ITO 10 (3)(1), MUMBAI V. NEW EMPIRE INFRASTRUCTURE PVT. LTD., MUMBAI

ITA 6360/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4465 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 03-10-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Keywords: Onus to prove; Set aside
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” Bench, Mumbai Before Shri SHAMIM YAHYA, AM & Shri RAHUL CHAUDHARY, JM I.T.A. No.6360/Mum/2019 (Assessment Year 2014-15) ITO-10(3)(1) Room No.621, Aaykar Bhawan M.K.Road Mumbai-400 020 PAN : AAECN1389G Vs. New Empire Infrastructure Pvt.Ltd. Flat No.42, bhavani Gujar CHS, Opp.Solitarie Corporate Park, Andheri(E) Mumbai-400 093 (Appellant) (Respondent) Assessee by None Department by Shri Kishan Vyas-CIT(DR) Date of Hearing 01.02.2022 Date of Pronouncement 18.04.2022 O R D E R Per Shamim Yahya (AM) :- This appeal by the revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-17, dated 29.07.2019 and pertains to assessment year 2014-15. 2. Grounds of appeal read as under:- 1. "On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deciding that the assessee had discharged its onus ignoring the fact that the assessee had failed to establish the identity, genuineness and creditworthiness of the loan transactions." 2) The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored. 3. Brief facts of the case are that the appellant is a Private Limited Company and is engaged in the business of providing the services and rendering information technology services. The appellant had filed its return of income on 10/05/2015 on ITA No.6360/Mum/2019 2 declaring the total income of Rs. 130/-.During course of assessment, AO observed that the appellant company had received the loan funds to the tune of Rs.10,01,61,551-from 5 parties stated as under:- The AO further observed that the major loan had been received by the appellant from M/s Sagar Samrat Caplease Pvt Ltd of Rs,9.19crores and therefore the investigate the transaction issued the commission u/s 131(1)(d) to DDIT(Inv.), Unit-2(3), Ahmedabad. The DDIT(Inv.), Unit-2(3), Ahmedabad furnished the investigation report based on the enquiries conducted by the inspector and stated that such lender was in existence at its given address and statement of its director named Mr. Rajeeved Prakash Mehra was recorded u/s 131 of the Act. The DDIT(lnv) stated that the lender company had furnished their bank statements, IT. acknowledgement receipt. However, DDlT(Inv.) disbelieved the loan transaction as the bank statements of such lender company revealed that the funds have been received through layering of funds from various bank accounts. On receipt of DDIT(Inv.) report, The AO held that such lender company is a NBFC who had received the funds of over Rs 51.23 crores from various 4 parties. The AO examined the financial of the4 parties who had provided the funds to appellants lender M/s Sagar Samrat Caplease Pvt Ltd and held that such companies have huge share capital and reserves, however the net profit disclosed by Sr.No. Name of the lender Amount (Rs.) 1 Sagar Samrat Caplease Pvt Ltd Rs. 9,19,61,551/- 2 Anantajit Developers Pvt.Ltd. Rs.50,00,000/- 3 Vardhaman Trade Link Pvt.Ltd. Rs.21,00,000/- 4 Roster Developers Pvt Ltd. Rs.9,90,000/- 5 Yogesh Vilpara Rs.1,10,000/- -------------------- Total Rs.10,00,51,551/- ----------------------- ITA No.6360/Mum/2019 3 such parties and taxes paid there on are of nominal amounts. Accordingly, AO held that such 4 entities have systematically arranged their business and also the paper work had been meticulously prepared. The AO even perused the ROC record of the parties who had provided the funds to appellant's lender M/s Sagar Samrat Caplease Pvt Ltd and held that such companies are registered at Kolkata who are engaged in providing bogus unsecured loans, share capital and accommodation transactions. Accordingly, AO held that the appellant had received the major loan of Rs.9.19 crores from M/s Sagar Samrat Caplease Pvt Ltd who had received the loans from various entities which are engaged in accommodation transactions. In respect of balance loan transactions, the AO issued the summon u/s 131 to the lenders named M/s Anantajit Developers Pvt Ltd, M/s Vardhaman Tradelink Pvt Ltd and M/s Roaster Developers Pvt Ltd, however the response was not received from M/s Anantajit Developers Pvt Ltd and notice u/s 131 were returned unserved to other 2 lenders. Accordingly, AO held that the unsecured loans received by the appellant are non-genuine. The AO also held that the appellant had not established the identity, genuineness and credit-worthiness of the loan transactions and accordingly made the addition u/s 68 of Rs.1,00,51,551/. 4. Against the above order, assessee appealed before the ld.CIT(A). 5. The ld.CIT(A) noted that assessee has filed the documentary evidences. He also referred to the AO’s finding that these companies who have provided the entries to the assessee are Kolkatta based companies and have huge share capital and reserves, however the net profit disclosed by such parties and taxes paid there on are of nominal amounts. The Ld.CIT(A) chose not to ignore the issue that these Kolkata based parties have no creditworthiness. The ld.CIT(A) took adverse inference, the AO ITA No.6360/Mum/2019 4 has not issued notice u/s. 143(6) to the banker of the lenders to verify the source of the lenders. 6. The ld.CIT(A) proceeded to refer to several decisions and proceeded to hold that assessee has discharged its onus and the burden to prove source of source was not on the assessee and hence, he deleted the addition. 7. Against the above order, revenue is in appeal before us. 8. We have heard the ld. DR and perused the record. Nobody appeared on behalf of the assessee, despite several notices. We note that in this case assessee has obtained unsecured loans from Kolkatta based parties found by investigation wing to be engaged in bogus accommodation entry business. The AO has found that these companies have meager net profit and huge share capital and reserves which are nothing but circuitous routing of money. The Assessee has not cooperated with the AO also and he has made some submission before the ld.CIT(A) on the basis of which, Ld.CIT(A) has granted relief. In our considered opinion, ld.CIT(A) has noted that the loan providers have no creditworthiness of their own. But he has chosen to ignore this aspect and has referred to decisions, which are not applicable on the facts of the case. The AO has even deputed the inspector and found the parties to be non- existent. When the lack of creditworthiness of the parties is palpable learned CIT(A) makes a bizarre comment that the Assessing Officer has not made enquiry from the bankers of lendors regarding their creditability. In this view of the matter, in our considered opinion the order of ld.CIT(A) is devoid of any application of mind on the facts of the case. Moreover, we note that assessee has chosen to submit certain documents before ld.CIT(A), Ld.CIT(A) has though referred to the remand report in this regard, but, he has summarily dismissed the same. In our considered opinion, on the facts and circumstances of the case, the AO has given a finding that these companies have no creditworthiness. Ld.CIT(A) has totally erred in ignoring these ITA No.6360/Mum/2019 5 facts. In our considered opinion, the issue needs to be remitted to the file of ld.CIT(A). The ld.CIT(A) is directed to give a finding as to how the parties involved in the circuitatious routing of money can be said to be creditworthy and how mere some paper work can be said to be sufficient compliance of the provisions of the Act. In this regard, we observe that the learned CIT(A)’s order is not in accordance to the ratio of Hon’ble Bombay High Court in the case of CIT Vs. Sadeq Shaikh in ITA No. 18, 819 of 2014 vide order dated 14.10.2020. Accordingly the issue stands remitted to the file of learned CIT(A). 9. In the result, this appeal by the revenue stands allowed for statistical purposes. Pronounced in the open court on 18.04.2022. Sd/- Sd/- (RAHUL CHAUDHARY) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUN TANT MEMBER Mumbai; Dated : 18/04/2022 Thirumalesh, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai