Shri Manjeet Singh Bhatia, Indore V. The Addl. CIT RANGE-3, Indore

ITA 652/IND/2013

AI Insights

The case revolves around an appeal by Shri Manjeet Singh Bhatia against the order of the Commissioner of Income-Tax (Appeals)-I, Indore, which confirmed an addition of Rs. 1.84 crores to the assessee's income for the Assessment Year 2009-10. This addition was initially made by the Assessing Officer under section 143(3) of the Income-tax Act, 1961, citing non-genuineness and lack of creditworthiness of the loan transactions from three companies. The Tribunal, after reviewing the submissions and evidence presented, including a previous ITAT decision that accepted the transactions as genuine, reversed the lower authorities' conclusions and allowed the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130355 (ITAT-INDORE)
• Duration Of Justice: 9 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-02-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2013
• Other Referred Cases: CIT Vs. P. Mohanklala, Sumati Dayal Vs. CIT, CIT Vs. Durga Prasad More
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; TDS
• Section: 68; 143(3); 133(6); 72

Judgement Text

Page 1 of 10 आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) ITA No.652/Ind/2013 Assessment Year: 2009-10 Shri Manjeet Singh Bhatia 8/5, BCC House Manoramaganj Indore बनाम/ Vs. Addl. CIT, Range-3 Indore (Appellant / Assessee) (Respondent / Revenue) PAN: AGJPB 0022 G Assessee by Shri Harsh Vijayvargiya, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 06.02.2023 Date of Pronouncement 28.04.2023 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 14.08.2013 passed by learned Commissioner of Income-Tax (Appeals)-I, Indore [“CIT(A)”], which in turn arises out of assessment-order dated 30.11.2011 passed by learned Addl. CIT, Range-3, Indore [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2009-10, the assessee has filed this appeal on following grounds: “(1) That on the facts & circumstances of the case, the learned CIT has erred in confirming an addition of Rs. 1.84 crores, which was received by way of loans from 3 different companies, as per provisions u/s 68 of the Income-tax Act, 1961. Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 2 of 10 (2) That the order so passed is bad in law & wrong.” 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Briefly stated the facts are such that the assessee-individual filed return of relevant AY 2009-10 declaring a total income of Rs. 4,40,55,570/- from commission, rent, capital gain, interest and agriculture. The case was selected for scrutiny and statutory notices u/s 143(2)/142(1) were issued which were duly complied with. Finally, the Ld. AO passed order u/s 143(3) after making certain additions. Amongst those additions, one was of Rs. 1,84,00,000/- u/s 68 on account of unsecured loans taken by assessee. The assessee contested this addition in first-appeal but could not succeed. Now, the assessee has come in next appeal before us assailing the orders of lower authorities. 4. The grounds raised by assessee are directed against the addition of Rs. 1,84,00,000/- made by AO u/s 68 on account of unsecured loans. 5. During assessment-proceeding, Ld. AO observed that the assessee had taken loans from 3 companies, namely (i) Rs. 89,00,000 from Bluering Commercial (P) Ltd., (ii) Rs. 45,00,000 from Winshers Commercial (P) Ltd., and (iii) Rs. 50,00,000 from Gladiator Commodities (P) Ltd.; all aggregating to Rs. 1,84,00,000/-. The AO scrutinized the impugned loan-transactions in terms of section 68 of the act and has given his observations/findings at Page No. 6 to 25 of assessment-order. Finally, the AO held that the loans taken by assessee from those 3 companies are not acceptable since the assessee could not establish the creditworthiness of companies and the genuineness of loan transactions as required by section 68. The main grounds taken by AO are : (i) Huge share capital and premium were received by those 3 companies; (ii) The companies are Kolkata-based and in recent years, the field officers of Income-tax Department have come across cases where companies registered in Kolkata, Mumbai and Surat are providing Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 3 of 10 accommodation entries to Indore-based entities; (iii) The group companies of assessee had obtained share capital from those very companies in AY 2005- 06 but the transactions were not acceptable to department after carrying out investigation; hence the department made additions in the hands of group companies and those additions were upheld by CIT(A); and (iv) A commission u/s 131(1)(d) was done through Addl. DIT(Inv.), Kolkata and report dated 19.12.2011 was received, according to which Mr. Sachin Jain appeared as common director on behalf of all 3 companies. He filed copy of return and bank statement of 1 company namely Winshers Commercial (P) Ltd. but no document of other 2 companies were filed. Thus, the genuineness of loans taken from those 2 companies is not established. The ADIT has also downloaded data of all 3 companies from ROC website and found that the companies were loss-making; thus creditworthiness is also doubted. Lastly, the AO also relied upon certain judicial rulings including CIT Vs. P. Mohanklala (2007) 291 ITR 278 (SC), Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC) and CIT Vs. Durga Prasad More (1969) 72 ITR 807 (SC). With such observations, Ld. AO made addition u/s 68. 6. During first-appeal, Ld. CIT(A) marshalled the facts from assessment- order and observed in the opening Para No. 4.1.1. of his order that the AO has made additions mainly because of twin-reasons, namely (i) the AO has relied upon the aforesaid report of ADIT and (ii) the AO has found that additions were made in the hands of group companies of assessee in earlier years u/s 68 qua the share capital received from those 3 companies and the additions so made were confirmed by CIT(A) in first-appeal. Accordingly, the Ld. CIT(A) adjudicated first-appeal taking into consideration those twin- reasons. Firstly, in Para No. 4.1.3 to 4.1.6 of order, Ld. CIT(A) dealt with the report of ADIT whereby he agreed with the observations of AO that Mr. Sachin Kumar Jain, common director of 3 companies, produced documents of 1 company only and no document was provided for other 2 companies. He further agreed with AO’s finding that all 3 companies were loss-making companies. Secondly, in Para No. 4.1.7 to 4.1.8 of his order, Ld. CIT(A) dealt Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 4 of 10 with the assessment-order passed by department in the cases of group company of assessee, M/s BCC Cargo Pvt. Ltd., for AY 2005-06 wherein the additions were made u/s 68 qua the share-capital received from above 3 companies and the same were confirmed by CIT(A) in first-appeal. Ld. CIT(A) observed that the same findings as made by department in M/s BCC Cargo Pvt. Ltd. are applicable in present case of assessee as well. In nutshell, the CIT(A) agreed with the twin-reasons assigned by AO and finally upheld the addition. 7. Before us, Ld. AR representing the assessee made very precise and to- the-point submissions; we sum up thus: (i) He submitted that both of the lower authorities are mainly influenced by the reasoning that the addition u/s 68 qua the share-capital received from above 3 companies, made by AO in the case of assessee’s group company M/s BCC Cargo Pvt. Ltd. for AY 2005-06 had been confirmed by CIT(A) in first-appeal. To dismantle this influence/reasoning, Ld. AR submitted that against the order of CIT(A), the assessee M/s BCC Cargo Pvt. Ltd. preferred next appeal to ITAT, Indore in Appeal No. IT(SS)A 108/Ind/2011, which appeal has already been decided by ITAT through order dated 18.05.2016, a copy of the order is placed at Page No. 160 to 167 of the Paper-Book. Drawing our attention to order, Ld. AR demonstrated successfully that the ITAT has already accepted those 3 companies and the transactions done with those companies as genuine and reversed the revenue- authorities’ conclusions. (ii) Then, Ld. AR submitted that prior to the execution of commission u/s 131(1)(d), the AO conducted enquiries directly from those 3 companies by issuing statutory notices u/s 133(6). Those notices were very well complied with and all 3 companies confirmed having given loans to assessee. This factual aspect is clearly admitted by AO in Para 5 / Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 5 of 10 Page No. 6 of assessment-order and by CIT(A) in Para No. 4.1.2 / Page No. 21 of appeal-order. (iii) Ld. AR submitted that it is true that in response to the commission u/s 131(1)(d), Mr. Sachin Jain, common director of all 3 companies appeared and filed documents only of 1 company, namely M/s Winsher Commercial Pvt. Ltd. But then Ld. AR carried us to Para No. 5.2.2 on Page No. 12 of assessment-order wherein the assessee clearly submitted that probably the summon was issued in the case of Winsher Commercial Pvt. Ltd. and for this reason Mr. Sachin Jain submitted documents of Winsher Commercial Pvt. Ltd. only. Ld. AR argued that there could be no reason of non-production of documents of other 2 companies when those companies incorporated under Companies Act and all documents are in public domain. Nonetheless, Ld. AR submitted, there is a clear fact accepted by both of the lower authorities in their orders that subsequently, the ADIT has himself downloaded documents of all 3 companies from ROC website. Ld. AR submitted that nothing adverse was found from those downloaded documents except the inference drawn therefrom that the companies were loss-making. (iv) Ld. AR also carried us to Page No. 8 and 9 of the order of CIT(A) where a chart submitted by assessee depicting the documents filed to AO is placed. The said chart is scanned below for an immediate reference: Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 6 of 10 Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 7 of 10 Ld. AR submitted that the assessee has filed so many documents to the AO. Then, Ld. AR carried us to Page No. 12 of the very same order where the assessee has submitted as to how those documents proved all three ingredients of section 68: “1.11] The assessee had submitted filed following papers to prove the identity, creditworthiness and genuineness of the case-: A] IDENTITY -Confirmations of unsecured loan creditors duly signed with their Income Tax details. -Bank Statements and Income Tax Returns of Said companies were filed. -Notices u/s 133(6) were issued and served to the Loan Creditors and they have filed details also. B] GENUINENESS OF THE LOANS - The assessee has taken loans through account payee cheques. -The assessee has given interest on loans taken -The amount of interest was also paid through account payee cheques. -TDS was also deducted wherever applicable C] CREDITWORTHINESS -The loans creditor is duly assessed to tax for last many years. -The loan creditor has also filed their audited final accounts wherein the source of amount advanced to the assessee was duly incorporated.” (v) Finally, Ld. AR also carried us to Page No. 55 to 66 of the Paper-Book and demonstrated that subsequently the assessee has also repaid the impugned loans through banking channel. 8. With these submissions, Ld. AR argued that the authorities have wrongly treated the genuine loans taken by assessee as unexplained and made addition; the action of authorities must be reversed. 9. Per contra, Ld. DR supported the orders of lower-authorities and emphasized the observations/conclusions made therein. He drew our Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 8 of 10 attention particularly to Para No. 4.1.5 of the order of CIT(A) and emphasized the CIT(A)’s version that even if loans have been taken through cheques, if genuineness and creditworthiness are not established, additions can be made; that the assessee had not been able to explain how those loss- making companies can provide loans; that the main activity of those companies is by way of giving loans or share capital only. He submitted that the lower-authorities have taken into consideration all relevant facts and rightly concluded that the 3 companies are just “jama kharchi companies / brief-case companies”; hence the orders of lower-authorities should be interfered. 10. We have considered rival submissions of both sides and perused the material held on record including the orders of lower-authorities and the documents placed in the paper-book filed by assessee. After a careful consideration, we find substantial merit in the submissions of Ld. AR. Firstly, we find the foremost point that the Co-ordinate Bench of ITAT, Indore in IT(SS)A 108/Ind/2011 (supra) has accepted the 3 companies and the transactions done with those companies as genuine. Thus, the very basis adopted by revenue-authorities that the companies and transactions with them are not genuine is devoid of any merit. Secondly, we find that in response to notice issued u/s 133(6) by AO, those 3 companies have confirmed the factum of loans given to assessee. Thirdly, we find that the departmental authorities have downloaded statutory documents of those 3 companies directly from website of ROC and could not find anything adverse which can suggest that the companies are not existing or not active. It is also not the case of department that the companies have been identified as paper-companies by the regulatory authorities under company-law. Fourthly, we find that the assessee has submitted several documents (as mentioned in earlier paragraph of this order) which clearly demonstrate that the identity and creditworthiness of all 3 companies and genuineness of loan-transactions are proved as required u/s 68. Finally, we also find that the assessee has subsequently repaid the impugned loans; this fact Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 9 of 10 strengthens that there were genuine loans taken by assessee. Ld. DR has though strongly defended the orders of lower-authorities yet could not rebut these vital facts and evidences. Ld. DR also could not contradict the applicability of order of ITAT in IT(SS)A 108/Ind/2011 (supra). Being so, we are of the considered view that the impugned addition made by AO and confirmed by CIT(A) is not sustainable. Therefore, we delete the addition. The assessee succeeds in his grounds. 11. Resultantly, this appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 28/04/2023. Order pronounced in the open court on ....../....../2023. Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 28.04.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Manjeet Singh Bhatia ITA No.652/Ind/2013 Assessment year 2009-10 Page 10 of 10 1. Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order