HE ASSESSEE HAS FILED ALL THE EVIDENCES BEFORE THE AO AND THE TRANSACTIONS WERE DULY CONFIRMED. THE AO HAS ONLY RELIED ON THE STATEMENT RECORDED DURING THE COURSE OF SEARCH OF SHRI BHANWA RLAL JAIN UNDER SECTION 132(4) OF THE ACT WHICH ALSO STOOD RETRACTED BY THE SAID PERSON AND HAS NO EVIDENTIARY VALUE. IN O UR OPINION THE LD. CIT(A) HAS PASSED A VERY REASONED ORDER CITING VARIOUS JUSTIFICATIONS AND REASONS FOR DELETING THE ADDITIO N. THEREFORE WE ARE INCLINED TO UPHOLD THE ORDER OF LD CIT(A) B Y DISMISSING THE GROUND NO. 1 RAISED BY THE REVENUE. 15. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DISALLOWANCE OF INTEREST OF RS.2,90,96,145/- BY LD. CIT(A) AS MADE BY THE AO UNDER SECTION 36(1)(III) OF THE ACT. 16. THE FACTS IN BRIEF ARE THAT DURING THE COURSE O F ASSESSMENT PROCEEDINGS NO ADDITION OF RS.2,90,96,145/- WAS MAD E UNDER ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 13 SECTION 36(1)(III) OF THE ACT BY THE AO TO THE INCO ME OF THE ASSESSEE AND THEREFORE THIS GROUND IS NOT ARISING O UT OF THE ASSESSMENT ORDER AS POINTED OUT BY THE LD. A.R. AND CANDIDLY ADMITTED BY THE LD. A.R. AND THEREFORE THE SAME IS DISMISSED. 17. THE ISSUE RAISED IN ROUND NO.3 IS AGAINST THE D ELETION OF DISALLOWANCE OF INTEREST OF RS.46,50,257/- AS MADE BY THE AO ON THE UNSECURED LOANS. 18. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS CL AIMED DEDUCTION OF INTEREST OF RS.2,70,77,377/-. THE AO TREATED PART OF THE BORROWINGS DURING THE YEAR AS NON GENUINE AN D MADE ADDITION UNDER SECTION 68 OF THE ACT AND THE CORRES PONDING INTEREST PAID ON THESE LOANS TO 13 PARTIES AGGREGA TING TO RS.46,50,257/- WAS ALSO DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 19. THE LD. CIT(A) DELETED THE DISALLOWANCE BY HOLD ING THAT SINCE THE LOANS RAISED BY THE ASSESSEE ON WHICH THE SAID INTEREST WAS PAID HAVE BEEN HELD TO BE GENUINE AND CONSEQUEN TLY THE INTEREST ON THE SAID LOAN WAS ADMISSIBLE AS EXPENSE . 20. SINCE WE HAVE ALREADY UPHELD THE ORDER OF LD. C IT(A) DELETING THE ADDITIONS ON ACCOUNT OF LOANS RAISED T O WHICH THIS INTEREST PERTAINED TO AND THEREFORE WE DISMISS THE GROUND RAISED BY THE REVENUE CHALLENGING THE ALLOWANCE OF INTERES T ON THESE LOANS AS THIS GROUND IS CONSEQUENTIAL TO GROUND NO. 1. 21. THE ISSUE RAISED IN GROUND NO.4 IS AGAINST THE DELETION OF DISALLOWANCE OF RS.4,87,52,408/- BY LD. CIT(A) AS M ADE BY THE AO UNDER SECTION 14A OF THE ACT. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 14 22. THE FACTS IN BRIEF ARE THAT AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS E ARNED DIVIDEND INCOME OF RS.10,36,465/- AND LONG TERM CAP ITAL GAIN OF RS.14,67,169/- WHICH WERE CLAIMED AS EXEMPT UNDER S ECTION 10(34) AND UNDER SECTION 10(38) OF THE ACT RESPECTIVELY WHILE DISALLOWANCE MADE SUO-MOTO WAS ONLY RS.9,24,800/-. ACCORDING TO THE AO, THE DISALLOWANCE HAS TO BE COMPUTED IN T ERMS OF SECTION 14A READ WITH RULE 8D AND ACCORDINGLY AFTER ISSUING A SHOW CAUSE NOTICE, THE AO CALCULATED THE DISALLOWAN CE AT RS.4,87,52,408/- COMPRISING DISALLOWANCE UNDER RULE 8D(2)(III) ONLY AND AFTER MAKING THE ALLOWANCE FOR SUO-MOTO DI SALLOWANCE OF EXPENSES OF RS.9,24,800/-, A NET ADDITION OF RS. 4,78,27,608/- WAS MADE TO THE INCOME OF THE ASSESSEE. 23. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PA RTLY ALLOWED THE APPEAL OF THE ASSESSEE ON THIS GROUND BY DIRECT ING THE AO TO RESTRICT THE DISALLOWANCE ONLY ON THOSE INVESTMENTS IN SHARES AND SECURITIES WHICH YIELDED EXEMPT INCOME DURING T HE YEAR BY FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. (2017) 82 TAXMANN.COM 41 5 (DELHI- TRIB.) (SB). 24. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT LD. CIT(A) HAS PASSED A VER Y REASONED ORDER BY FOLLOWING THE SPECIAL BENCH DECISION IN TH E CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. (SUPRA) WHEREIN SPEC IAL BENCH HELD THAT WHILE CALCULATING THE DISALLOWANCE UNDER RULE 8D ONLY THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME DURING THE YEAR OUGHT TO BE CONSIDERED FOR THE PURPOSE OF AVERAGE INVESTM ENTS. ITA NO.6330/M/2017 M/S. BUSINESSMATCH SERVICES (I) PVT. LTD. 15 ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 11.07.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.