ACIT 32(3), MUMBAI V. VIVEK R. SHETTY, MUMBAI

ITA 6850/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4448 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POOJASWAROOP LD SR DR
• Assessee Lawyers: N N JAMBUSARIA LD
• Keywords: Accommodation entries; Bogus loan
• Section: 143(3); 68; 132

Judgement Text

ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.6850/MUM/2016 ( ASSESSMENT YEAR: 2012-13) ASSISTANT COMMISSIONER OF INCOME TAX-32(3) ROOM NO.108, 1 ST FLOOR, C-11 PRATYAKSHKAR BHAVAN, BKC, BANDRA MUMBAI-400 051 VS. VIVEK R. SHETTY 1/1, SHRINAGAR BUILDING CHANDAVARKAR ROAD, BORIWAI(W) MUMBAI-400 092 ! ' PAN/GIR NO. AAEPS-2750-D ( !# APPELLANT ) : ( $%!# RESPONDENT ) A SSESSEE BY : N.N. JAMBUSARIA, LD. AR RE VENUE BY : POOJA SWAROOP, LD. SR.DR & DATE OF HEARING : 25/07/2018 '() / DATE OF PRONOUNCEMENT : 08/08/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-44 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-44/ACIT 32(3)/ITA-168/15-16 DATED 22/09/2016 QUA DELETION OF CERTAIN ADDITIONS OF RS.106.48 LACS U/S 68 AS MADE BY LD. AO IN QUANTUM ASSESSMENT U/S 143(3) ON 27/03/2015. ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 2 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED AS COMMISSION AGENT AND DEALER IN SHARES UNDER PROPRIETORSHIP CONCERN NAMELY V.R. TOURS & TRAVELS WAS SADDLED WITH IMPUGNED ADDITIONS OF RS.106.48 LACS U/S 68. PURSUANT TO RECEIPT OF CERTA IN INFORMATION FROM DGIT (INVESTIGATION), MUMBAI , IT WAS FOUND THAT THE ASSESSEE OBTAINED LOANS AGGREGATING TO RS.106.48 LACS FROM 6 ENTITIES , THE NAMES OF WHICH WERE APPEARING IN THE LIST OF BENEFICIARIES OF ACCO MMODATION ENTRIES GIVEN BY ENTRY PROVIDER GROUP OF BHANWARLAL JAIN. THE DETAIL OF ALLEGED BOGUS LOANS TAKEN BY THE ASSESSEE WAS AS FOLLOWS:- NO. NAME AMOUNT (RS.) 1 ABHIMAN GEMS PVT.LTD RS.3,08,590/- 2 MOHIT ENTERPRISES RS.10,80,730/- 3 MAYUR EXPORTS RS.34,58,336/- 4 NAVKAR DIAMOND RS.13,91,043/- 5 MUKTI EXPORTS RS.16,21,095/ - 6 MEENAKSHI EXPORTS RS, 27,88,370/- TOTAL RS.1,06,48,164/ - THE SEARCH OPERATION U/S 132 ON BHANWARLAL JAIN GROUP REVEALED THAT THE AFORESAID GROUP, THROUGH WEB OF NUMEROUS BOGUS ENTITIES, PROVIDED BOGUS UNSECURED LOANS. 2.2 THE ASSESSEE DEFENDED THE LOANS ON THE STRENGTH OF THE CONFIRMATION OF THE PARTIES AND RELEVANT BANK STATE MENTS WHICH COULD NOT FIND FAVOR WITH LD. AO. ACCORDINGLY, THE AFORESAID LOANS WERE ADDED TO THE INCOME OF THE ASSESSEE AS CASH CREDIT U/S 68. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 22/09/2016 WHE REIN THE MATTER WAS CONCLUDED IN THE FOLLOWING MANNER:- ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 3 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER AS WELL AS THE WRITTEN SUBMISSION OF THE AR. I HAVE ALSO PERUSED THE DETAI LS FILED BY THE AR. THE AO HAS MADE ADDITION U/S 68 OF THE IT ACT 1961. IT IS THER EFORE IMPORTANT TO UNDERSTAND THE POSITION OF LAW WHICH HAS EVOLVED FROM A CATENA OF JUDGMENTS DELIVERED BY HIGH COURTS AND TRIBUNALS ON THIS ISSUE. FOR APPLYING TH E PROVISION OF SECTION 68 ONE OF THE FUNDAMENTAL CONDITION IS THAT A SUM IS FOUND CR EDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR THE PREVIOUS YEAR . THE SECTION FURTHER SAYS THAT IF THE EXPLANATION OFFERED BY THE ASSESSEE REGARDING THE N ATURE AND SOURCE OF SUCH CREDIT ENTRY IS NOT FOUND TO BE SATISFACTORY BY THE AO THE N THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR . FROM A PLAIN READING OF SECTION 68 IT IS ABSOLUTELY CLEAR THAT ADDITION U/S 68 CAN BE MADE FOR THAT PREVIOUS YEAR IN WHICH SUCH SUM IS FOUND CREDI TED IN THE BOOKS OF THE ASSESSEE. THIS VIEW ALSO DERIVES SUPPORT FROM THE JUDGMENT GI VEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS USHA STUD AGRICULTURAL FARMS LTD. 301 ITS 384 (DEL). IN THIS CASE ALSO THE CIT(A)S HAD DELETED ADDITION ON GROUND THAT THE SAID CASH CREDIT WAS APPEARING IN BOOKS OF ASSESSEE OVER PAST 4 TO 5 YEARS AND THUS IT WAS NOT FRESH CREDIT ENTRY PERTAINING TO RELEVANT ASSESSMENT YEAR . THE ORDER OF THE CIT(A) WAS BOTH BY THE ITAT DELHI AND THE DELHI HIGH COURT. 3.4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE FOLLOWING DETAILS WERE FILED BEFORE THE AO. AUDITED BOOKS OF ACCOUNTS OF ASSESSEE BANK STATEMENTS REFLECTING RECEIPT OF LOAN AND IN TEREST PAYMENTS. LOAN CONFIRMATIONS STATEMENTS PROFIT & LOSS OF PARTIES FROM WHOM THE LOAN IS OB TAINED BALANCE SHEET OF PARTIES FROM WHOM THE LOAN IS OB TAINED. 3.5 IT IS THE CONTENTION OF THE APPELLANT THAT DURI NG THE RELEVANT PREVIOUS YEAR I.E. FY 2011-12 PERTAINING TO AY 2012-13 ONLY AN AMOUNT OF RS 20,50,000/- HAS BEEN TAKEN AS LOAN. THE BALANCE AMOUNT OF LOAN TOTALING UP TO RS 79,00,000/- HAS BEEN TAKEN IN VARIOUS PREVIOUS YEARS BEFORE THE FY 2011- 12. THE SAME EXPLANATION WAS GIVEN BY THE APPELLANT BEFORE THE AO ABOUT WHICH TH E AO HAS NOT MENTIONED ANYTHING IN THE ASSESSMENT ORDER. THE AO HAS HIMSEL F MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SUBMITTED COPIES OF CON FIRMATION AS WELL AS BANK STATEMENTS. IF THE AO HAD EXAMINED THE DETAILS FILE D BY THE APPELLANT HE COULD HAVE BEEN THAT THERE IS AN OPENING BALANCE OF LOAN SHOWN BY N/S MAYUR EXPORTS, MIS MOHIT ENTERPRISES, M/S MINAKSHI EXPORTS & M/S MUKTI EXPORTS. THE FRESH LOAN ACCEPTED DURING THE FINANCIAL YEAR 2011-12 WAS RS.4 ,00,000/- FROM M/S MINAKSHI EXPORTS, RS. 13,50,000/- FROM M/S NAVKAR DIAMONDS A ND RS.3,00,000/- FROM M/S ABHINAV GEMS. THUS THE CLOSING BALANCE OF LOAN TOTA LING UP TO RS 1,06,48,133/ CONSISTED OF AN AMOUNT OF RS 79,00,000/- OF OLD LOA NS, RS 20,50,000/- OF FRESH LOANS AND INTEREST ACCRUED ON LOANS. AO, HOWEVER, DID NOT EVEN CHECK WHETHER THE SUMS OF LOAN HAVE BEEN CREDITED IN THE BOOKS OF THE APPE LLANT DURING THE CONCERNED PREVIOUS YEAR AND ADDED THE ENTIRE CLOSING BALANCE OF LOAN TOGETHER WITH INTEREST U/S 68 OF THE IT ACT. AS MENTIONED EARLIER THERE IS A L EGAL REQUIREMENT FOR SECTION 68 TO BE APPLICABLE IN A CONCERNED ASSESSMENT YEAR THAT T HE CREDIT OF SUM IN QUESTION HAS TO BE MADE IN THE CONCERNED PREVIOUS YEAR OF THAT P ARTICULARS ASSESSMENT YEAR. SINCE IT IS A MATTER OF FACT AND RECORD THAT LOANS TOTALING UP TO RS 79,50,000/- WERE NOT CREDITED IN THE BOOKS OF THE APPELLANT DURING T HE CONCERNED PREVIOUS YEAR 2011- 12 THE SAME CANNOT BE ADDED U/S 68 IN THE ASSESSMEN T OF THE AY 2012-13. ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 4 3.6 AS FAR AS THE FRESH LOAN TOTALING UP TO RS 20,5 0,000/- IS CONCERNED IT IS SEEN THAT IN THE ASSESSMENT ORDER, THE AO DID NOT AT ALL DISCUSS THE MERITS OF SUBMISSIONS BY THE APPELLANT AND CASUALLY BRUSHED ASIDE THE DET AILS FILED BY THE APPELLANT. FURTHER, FROM A CAREFUL PERUSAL OF ASSESSMENT ORDER IT IS SEEN THAT NO ENQUIRY WHATSOEVER HAS BEEN CONDUCTED BY THE AO. AO DID NOT MAKE ANY INDEPENDENT VERIFICATION WHICH WOULD BRING IN EVIDENCES AGAINST THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE LOAN TRANSA CTIONS. INSTEAD THE ENTIRE FOCUS OF THE AO WAS TO DISCUSS THE MODUS OPERANDI ADOPTED BY BHANWARLAL JAIN TO PROVIDE BOGUS ACCOMMODATION ENTRY OF LOAN. HOWEVER, THE MOO T POINT BEFORE THE AO WAS TO EXAMINE THE APPLICATION OF SECTION 68 IN THE CASE O F THE APPELLANT. INSTEAD OF ESTABLISHING THAT THE EXPLANATION OFFERED REGARDING THE NATURE AND SOURCE OF CREDIT IN THE BOOKS OF THE APPELLANT IS NOT SATISFACTORY THE AO WENT TO DISCUSS IN DETAIL THE FACTS RELATED WITH BHANWARLAL JAIN GROUP OF CASES. THE AO HAS NOT APPRECIATED THE FACT THAT HE WAS NOT MAKING ASSESSMENT OF BHANWARLA L JAIN GROUP OF CASES. ON THE OTHER HAND, THE APPELLANT WAS ABLE TO ESTABLISH THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITORS AS WELL AS THE GENUINENESS OF TRAN SACTIONS. 3.7 THE HON'BLE ITAT MUMBAI IN THE CASE OF ITO VS A NANT SHELTERS PVT. LTD. (2012) 20 TAXRNANN.COM 153 HAS ENUMERATED CERTAIN PRINCIPL ES WHICH WOULD BE EXTREMELY USEFUL IN UNDERSTANDING THE ISSUE IN HAND. IT HAS B EEN STATED IN THE SAID JUDGMENT THAT OVER THE YEARS, LAW REGARDING CASH CREDITS HAV E EVOLVED AND HAS TAKEN A DEFINITE SHAPE. A FEW ASPECTS OF LAW U/S 68 CAN BE ENUMERATED 1. SEC. 68 CAN BE INVOKED WHEN THERE IS A CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE, SUCH CREDIT IS A SUM OF MONEY DURING THE PREVIOUS YEAR AND EITHER THE ASSESSEE OFFERS NO EXP LANATION ABOUT THE NATURE AND SOURCE OF SUCH CREDITS OR THE EXPLANATIO N BY THE ASSESSEE IN THE OPINION OF THE AO IS NOT SATISFACTORY. 2. THE OPINION OF THE AO FOR NOT ACCEPTING THE EXP LANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQUIRED TO BE FARM ED OBJECTIVELY WITH REFERENCE TO THE MATERIAL ON RECORD. 3. COURTS ARE OF THE FIRM VIEW THAT THE EVIDENCE PR ODUCED BY THE ASSESSEE CANNOT BE BRUSHED ASIDE IN A CASUAL MANNER . 4. THE ONUS OF PROOF IS NOT STATIC. THE INITIAL BU RDEN LIES ON THE ASSESSEE TO ESTABLISH THE IDENTITY AND THE CREDIT WORTHINESS OF THE CREDITOR AS WELL AS THE GENUINENESS OF TRANSACTION. 5. THE IDENTITY OF CREDITORS CAN BE ESTABLISHED BY EITHER FURNISHING THEIR PANS OR ASSESSMENT ORDERS. THE GENUINENESS OF THE T RANSACTION CAN BE PROVED IF IT WAS SHOWN THAT THE MONEY WAS RECEIV ED BY A/C PAYEE CHEQUE. CREDITWORTHINESS OF THE LENDER CAN BE ESTAB LISHED BY ATTENDING CIRCUMSTANCES. 3.8 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E FOLLOWING DETAILS WERE FILED BEFORE THE AO. AUDITED BOOKS OF ACCOUNTS OF ASSESSEE BANK STATEMENTS REFLECTING RECEIPT OF LOAN AND IN TEREST PAYMENTS. LOAN CONFIRMATIONS STATEMENTS PROFIT & LOSS OF PARTIES FROM WHOM THE LOAN IS OB TAINED BALANCE SHEET OF PARTIES FROM WHOM THE LOAN IS OB TAINED ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 5 3.9 IF THE ABOVE REFERRED PRINCIPLES ARE APPLIED TO THE FACTS OF THE CASE UNDER CONSIDERATION IT CAN BE SEEN THAT THE IDENTITY OF T HE CREDITORS HAS BEEN ESTABLISHED AS THEY ARE HAVING PAN AND THEY ARE FILING RETURN O F INCOME. THE GENUINENESS OF THE TRANSACTION IS ESTABLISHED FROM THE FACT THAT THE A CCEPTANCE OF LOAN HAS BEEN THROUGH BANKING CHANNELS. FURTHER INTEREST HAS BEEN PAID AGAINST SUCH LOANS AND SUCH INTEREST PAYMENTS HAVE BEEN SUBJECT TO TDS. TH E CREDITWORTHINESS OF THE LENDERS CAN BE ESTABLISHED FROM THE FINANCIAL STATE MENTS OF THE LENDERS WHICH WERE FILED BEFORE THE AO. 3.10 RECENTLY THE HONBLE BOMBAY HIGH COURT HAS PAS SED AN ORDER IN WP NO.167 OF 2015 DATED 15.04.2015 IN THE CASE OF M/S RUSHABH ENTERPRISES VS. ACIT 24(3) AND ORS. IN THIS CASE ALSO THE ASSESSEE HAD TAKEN L OAN FROM CONCERNS RELATED WITH BHANWARLAL JAIN GROUP OF CASES. IN ITS ORDER THE HO NBLE BOMBAY HIGH COURT IN ADDITION TO DECIDING THE LEGAL VALIDITY OF REOPENIN G OF ASSESSMENT ALSO DISCUSSED THE FACTS OF THE CASE. THE HONBLE BOMBAY HIGH COURT IN PARA 8 OF ITS ORDER STATED . ACCORDING TO HER (AO) THE REVENUE HAS RECEIVED INFORMATION FROM THE DGIT (INV) THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS FROM TH E ABOVE PARTIES BY WAY OF UNACCOUNTED CASH/ACCOMMODATION ENTRIES. WE ARE UNAB LE TO AGREE SINCE THE PETITIONER HAS CLEARLY STATED THAT ALL THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUES WHICH WERE ENCASHED IN THE BANK ACCOUNT OF THE PETI TIONER IN THE REGULAR COURSE OF BUSINESS. WE FIND THAT THE PETITIONER HAS ALSO PAID INTEREST ON THIS LOANS AFTER DEDUCTION OF TAX AT SOURCE AND TDS RETURNS ARE ALSO ACCORDINGLY FILED. THERE IS NO DISPUTE IN REGARD TO THE ABOVE. WE FIND NOTHING TO SUPPORT THE SAID CONTENTIONS OF THE REVENUE. THE REVENUES CONTENTION IN THE AFFIDA VIT IN REPLY HAS NO MERIT. ON THE OTHER HAND, THE LOANS APPEAR TO BE TAKEN IN THE REG ULAR COURSE OF BUSINESS. 3.11 AFTER CONSIDERING THE TOTALITY OF FACTS, THE R IVAL SUBMISSIONS, APPLICABLE LAW AND ON THE BASIS OF DISCUSSIONS MENTIONED ABOVE I H AVE COME TO A CONCLUSION THAT NATURE AND SOURCE OF CREDIT IN THE BOOKS OF ACCOUNT S OF THE APPELLANT STANDS EXPLAINED. CONSEQUENTLY, ADDITION U/S 68 CANNOT BE SUSTAINED EVEN FOR THE FRESH LOAN TOTALING UP TO RS 20,50,000/-. AS MENTIONED IN PARA 3.5 THE OLD LOANS WHICH WERE TAKEN EARLIER CANNOT BE ADDED U/S 68 IN THE AS SESSMENT OF AY 2012-13. THE GROUNDS OF APPEAL NO. 1 IS ACCORDINGLY ALLOWED AND ADDITION OF RS 1,06,48,164/- IS DELETED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], MS. POOJA SWAROOP, SUBMITTED THAT LD. CIT(A) ERRED IN PROVIDING RELIEF TO THE ASSESSEE IN VIEW OF THE FACT THAT SEARCH OPERATIONS ON THE TAINTED G ROUP CLEARLY REVEALED THAT THE SAID GROUP WAS ENGAGED ONLY IN PROVIDING A CCOMMODATION / BOGUS ENTRIES. RELIANCE HAS BEEN PLACED ON THE JUDGMENT O F HON;BLE DELHI HIGH COURT RENDERED IN CIT VS. JANSAMPARK ADVERTISING & MARKETING P. LTD. [56 TAXMANN.COM 286]. PER CONTRA, LD. AUHTORIZED ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 6 REPRESENTATIVE FOR ASSESSEE [AR], SHRI N.N.JAMBUSARIA, SUBMITTED THAT NO ADDITION COULD BE MADE U/S 68 TO THE EXTENT OF R S.79 LACS SINCE THE CREDIT OF THE SAME WAS NOT RECEIVED IN THE IMPUGNED AY. REGARDING THE BALANCE, IT WAS FAIRLY SUBMITTED THAT THE MATTER MA Y BE REMITTED BACK TO THE FILE OF LD. AO FOR FRESH ADJUDICATION. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. SO FAR AS T HE ADDITION OF RS.79 LACS IS CONCERNED, LD. CIT(A), AFTER EXAMININ G CONFIRMATION OF ACCOUNTS, HAS RECORDED A FINDING THAT CREDIT OF THE SAME WAS NOT RECEIVED BY THE ASSESSEE DURING IMPUGNED AY AND THE REFORE, THE ADDITION U/S 68, TO THAT EXTENT, COULD NOT BE MADE. WE AGREE WITH THE ARGUMENTS OF LD. AR TO THAT EXTENT. ACCORDINGLY, TH E CONCLUSION DRAWN BY LD. CIT(A), TO THAT EXTENT, STAND CONFIRMED. 6. HOWEVER, REGARDING THE BALANCE FRESH LOANS OF RS .20.50 LACS AS OBTAINED BY THE ASSESSEE DURING IMPUGNED AY, IN TER MS OF SUBMISSIONS OF LD. AR, WE DEEM IT FIT TO RESTORE THE MATTER BAC K TO THE FILE OF LD. AO FOR DECIDING AFRESH AS PER LAW WITH A DIRECTION TO THE ASSESSEE TO SUBSTANTIATE THE SAME WITH DOCUMENTARY EVIDENCES ET C. THE GROUND OF APPEAL STAND ALLOWED TO THAT EXTENT. 7. RESULTANTLY, THE REVENUES APPEAL STAND PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH AUGUST, 2018 SD/- SD/- (SAKTIJIT DEY) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER *& MUMBAI; DATED : 08.08.2018 SR.PS:-THIRUMALESH ITA NO.6850/MUM/2016 VIVEK R. SHETTY ASSESSMENT YEAR-2012-13 7 ! COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - -) *& / DR, ITAT, MUMBAI 6. , ./0 & GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) *& / ITAT, MUMBAI