ITO WD 25(1)(5), MUMBAI V. UNITED METAL & WIRE INDUSTRIES, MUMBAI

ITA 7356/MUM/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6964 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA UNITED METAL; WIRE INDUSTRIES O
• Assessee Lawyers: J P PUROHIT
• Keywords: Bogus purchase; Unexplained cash credit; Rejection of books of accounts; Corroborative evidences; Accommodation entries; Set aside
• Section: 69C; 143(3); 133(6); 131; 68

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER, ITA NOS.7336/MUM/2016 ASSESSMENT YEAR: 2012-13 UNI TED METAL & WIRE INDUSTRIES, 16, LATIF MANSION, 56, TELI GALLI ANDHERI(EAST), MUMBAI-400069 / VS. ITO , WARD - 25(1)(5), C-10, PRATYAKSHKAR BHAWAN, 4 TH FLOOR BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( /ASSESSEE) ( / REVENUE) P.A. NO.AAAFU2811K ITA NOS.7356/MUM/2016 ASSESSMENT YEAR: 2012-13 ITO , WARD - 25(1)(5), C-10, PRATYAKSHKAR BHAWAN, 4 TH FLOOR BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. UNITED METAL & WIRE INDUSTRIES, 16, LATIF MANSION, 56, TELI GALLI ANDHERI(EAST), MUMBAI-400069 ( / REVENUE) ( /ASSESSEE) P.A. NO.AAAFU2811K / DATE OF HEARING : 11/12/2018 / DATE OF ORDER: 01/03/2019 / ASSESSEE BY SHRI J. P. PUROHIT / REVENUE BY SHRI RAJEEV GUBGOTRA 2 UNITED METAL & WIRE INDUSTRIES / O R D E R PER G. MANJUNATHA, (ACCOUNTANT MEMBER) THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL A S THE REVENUE ARE DIRECTED AGAINST ORDER OF THE LD. CIT(A)-37, MUMBAI, DATED 2 8/09/2016 FOR ASSESSMENT YEAR 2012- 13. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- I. IN THE FACTS & CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.3,43,000/- A S UNEXPLAINED CASH CREDIT AND ALSO MAKING AN ADDITION OF INTEREST ACCRUED THEREON . II. IN THE FACTS & CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES RS .1,00,021/- BEING 10% OF THE EXPENSES CLAIMED THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1 THE ID. CIT(A) HAS ERRED ON FACT AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.2,30,16,415/- MADE B Y THE A.O. ON ACCOUNT OF DISCREPANCY OF PURCHASES. 2. THE ID. CIT(A) ERRED IN NOT CONSIDERING THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PURCHASE TR ANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THE ID. CIT(A) HAS ERRED ON FACT AND IN LAW, IN VIEW OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX ... ...VS M/S LA MEDICA, DELHI ON 15 MARCH, 2001 [2001 VAD DELHI 931, 92 (2001 DLT 406, 2001(59) DRJ 404] WHEREIN THE HON'BLE COURT HAS UPHELD THE 100% DISALLOWANCE OF BOGUS PURCHASES. 4. THE ID. CIT(A) HAS ERRED ON FACT AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING AND ADDITION OF RS.1,56,77,456/- MADE O N ACCOUNT OF UNEXPLAINED CASH CREDIT AND UNPROVED LOANS U/S 68 OF THE I.T. ACT, 1 961. 5. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3 UNITED METAL & WIRE INDUSTRIES 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAPER COVERED ALUMINIUM WIRES, STR IPES, BARS, ETC, FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 27/09/2012, DECLARING TOTA L INCOME OF RS.14,16,658/-. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLE TED U/S 143(3) OF THE INCOME TAX ACT, (HEREINAFTER THE ACT) ON 30/03/2015 DETERMIN ING TOTAL INCOME AT RS.4,05,53,550/- BY MAKING ADDITIONS TOWARDS DISALLOWANCE 25% OF PURCHA SE, FROM TWO PARTIES ON THE GROUND THAT NO DETAILS HAS BEEN FILED TO JUSTIFY PURCHASES , ADDITIONS TOWARDS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT OF RS.1,60,20,456/- AND A LSO DISALLOWANCE OF 10% EXPENSES DEBITED UNDER THE HEAD MOTOR CAR EXPENSES, GENERAL EXPENSES, MISCELLANEOUS EXPENSES, CONVEYANCE EXPENSES, LABOUR WELFARE AND SALES PROMO TION. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HAVE R ECORDED REASONS IN ITS ORDER DATED 28/09/2016, PARTLY ALLOWED APPEAL FILED BY THE ASSE SSEE, WHERE HE HAD DELETED ADDITIONS MADE TOWARDS DISALLOWANCE OF PURCHASE AND ALSO ALLO WED PARTIAL RELIEF IN RESPECT OF ADDITIONS MADE TOWARDS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT, HOWEVER CONFIRMED THE ADDITIONS MADE TOWARDS AD-HOC DISALLOWANCE OF EXPEN SES. 3. AGGRIEVED BY ORDER OF THE LD. CIT(A), THE ASSES SEE AS WELL AS REVENUE IS IN APPEAL BEFORE US. THE FIRST ISSUE CAME UP FOR CONSI DERATION FOR REVENUES APPEAL IS ADDITION TOWARDS 25% OF PURCHASES FROM M/S HINDUSTA N COPPER LTD. AND M/S STERLITE INDUSTRIES (I) LTD.. DURING ASSESSMENT PROCEEDINGS, TO EXAMINE PURCHASES CLAIMED BY THE ASSESSEE, NOTICE U/S 133(6) WERE ISSUED TO CERTAIN PARTIES ON TEST CHECK BASIS. IN 4 UNITED METAL & WIRE INDUSTRIES RESPONSE OF NOTICE, M/S HINDUSTAN COPPER LTD. AND M /S STERLITE INDUSTRIES (I) LTD. DID NOT RESPOND. THEREAFTER, THE AO ASKED THE ASSESSEE TO FILE CONFIRMATION FROM THE PARTIES ALONG WITH STOCK REGISTER, QUANTITATIVE DETAILS, RE CONCILIATION OF RAW MATERIAL TO PRODUCTION AND ALSO TRANSPORTATION BILLS RELATED TO PURCHASE. IN RESPONSE, THE ASSESSEE HAS FILED COMPLETE DETAILS AS CALLED FOR BY AO, INCLUDING TRA NSPORTATION BILLS TO PROVE PURCHASE FROM ABOVE PARTIES. THE AO AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE CAME TO CONCLUSION THAT THE ASSESSEE HAS FAILED TO PROVE HOW THE MATER IAL SHOWN TO HAVE BEEN PURCHASED SPECIFICALLY USED IN THE BUSINESS OF THE ASSESSEE G IVING USE PATTERNS OF THE MATERIAL. THE ASSESSEE WAS ALSO UNABLE TO PRODUCE LATEST ADDRESS AND WHEREABOUTS OF THESE DEALERS/SELLERS. THE ONUS OF PROVING THE GENUINENES S OF EXPENDITURE WAS NOT DISCHARGED BY THE ASSESSEE. WHEN EXPENDITURE IS CLAIMED TO HAV E BEEN INCURRED, THE INITIAL BURDEN WILL BE ON THE ASSESSEE TO PROVE THAT EXPENDITURE W AS GENUINE, BUT THE ASSESSEE FAILS TO DISCHARGE ITS ONUS BY FILING NECESSARY EVIDENCE, AC CORDINGLY, AFTER ANALYZING THE BOOK RESULTS OF THE ASSESSEE AND ALSO CONSIDERING NET PR OFIT DECLARED FOR THE YEAR UNDER CONSIDERATION CAME TO THE CONCLUSION THAT PURCHASES CLAIMED TO HAVE BEEN MADE FROM ABOVE PARTIES ARE NOT PROVED AND HENCE REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ADDED 25% UNVERIFIABLE PURCHASES U/S 69C OF THE ACT. 4. THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS ERR ED IN DELETING THE ADDITION MADE BY THE AO TOWARDS 25% OF UNVERIFIABLE PURCHASES WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE NOT EVEN ABLE TO FILE LATEST ADDRESS OF TH E DEALER WHEN NOTICE ISSUED U/S 133(6) OF THE ACT, WERE RETURNED UN-SERVED. THE LD. DR FUR THER SUBMITTED THAT THE AO BROUGHT OUT 5 UNITED METAL & WIRE INDUSTRIES CLEAR FACTS TO THE EFFECT THAT THE ASSESSEE HAS DEC LARED NOMINAL NET PROFIT PERCENTAGE WHICH WORKS OUT 0.61% OF ITS SALES, THEREFORE, THE AO WAS RIGHT IN REJECTED BOOKS OF ACCOUNTS AND MAKING ADDITIONS TOWARDS UNVERIFIABLE PURCHASES, BUT THE LD. CIT(A) MERELY FOR FILING CERTAIN SUPPORTING EVIDENCE ACCEPTED PUR CHASES FROM ABOVE PARTIES AS GENUINE. 5. THE LD. AR FOR THE ASSESSEE ON THE OTHER HAND, STRONGLY SUPPORTED ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS RI GHTLY APPRECIATED THE FACTS IN LIGHT OF VARIOUS DETAILS FILED BY THE ASSESSEE INCLUDING CON FIRMATION FROM THE PARTIES TO COME TO THE CONCLUSION THAT PURCHASES FROM BOTH PARTIES ARE GEN UINE WHICH ARE SUPPORTED BY VALID EVIDENCE. THE LD. AR FURTHER SUBMITTED THAT OUT OF TWO PARTIES, ONE IS GOVERNMENT OF INDIA COMPANY AND ANOTHER IS REPUTED PUBLIC LISTED COMPAN Y BELONGING TO VEDANTA GROUP, THEREFORE, THE VERSION OF THE AO THAT IDENTITY IS N OT PROVED CANNOT BE ACCEPTED. IN RESPECT OF PURCHASES, VARIOUS DETAILS HAS BEEN FILED INCLUD ING STOCK REGISTER DETAILS, THEREFORE, MERELY FOR THE REASON OF NON-SERVICE OF NOTICE U/S 133(6) ADDITIONS COULD NOT BE MADE. 6. WE HAVE HEARD BOTH OF PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS FILED VARIOUS DETAILS INCLUDING CO NFIRMATION FROM TWO PARTIES BEFORE THE LD. CIT(A) TO PROVE THAT PURCHASES ARE GENUINE WHIC H ARE SUPPORTED BY NECESSARY EVIDENCE. THE ASSESSEE ALSO FILED VARIOUS EVIDENCES TO PROVE THAT BOTH ARE REPUTED COMPANIES INVOLVED IN MANUFACTURING COPPER AND OTHE R PRODUCTS. IT IS ALSO AN ADMITTED FACT THAT M/S HINDUSTAN COPPER LTD. IS GOVT. OF INDIAS COMPANY. THE ANOTHER DEALER M/S STERLITE INDUSTRIES (I) LTD. IS A PUBLIC LISTED COM PANY BELONGING TO VEDANTA GROUP. THEREFORE, THERE IS NO QUESTION OF PROVING THE IDEN TITY OF SUCH COMPANIES. THE ASSESSEE 6 UNITED METAL & WIRE INDUSTRIES ALSO SUBMITTED ALL PURCHASES, STOCK, RECONCILIATION AND TRANSPORT RELATED DOCUMENTS BEFORE THE LOWER AUTHORITIES. IN FACT, THE AO HAS NEVER DO UBTED ON THIS ASPECT, BUT HE HAS MADE ADDITIONS ONLY FOR THE REASON THAT NOTICE U/S 133(6 ) ISSUED TO ABOVE PARTIES WERE RETURNED UNSERVED EXCEPT THIS, NO OBSERVATION WITH REGARD TO BOOKS OF ACCOUNTS OR STOCK DETAILS WAS MADE BY THE AO. IN ABSENCE OF ANY OBSERVATIONS WITH REGARD TO BOOKS OF ACCOUNTS, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESS EE MERELY FOR NON-SERVICE OF NOTICE U/S 133(6) OF THE ACT, MORE PARTICULARLY WHEN TWO S UPPLIERS ARE REPUTED COMPANIES HAVING CREDIBLE BUSINESS ACTIVITIES. IT IS NOT A CASE OF A O THAT THESE ARE BOGUS PURCHASES (HAWALA DEALERS AS PER SALES TAX DEPARTMENT) AS THE PURCHAS ES WERE MADE FROM LARGE SCALE COMPANY ONE OF IT IS OWNED BY THE GOVT. OF INDIA AN D ANOTHER ONE IS FLAGSHIP COMPANY OF VEDANTA GROUP. THE ASSESSEE CANNOT BE RESPONSIBLE F OR NON-SERVICE OF NOTICE U/S 133(6) OF THE ACT TO THE SUPPLIERS. THE LD. CIT(A) AFTER C ONSIDERING ALL THESE FACTS HAS RECORDED CATEGORICALLY FINDING OF THE FACT THAT NO CONTRARY EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO PROVE THAT PURCHASES FROM ABOVE TWO PARTI ES ARE NON-GENUINE EXCEPT NON- SERVICE OF NOTICE U/S 133(6) OF THE ACT. ON THE OT HER HAND, THE ASSESSEE HAS FILED COMPLETE DETAILS ALONG WITH STOCK REGISTER EXECISE AUDIT REPORT AND TRANSPORTATION DOCUMENTS TO PROVE THAT THESE PURCHASES ARE GENUINE . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDI NGS RECORDED BY THE LD. CIT(A) IN DELETING THE ADDITIONS TOWARDS 25% OF UNVERIFIABLE PURCHASES . HENCE, WE REJECT THE GROUND TAKEN BY THE REVENUE. 7 UNITED METAL & WIRE INDUSTRIES 7. THE NEXT ISSUE CAME UP FOR CONSIDERATION IS ADD ITIONS TOWARDS UNSECURED LOANS U/S 68 OF THE ACT. DURING THE ASSESSMENT PROC EEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN OUTSTANDING UNSECURED LOANS AGGR EGATING TO RS.3,87,59,796/- FROM 53 PARTIES AS ON 31/03/2012. THE CORRESPONDING FIGU RE OF OUTSTANDING UNSECURED LOANS AS ON 31/03/2011 WAS AT RS.2,80,77,650/- FROM 46 PARTI ES. IN ORDER TO VERIFY THE GENUINENESS OF THE UNSECURED LOAN, THE AO CALLED UPON THE ASSES SEE TO SUBMIT CONFIRMATION LETTER FROM THE LENDERS ALONG WITH THEIR ITR COPIES, BANK STATE MENT AND FINANCIAL STATEMENTS. IN RESPONSE, THE ASSESSEE HAS NOT FURNISHED CERTAIN DO CUMENTS. DURING ASSESSMENT PROCEEDINGS, IN ORDER TO VERIFY THE CORRECTNESS OF CERTAIN DOCUMENTS FILED BY THE ASSESSEE, THE AO ISSUED A COMMISSION TO KOLKATA IN CASE OF M/ S PUSHPANJALI COMMOTRADE PVT. LTD. AND M/S RADIANT MERCHANDISE PVT. LTD. IN RESPONSE, THE DDIT(INV.), UNIT-2(3), KOLKATA, VIDE ITS REPORT DATED 13/03/2015 SUBMITTED THAT NON E OF THE PARTIES WERE RESPONDED IN RESPONSE TO SUMMONS ISSUED U/S 131 OF THE ACT, EVEN AS PER REPORT OF INSPECTOR WHEREABOUTS OF THIS COMPANY COULD NOT BE ESTABLISHE D DUE TO NON-AVAILABILITY OF THESE COMPANIES AT GIVEN REGISTERED OFFICE. SIMILARLY, TH E AO HAS EXAMINED OTHER CREDITORS IN LIGHT OF THE EVIDENCES FILED BY THE ASSESSEE AND CA ME TO CONCLUSION THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS INITIAL ONUS BY FILING EVID ENCE AND ACCORDINGLY MADE ADDITION OF RS.1,60,20,456/- TOWARDS UNSECURED LOANS U/S 68 OF THE ACT. 8. THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS ER RED IN ALLOWED PARTIAL RELIEF TOWARDS ADDITIONS MADE ON ACCOUNT OF UNSECURED LOAN S WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENU INENESS OF TRANSACTION AND 8 UNITED METAL & WIRE INDUSTRIES CREDITWORTHINESS OF THE PARTIES IN RESPECT OF TWO U NSECURED LOANS FROM KOLKATA BASED COMPANY. THE LD. DR FURTHER SUBMITTED THAT IN RESPE CT OF UNSECURED LOANS RECEIVED FROM M/S CHANDIMATA MANAGEMENT PVT. LTD. AND M/S MAX WO RTH PROJECT PVT. LTD. , IT WAS OBSERVED BY THE AO THAT DIRECTOR, SHRI UMESH SINGH HAD ADMITTED IN HIS STATEMENT THAT HE WAS DUMMY PERSON OF SHRI PRAVIN AGGARWAL AND SHRI P RAMOD RAMDEV SHARMA HIMSELF ADMITTED THAT THESE COMPANIES ARE INVOLVED IN GIVIN G ENTRIES TO THE BENEFICIARIES ON THE BASIS OF COMMISSION. THE LD. CIT(A), WITHOUT APPREC IATING THESE FACTS HAS DELETED ADDITION ON TECHNICAL GROUND THAT THE ASSESSEE HAS DISCHARGE D ITS INITIAL ONUS BY FILING CONFIRMATION AND OTHER DOCUMENTS. THE LD. DR FURTHER SUBMITTED T HAT IN RESPECT OF OTHER LOANS RECEIVED FROM CERTAIN INDIVIDUALS, NONE OF THE CREDITORS HAV ING SUFFICIENT SOURCE OF INCOME TO EXPLAIN LOANS GIVEN TO THE ASSESSEE. BUT, THE LD. CIT(A) HA S DELETED THE ADDITION BY ACCEPTING CONFIRMATION LETTER FILED BY THE ASSESSEE WITHOUT R ECORDING ANY REASONS AS TO HOW OTHER TWO INGREDIENTS I.E. GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS HAS BEEN DISCHARGED BY THE ASSESSEE. 9. THE LD. AR FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). THE LD. CIT(A), RECORDED CATEGORICA L FINDINGS IN THE LIGHT OF VARIOUS DETAILS FILED DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS, AS PER WHICH, THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN CAST UPO N U/S 68 OF THE ACT, INCLUDING IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED VARIOUS DETAI LS INCLUDING CONFIRMATION FROM THE PARTIES AND THEIR FINANCIAL STATEMENTS ALONG WITH B ANK STATEMENT TO PROVE THAT THEY HAVE 9 UNITED METAL & WIRE INDUSTRIES SUFFICIENT SOURCE OF INCOME TO EXPLAIN LOANS GIVEN TO THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE DETAILS, RIGHTLY DELETED ADDITIONS MADE TOWARDS UNSECURED LOANS INCLUDING LOANS TAKEN DURING THE PREVIOUS FINANCIAL YEAR, AS PROVISIONS OF SECTION 68 OF THE ACT IS APPLICABLE TO ONLY CREDITS FOUND IN THE BOOKS ACCOU NTS FOR THE YEAR UNDER CONSIDERATION BUT NOT TO THE OPENING BALANCE BROUGHT FORWARD FROM EAR LIER YEAR. IN SO FAR AS UNSECURED LOANS CONFIRMED BY THE LD. CIT(A), THE LD. AR SUBMITTED T HAT IN RESPECT OF THREE PARTIES, THE ASSESSEE HAS FILED CONFIRMATION, HOWEVER, COULD NOT FILE BANK STATEMENT AND ITR BECAUSE THOSE PARTIES ARE NOT ASSESSED TO INCOME TAX. HE FU RTHER SUBMITTED THAT WHEN IDENTITY HAS BEEN PROVED MERELY FOR THE REASON THAT BANK STATEME NT AND COPIES OF ITR WERE FILED, NO ADDITIONS COULD BE MADE WHEN THE ASSESSEE HAS MADE IT CLEAR THAT THOSE PARTIES ARE NOT ASSESSED TO INCOME TAX. 10. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MAT ERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE LD. CIT(A). THE LD. CIT(A ) HAS DELETED ADDITIONS MADE BY THE AO TOWARDS UNSECURED LOAN U/S 68 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS DISCHARGED INITIAL ONUS CAST UPON U/S 68 OF THE ACT , BY FILING CONFIRMATION LETTERS FROM THE CREDITORS ALONG WITH THEIR ITR COPIES, BANK STATEME NT AND FINANCIAL STATEMENT, ETC. THE CIT(A) HAS DELETED ADDITIONS MADE TOWARDS LOAN TAKE N FROM M/S PUSHPANJALI COMMOTRADE PVT. LTD. AND M/S RADIANT MERCHANDISE PVT. LTD. ON THE GROUND THAT THEY HAVE FURNISHED CONFIRMATIONS ALONG WITH FINANCIAL STATEMENT. WE FI ND THAT THE AO HAS RECORDED CATEGORICAL FINDING IN HIS ASSESSMENT ORDER IN THE CASE OF M/S PUSHPANJALI COMMOTRADE PVT. LTD. AND M/S RADIANT MERCHANDISE PVT. LTD. THAT ABOVE TWO PA RTIES ARE PAPER COMPANIES FLOATED BY 10 UNITED METAL & WIRE INDUSTRIES SHRI PRAVIN AGGARWAL, WHO IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES. WE FURTHER NOTICED THAT INVESTIGATIO N CARRIED OUT BY DDIT(INV.), KOLKATA, CLEARLY ESTABLISHED THE FACT THAT THOSE COMPANIES A RE NOT EXISTING AT THE GIVEN ADDRESS. EVEN THE INSPECTOR ATTACHED TO THE OFFICE OF DDIT(I NV.) KOLKATA, GAVE A REPORT THAT THE PARTIES ARE NOT TRACEABLE. WE FURTHER NOTICED THAT SHRI PRAVIN AGGARWAL HIMSELF ADMITTED IN HIS STATEMENT RECORDED U/S 131 THAT THESE COMPANIES ARE INVOLVED IN FOR GIVING ENTRIES TO THE BENEFICIARIES ON THE BASIS OF COMMISSION. WHEN ALL THESE EVIDENCES CLEARLY SHOWS THAT THESE ARE PAPER COMPANIES INVOLVED IN PROVIDING ACC OMMODATION ENTRIES, THE LD. CIT(A) WAS ERRED IN DELETING THE ADDITION MADE BY AO TOWAR DS LOANS RECEIVED FROM ABOVE COMPANIES ONLY FOR THE REASON THAT THEY HAVE FURNIS HED CONFIRMATIONS LETTERS ALONG WITH THEIR FINANCIAL STATEMENT. WE, THEREFORE, ARE OF TH E OPINION THAT PAYMENT THROUGH BANKING CHANNEL OR FURNISHING CONFIRMATIONS IS NOT SUFFICIE NT ENOUGH TO DISCHARGE THE ONUS CAST UPON U/S 68, WHEN THE PARTIES HIMSELF ADMITTED THAT THEY ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. UNDER NORMAL CIRCUMSTANCES W HEN IDENTITY IS PROVED, IT IS FOR THE AO TO GO BEHIND CREDITORS TO ASCERTAIN TRUE NATURE OF TRANSACTIONS BUT CREDITS CANNOT BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE. I N A CASE LIKE HAWALA OPERATORS, MERE FURNISHING PROOF OF IDENTITY OR CERTAIN DOCUMENTS I S NOT SUFFICIENT ENOUGH TO COME OUT THE PROVISIONS OF SECTION 68 OF THE ACT. IN THIS CASE, THE AO HAS BROUGHT OUT CLEAR FACT TO THE EFFECT THAT THOSE COMPANIES ARE PAPER COMPANIES INV OLVED IN PROVIDING ACCOMMODATION ENTRIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW T HAT THE LD. CIT(A) WAS ERRED IN DELETING ADDITIONS MADE BY THE AO TOWARDS LOAN TAKEN FROM OF M/S PUSHPANJALI COMMOTRADE PVT. 11 UNITED METAL & WIRE INDUSTRIES LTD. AND M/S RADIANT MERCHANDISE PVT. LTD.. ACCORDI NGLY, WE REVERSE FINDINGS OF THE LD. CIT(A) AND UPHELD ADDITIONS MADE BY AO. 11. COMING TO LOANS TAKEN FROM M/S CHANDIMATA MANAG EMENT PVT. LTD. AND M/S MAX WORTH PROJECT PVT. LTD.. THE AO HAS RECORDED CATEGO RICAL FINDING IN ASSESSMENT ORDER THAT SHRI UMESH SINGH, DIRECTOR OF THE ABOVE COMPANY, IN HIS STATEMENT RECORDED U/S 131 HAD ADMITTED THAT HE WAS DUMMY DIRECTOR ONLY WORKING ON THE INSTRUCTION OF SHRI PRAVIN AGGARWAL. HE FURTHER ADMITTED THAT THESE COMPANIES ARE JUST PAPER/SHELL COMPANIES USED FOR JAMA-KHARCHY/SHELL /ENTRY BUSINESS. FURTHER, IN HIS STATEMENT ON OATH U/S 132(4) OF THEACT, DATED 10/11/2012, SHRI PRAMOD RAMDIN SHARMA HAS CLEARLY ADMITTED THAT M/S CHANDIMATA MANAGEMENT PVT. LTD. AND M/S MAX WORTH PROJECT PVT. LTD. WERE PROVIDING ACCOMMODATION ENTRIES. WHEN ALL THESE EVIDENCES UND OUBTEDLY PROVE THE FACT THAT THEY ARE ENTRY PROVIDERS, THE LD. CIT(A) WAS ERRED IN DE LETING THE ADDITIONS ON TECHNICAL GROUND BY STATING THAT NO ADDITIONS COULD BE MADE U/S 68 O F THE ACT WHEN THE CREDIT WAS BROUGHT OUT FROM PREVIOUS FINANCIAL YEAR. NO DOUBT, THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS USHA STUD AGRICULTURAL FARMS LTD. (301 ITR 384)( DEL.) HELD THAT CREDIT BALANCE APPEARING IN THE ACCOUNTS OF THE ASSESSEE, DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, NO ADDITIONS COULD BE MADE U/S 68 O F THE ACT. THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IS SQUARELY APPLICABLE IN A CASE WHERE THE ASSESSEE HAS TAKEN LOANS FROM GENUINE PARTIES WHICH WERE VERIFIED IN T HE PREVIOUS FINANCIAL YEAR, BUT FOR CHANGED CIRCUMSTANCES, THE AO HAS TAKEN DIFFERENT V IEW TO MAKE ADDITIONS U/S 68 OF THE ACT, THEN NO ADDITIONS COULD BE MADE WHEN THE CREDI T HAS BEEN BROUGHT OUT FROM PREVIOUS 12 UNITED METAL & WIRE INDUSTRIES FINANCIAL YEAR. IN THIS CASE, IT IS UNDOUBTEDLY PRO OVED THAT THOSE COMPANIES ARE HAWALA OPERATORS INVOLVED IN PROVIDING ACCOMMODATION ENTRI ES. WHEN FACTS GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS CLEARLY PROVES THA T THESE ARE ACCOMMODATION ENTRY PROVIDERS, THE RATIO LAID DOWN BY HONBLE DELHI HIG H COURT IN ABOVE CASE CANNOT BE APPLIED TO DELETE ADDITIONS. ACCORDINGLY, WE ARE OF THE CON SIDERED VIEW THAT LD. CIT(A) WAS ERRED IN DELETING ADDITIONS MADE TOWARDS LOANS FROM M/S C HANDIMATA MANAGEMENT PVT. LTD. AND M/S MAX WORTH PROJECT PVT. LTD. HENCE, WE REVE RSE FINDINGS OF THE LD. CIT(A) AND SUSTAINED ADDITIONS MADE TOWARDS LOAN TAKEN FROM AB OVE TWO COMPANIES. 12. COMING TO OTHER UNSECURED LOAN, RECEIVED FROM C ERTAIN INDIVIDUALS. THE LD. CIT(A) HAS RECORDED CATEGORICAL FINDING THAT THE ASSESSEE HAS FILED VARIOUS DETAILS INCLUDING CONFIRMATION LETTERS FROM THE PARTIES ALONG WITH TH EIR ITR COPIES, BANK STATEMENTS, ETC. THE LD. CIT(A) FURTHER OBSERVED THAT ALL THE TRANSACTIO NS WERE ROUTED THROUGH ACCOUNT PAYEE CHEQUES. THE SOURCE OF RECEIPT FROM BANKING CHANNEL CLEARLY ESTABLISHED GENUINENESS OF THE CREDIT WHICH IS REFLECTED IN THE BOOKS OF ACCOU NTS, THEREFORE, HE CAME TO CONCLUSION THAT THE ASSESSEE HAS DISCHARGED INITIAL ONUS CAST UPON U/S 68 OF THE ACT BY PROVING IDENTITY OF THE CREDITORS BY GIVING THEIR COMPLETE ADDRESS, PAN AND COPIES OF ASSESSMENT ORDERS WHERE EVER READLY AVAILABLE. THE ASSESSEE A LSO PROVED THE CAPACITY OF THE CREDITOR BY SHOWING THE AMOUNTS RECEIVED THROUGH BANKING CHA NNELS. WHEN THE IDENTITY AND CREDITWORTHINESS HAVE BEEN PROVED, MERELY FOR THE R EASON THAT NON-APPEARANCE OF PARTIES BEFORE THE AO, NO ADDITIONS COULD BE MADE U/S 68 OF THE ACT. THEREFORE, HE CAME TO CONCLUSION THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITIONS TOWARDS LOANS TAKEN FROM 13 UNITED METAL & WIRE INDUSTRIES VIKASH SHARMA, UMARAO PRASAD AND OTHER PARTIES. TH E LD. CIT(A) FURTHER OBSERVED THAT WHEREVER THE ASSESSEE COULD NOT FURNISH EVEN CONFIR MATION LETTERS FROM THE PARTIES, ESPECIALLY IN THE CASE OF SONAL S. AGARWAL, SURESH REENGUSIA AND NARESH JAIN, HE CONFIRMED ADDITIONS MADE BY AO TO THE EXTENT OF RS .3,43,000/-. THE LD. DR FAILED TO CONTROVERT THE FINDINGS RECORDED BY THE LD. CIT(A) IN LIGHT OF EVIDENCES FILED BY THE ASSESSEE IN RESPECT OF ABOVE PARTIES. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE HAS ALSO FAILED TO FILE FURTHER EVIDENCE IN RESPECT OF THREE PARTIES, WHERE THE LD. CIT(A) HAS CONFIRMED ADDITION TO JUSTIFY LOANS TAKEN FROM THE ABOVE PARTIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW, THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE LD. CIT(A) IN RESPECT OF UNSECURED LOANS TAKEN FROM THESE PARTIES AND ACCORD INGLY WE ARE INCLINED TO UPHELD THE FINDINGS OF THE LD. CIT(A) AND REJECTED GROUND TAKE N BY THE REVENUE AS WELL AS THE ASSESSEE. 13. THE NEXT ISSUE THAT CAME UP FOR CONSIDERATION FROM ASSESSEES APPEAL IS AD- HOC DISALLOWANCE OF CERTAIN EXPENSES. THE AO HAS DI SALLOWED 10% EXPENSES INCURRED UNDER THE HEAD CONVEYANCE AND OTHER EXPENSES ON THE GROUND THAT ASSESSEE COULD NOT PRODUCE BILLS OR OTHER EVIDENCES AND ALSO LARGE PAR T OF SUCH EXPENSE HAVE BEEN INCURRED IN CASH. IT IS THE CONTENTION OF THE ASSESSEE THAT EXPENSES INCURRED UNDER THE HEAD CONVEYANCE AND OTHER EXPENSES ARE SUPPORTED BY PROP ER EVIDENCES, THEREFORE, MERELY FOR THE REASON THAT CERTAIN EXPENSES HAVE BEEN INCURRED IN CASH, AD-HOC DISALLOWANCE CANNOT BE MADE. 14 UNITED METAL & WIRE INDUSTRIES 14. HAVING HEARD BOTH SIDES, WE FIND THAT THE LD. CIT(A) HAS RECORDED CATEGORICAL FINDING THAT THE ASSESSEE NEITHER SUBMI TTED BILLS AND OTHER EVIDENCES NOR ADDRESS OF PERSON TO WHOM SUCH PAYMENTS WERE MADE. FURTHER, THE ASSESSEE FAILED TO PROVE ABOVE EXPENSES ARE INCURRED WHOLLY EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. BEFORE US NO CHANGE IN FACTS. THE ASSES SEE HAS FAILED TO PROVIDE ANY EVIDENCE TO PROVE THAT FINDINGS OF FACTS RECORDED B Y THE LD. CIT(A) ARE INCORRECT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE L D. CIT(A) WAS RIGHT IN CONFIRMING ADDITIONS MADE BY AO TOWARDS AD-HOC DISALLOWANCE OF EXPENSES. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LD. CIT(A) AND REJECT GRO UND TAKEN BY THE ASSESSEE. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS DISMISSED AND APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/03/2019. SD/- SD/- ( SAKTIJIT DEY ) (G. MANJUNATHA) ! ' /JUDICIAL MEMBER # ' / ACCOUNTANT MEMBER MUMBAI; DATED : 01/03/2019 F{X~{T F{X~{T F{X~{T F{X~{T? P.S / /. .. $!%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. !'# / THE APPELLANT (RESPECTIVE ASSESSEE) 2. $%&'# / THE RESPONDENT. 3. '& '& ( ( ! ) / THE CIT, MUMBAI. 4. '& '& ( / CIT(A)- , MUMBAI, 5. *+, &$ - , '& !&- / , / DR, ITAT, MUMBAI 6. ,01! / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI