DCIT CC 7(2), MUMBAI V. MANBA FINANCE LTD, MUMBAI

ITA 6606/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5127 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Keywords: Bogus purchase; Unexplained cash credit; Principle of natural justice; Accommodation entries; Retraction
• Section: 68; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NOS. 6606 /MUM/201 7 & 6715/MUM/2018 : A.Y S : 2014 - 15 & 2015 - 16 DCIT, CENTRAL CIRCLE 7(2) MUMBAI (APPELLANT) VS. M/S. MANBA FINANCE LTD., 306, RUNWAL HEIGHTS, OPP. NIRMAL LIFESTYLE, L.B.S. MARG, MULUND (W), MUMBAI 400 080. PAN : AAACM4681Q (RESPONDENT) APPELLANT BY : SHRI V. VINOD KUMAR RESPONDENT BY : SHRI J.P. BAIRAGRA DATE OF HEARING : 17/06/2020 DATE OF PRONOUNCEMENT: 10/07/2020 O R D E R PER RAJESH KUMAR, AM : THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-49, MUMBAI (IN SHORT CIT(A)) DATED 27.12.2016 AND 04.07.2017 PERTAINING TO ASSESSMENT YEARS 2014-15 AND 2015- 16. ITA NO. 6606/MUM/2017 :- 2. THE GROUNDS RAISED BY REVENUE IN THIS APPEAL READ AS UNDER :- 2 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. 1. IN THE CIRCUMSTANCES AND ON THE FACTS OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,50,40,000/- MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT WITHOUT CONSIDERING THE FACT THAT THE DIRECTOR/PROMOTER OF THE LENDING COMPANIES SHRI PRAVIN KUMAR JAIN/RAKESH DOSHI/ VIPUL VIDUR BHATT HAVE ALREADY ADMITTED DURING THE SURVEY ACTION THAT THE LENDER COMPANY CONTROLLED BY PRAVIN JAIN/ RAKESH DOSHI/VIPUL VIDUR BHATT AND COMPANIES NOT CONTROL BY PRAVIN JAIN ARE BOGUS COMPANIES WHO ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS PURCHASE/SALES AND UNSECURED LOAN TO OTHER PARTIES. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,50,40,000/- ADDED BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT WITHOUT CONSIDERING THE FACT THAT THE DIRECTOR OF THE ASSESSEE COMPANY M/S MANBA FINANCE LTD., SHRI MANISH SHAH HAS ADMITTED DURING THE SURVEY ACTION THAT THE UNSECURED LOANS TAKEN BY THE ASSESSEE FROM COMPANIES CONTROLLED BY PRAVIN JAIN/ RAKESH DOSHI/VIPUL VIDUR BHATT AND COMPANIES NOT CONTROLLED BY PRAVIN JAIN WERE BOGUS IN NATURE AND HENCE NO OPPORTUNITY FOR CROSS EXAMINATION WAS PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTEREST EXPENSE OF RS.1,18,31,274/- GIVEN COMPANIES CONTROLLED BY PRAVIN JAIN AND COMPANIES NOT CONTROLLED BY PRAVIN JAIN, WITHOUT CONSIDERING THE FACT THAT THE UNSECURED LOANS OF RS. 4,50,40,000/- PURPORTED TO BE TAKEN BY THE ASSESSEE COMPANY WERE NOT GENUINE AND HENCE THE INTEREST EXPENSE CLAIMED ON THE SAME CANNOT BE ALLOWED.' 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NOS. 1448, 1449 & 1467/MUM/2017 FOR ASSESSMENT YEARS 2013-14, 2011-12 AND 2010-11 VIDE ORDER DATED 05.10.2018 WHEREIN IDENTICAL ISSUE HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE THE LEARNED COUNSEL PRAYED THAT THE GROUNDS OF APPEAL NO. 1 AND 2 RAISED BY THE REVENUE MAY KINDLY BE DISMISSED FOLLOWING THE SAID DECISION. 3 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. 4. THE ISSUE RAISED BY THE REVENUE IN GROUNDS OF APPEAL NOS. 1 AND 2 IS AGAINST THE DELETION OF ADDITION OF RS.4,50,40,000/- BY THE LD. CIT(A) AS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT ON THE GROUND THAT THE DIRECTOR-PROMOTER OF THE LENDING COMPANIES, SHRI PRAVIN KUMAR JAIN, SHRI RAKESH DOSHI AND SHRI VIPUL VIDUR BHATT HAVE ALREADY CONFESSED DURING THE SURVEY ACTION THAT THE LENDING COMPANIES CONTROLLED BY SHRI PRAVIN KUMAR JAIN AND OTHERS ARE BOGUS COMPANIES ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS SHOWN UNSECURED LOANS OF RS.45,31,60,431/-. ON FURTHER PERUSAL OF THE DETAILS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS BORROWED MONEY FROM CONCERNS/COMPANIES RELATED TO SHRI PRAVIN KUMAR JAIN AMOUNTING TO RS.3,75,00,000/- AS DETAILED IN PARA 2 OF THE ASSESSMENT ORDER. THIS MONEY HAS BEEN BORROWED FROM FOUR CONCERNS, VIZ. JOSH TRADING PVT. LTD., FALAK TRADING CO. PVT. LTD., OLIVE OVERSEAS PVT. LTD. AND PRAGATI GEMS PVT. LTD. SIMILARLY, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ALSO BORROWED MONEY FROM OTHER ENTITIES WHICH ARE NOT DIRECTLY CONNECTED WITH SHRI PRAVIN KUMAR JAIN BUT SHRI PRAVIN KUMAR JAIN HAS ARRANGED THESE ACCOMMODATION ENTRIES. TOTAL MONEY BORROWED FROM THESE THREE ENTITIES, VIZ. VENUS PORTFOLIO & FINANCE PVT. LTD., PACHELI ENTERPRISES LTD. AND ARYA GLOBAL SHARES & SECURITIES LTD. WAS RS.1,83,00,000/-. ACCORDINGLY, SHOW CAUSE WAS ISSUED TO THE ASSESSEE TO PROVE THE THREE INGREDIENTS UNDER SECTION 68 OF THE ACT - IDENTITY, CREDIT- WORTHINESS AND GENUINENESS OF THE TRANSACTIONS, FAILING WHICH WHY THE SAME SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE, IN ORDER TO PROVE THE GENUINENESS, FILED VARIOUS DETAILS AND DOCUMENTS COMPRISING OF COPIES OF LOAN CONFIRMATION, ANNUAL ACCOUNTS, ACKNOWLEDGEMENT OF ITRS AND BANK STATEMENTS OF THE PERSONS ADVANCING THE LOANS. THE BANK STATEMENTS SHOWED RTGS/TRANSFER ENTRIES OF VARIOUS OTHER ENTITIES AND CONCERNS CONTROLLED 4 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. BY SHRI PRAVIN KUMAR JAIN, SHRI RAKESH DOSHI AND SHRI VIPUL VIDUR BHATT. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE GENUINENESS OF THE TRANSACTIONS AND ACCORDINGLY, HE CALCULATED THE PEAK AT RS.4,50,00,000/- OF ALL THE LOANS TAKEN ALTOGETHER DURING THE FINANCIAL YEAR 2013-14 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT U/S . 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AND HOLDING AS UNDER :- 6.1. AS ALREADY MENTIONED, THE FACTS OF THE CASE FOR THE RELEVANT ASSESSMENT YEARS ARE IDENTICAL TO THOSE OF A.Y.2013-14. THE A.O. HAD INFORMATION THAT THE APPELLANT HAD TAKEN ACCOMMODATION ENTRIES TOWARDS SHARE CAPITAL AND UNSECURED LOANS FROM THE CONCERNS CONTROLLED BY SHRI PRAVIN KUMAR JAIN AND VIPUL VIDUR BHATT DURING THE SURVEY U/S.133A, SHRI MANISH SHAH, DIRECTOR OF THE COMPANY HAD ADMITTED THAT THE AMOUNTS RECEIVED TOWARDS SHARE CAPITAL ARE BOGUS. AS FAR AS THE UNSECURED LOANS ARE CONCERNED SHRI MANISH SHAH SURRENDERED AN AMOUNT OF RS.7,70,00,000/- AS HE COULD NOT SUBSTANTIATE THE GENUINENESS OF THE LOANS AT THAT POINT OF TIME. HOWEVER, HE STATED THAT THE LOANS HAVE BEEN REPAID AND ARE RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER, HE DID NOT DISCLOSE THIS INCOME WHILE FILING THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS HE HAD FURNISHED CONFIRMATIONS FROM ALL THE LOAN PARTIES, COPIES OF THE ACKNOWLEDGEMENTS OF RETURNS OF INCOME, COPIES OF THE FINANCIAL STATEMENTS, COPIES OF THE BANK ACCOUNTS ETC. DURING THE COURSE OF APPELLATE PROCEEDINGS, DETAILS OF THE TAX DEDUCTED AT SOURCE ALONGWITH COPIES OF FORM 16 HAVE BEEN OBTAINED AND PLACED ON RECORD. THE RECEIPT AND REPAYMENT OF LOANS ARE EVIDENCED FROM THE BANK STATEMENTS. FURTHER, THERE IS NO RECORD OF ANY CASH DEPOSITS OR WITHDRAWALS IN THESE BANK STATEMENTS. OTHER THAN RELYING UPON THE STATEMENTS OF SHRI PRAVIN JAIN AND SHRI MANISH SHAH WITHOUT CONSIDERING THEIR RETRACTIONS, THE A.O. HAS NOT BROUGHT ANYTHING TO SHOW THAT THE LOANS TAKEN BY THE APPELLANT ARE BOGUS. RELIANCE IS ALSO PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF PULLANGODE RUBBER PRODUCE CO.LTD VS STATE OF KERALA (1973)91 ITR 18(SC) WHERE IT WAS HELD THAT 'AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE ADMISSION TO SHOW THAT IT IS INCORRECT.' FURTHER, THE A.O., INSPITE OF 5 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. REQUESTS FROM THE ASSESSEE, HAS NOT PROVIDED FOR CROSS EXAMINATION OF SHRI PRAVIN JAIN AND RAKESH DOSHI ON WHOSE STATEMENTS THE A.O HAS PLACED RELIANCE, THEREBY GROSSLY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. IN VIEW OF THE ABOVE DISCUSSION, THE LOANS TAKEN AND SUBSEQUENTLY REPAID BY THE ASSESSEE ARE CONSIDERED GENUINE AND THE ADDITION OF RS.4,50,40,000/- MADE BY THE A.O. IS DELETED. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS ASKED FOR CROSS EXAMINATION OF PRAVIN JAIN AND RAKESH DOSHI WHICH HAS NOT BEEN PROVIDED BY THE A.O., THEREBY VIOLATING THE PRINCIPLE OF NATURAL JUSTICE AS HE HAD RELIED ONLY ON THE STATEMENTS OF PRAVIN JAIN AND RAKESH. 6. THE LD. DR, ON THE OTHER HAND, RELIED ON THE GROUNDS OF APPEAL AND THE ORDER OF AO THOUGH FAIRLY AGREED TO LD AR THAT SIMILAR ISSUE HAS BEEN DECIDED IN THE EARLIER YEAR BY THE TRIBUNAL. 7. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT SIMILAR ISSUE HAS BEEN DECIDED BY OUR CO-ORDINATE BENCH IN ITA NOS. 1448, 1449 & 1467/MUM/2017 (SUPRA) WHEREIN SIMILAR ADDITIONS WERE DELETED BY THE TRIBUNAL BY TREATING THE LOANS TAKEN AS GENUINE ON THE GROUND THAT THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON HIM AS HE HAS FILED ALL THE DOCUMENTS PROVING IDENTITY , CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS AND THEREFORE THE ADDITION CAN NOT BE MADE U/S 68 OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED BELOW :- 41. WE HAVE CAREFULLY CONSIDERED THIS PROPOSITION. WE NOTE THAT THE LD. COUNSEL OF THE ASSESSEE HAS REFERRED TO SEVERAL CASE LAWS IN THIS REGARD THAT WHEN THE ASSESSEE HAS SUPPLIED ALL THE DOCUMENTS THE ONUS IS DISCHARGED. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE SEVERAL CASE LAWS INCLUDING THAT FROM HON'BLE DELHI HIGH COURT IN THE CASE OF GANGESHWARI METAL PVT. LTD. (SUPRA), CIT V. VARINDER RAWLEY (2014) 366 ITR 232 (P&H), HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V. SACHITEL COMMUNICATIONS P. LTD.(2014) 227 TAXMAN 219 (MAG) AND OTHERS. 6 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. 42. IN OUR CONSIDERED OPINION, THESE CASE LAWS DULY SUPPORT THE PROPOSITION CANVASSED BY THE ASSESSEE. IN OUR CONSIDERED OPINION, THE A.O. HAS NOT BROUGHT ON RECORD ANY COGENT, ADVERSE MATERIAL TO REBUT THE CREDIBILITY OF THE CORPORATE ENTITY FROM WHOM LOAN HAS BEEN TAKEN. AS ALREADY POINTED OUT BY US AS ABOVE, THAT THESE CORPORATE ENTITIES WERE FOUND BY THE A.O. TO HAVE ACQUIRED FUNDS BY BORROWALS AND ACCEPTANCE OF SHARE CAPITAL AND SHARE PREMIUM. THIS BY ITSELF CANNOT LEAD TO PRESUMPTION THAT THESE SOURCES ARE BOGUS WITHOUT ANY ENQUIRY. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE LD. DR'S REQUEST THAT THIS ISSUE BE AGAIN REMITTED TO THE FILE OF THE A.O. TO MAKE FURTHER NECESSARY ENQUIRIES CANNOT BE ENTERTAINED. THE DECISION OF THE HONBLE KARNATAKA HIGH COURT REFERRED BY THE LD. DR WAS ON A DIFFERENT SET OF FACTS, WHEREIN, THE HONBLE KARNATAKA HIGH COURT ON THE FACTS AND CIRCUMSTANCES OF THE CASE HAD UPHELD THE CERTAIN DIRECTION OF THE ITAT. IN THE PRESENT CASE, AS POINTED OUT HEREINABOVE, IN OUR CONSIDERED OPINION, THE ASSESSEE HAS DISCHARGED ITS ONUS. AS NOTED ABOVE, THE A.O. HAS NOT BROUGHT ON REQUIRED COGENT MATERIAL TO REBUT THE DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE NOR HE MADE ANY ENQUIRY. AS NOTED ABOVE, THE ASSESSEE HAS GIVEN ALL THE NECESSARY EVIDENCE INCLUDING THE CONFIRMATION LETTERS, BANK STATEMENT, FINANCIAL STATEMENTS OF THE CORPORATE ENTITIES. HENCE, IN OUR CONSIDERED OPINION, THE IDENTITY, CREDITWORTHINESS, GENUINENESS OF THE TRANSACTION HAS BEEN PROVED BY THE ASSESSEE AND THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE FIND THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER SUPPORTED BY APPROPRIATE CASE LAWS DULY REBUTTING ALL THE FINDINGS OF THE A.O. HENCE WE UPHOLD THE ORDER OF THE LD. CIT(A). SINCE THE FACTS IN THE CURRENT YEAR ARE MATERIALLY SAME, WE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH, DISMISS GROUNDS OF APPEAL NOS. 1 AND 2 OF THE REVENUE BY UPHOLDING THE ORDER OF LD. CIT(A). 8. GROUND OF APPEAL NO. 3 IS AGAINST DELETION OF INTEREST EXPENDITURE OF RS.1,18,31,274/- PAID ON UNSECURED LOANS RAISED FROM COMPANIES RELATED TO SHRI PRAVIN KUMAR JAIN BY THE LD. CIT(A), WHICH WAS DISALLOWED BY THE ASSESSING 7 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. OFFICER ON THE GROUND THAT THESE LOANS WERE BOGUS AND CONSEQUENTLY, THE INTEREST PAID THEREON IS ALSO BOGUS. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF CO-ORDINATE BENCH IN ITA NOS. 1448, 1449 & 1467/MUM/2017 (SUPRA). 10. THE LD. DR, ON THE OTHER HAND, RELIED ON THE GROUNDS OF APPEAL. 11. SINCE WE HAVE DISMISSED THE GROUND NO. 1 AND 2 RAISED BY THE REVENUE CHALLENGING THE DELETION OF UNSECURED LOANS OF RS. 4,50,40,000/- IN PARA 7 SUPRA BY HOLDING THAT THE ADDITION MADE BY THE AO IS NOT CORRECT BY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEE OWN CASE IN EARLIER YEARS. THEREFORE THE GROUND NO, 3 IS CONSEQUENTIAL AND CONSEQUENTLY THE DISALLOWANCE OF INTEREST ON THESE LOANS CAN NOT BE DISALLOWED. ACCORDINGLY THE GROUND NO. 3 IS DISMISSED BY UPHOLDING THE ORDER OF LD. CIT(A). ITA NO. 6715/MUM/2018 :- 12. THE ISSUES RAISED IN THIS APPEAL ARE IDENTICAL TO THE ONES DECIDED BY US IN ITA NO. 6606/MUM/2017. THEREFORE, OUR FINDING AND DECISION IN ITA NO. 6606/MUM/2017 WOULD, MUTATIS MUTANDIS, APPLY TO THIS APPEAL AS WELL. ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. 13. RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED AND ORDER OF CIT(A) IS UPHELD. 8 ITA NOS. 6606/M/2017 & 6715/M/2018 M/S. MANBA FINANCE LTD. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2020. SD/ - P-SD/- S SD/ - D/- (RAM LAL NEGI) JUDICIAL MEMBER (RAJESH KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE : 10 TH JULY, 2020 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, D BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI