MAANWATI AGARWAL, JAIPUR,JAIPUR V. ITO, WARD 1(4), JAIPUR, JAIPUR

ITA 1329/JPR/2024

AI Insights

The case involves Maanwati Agarwal, who appealed against the order of the Addl. CIT(A)-6, Chennai, which confirmed the disallowance of interest paid on loans considered as accommodation entries. The loans were taken from M/s. Megha Gems, M/s. Astha Gema, and M/s. Navkar India, each amounting to Rs. 25,00,000 during the financial years 2008-09 and 2009-10. The Income Tax Officer (ITO) disallowed the interest of Rs. 6,75,000 claimed by the appellant for the assessment year 2013-14, based on information from a search and survey operation that revealed these entities were involved in providing accommodation entries. The ITAT dismissed the appeal regarding the disallowance but allowed the set-off of unclaimed interest against the disallowed amount.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35418 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Other Referred Cases: CIT V. Precision Finance (P) Ltd 208 ITR-465(Cal.)
• Laws Referred To: Income Tax Act, 1961, Evidence Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: MUKESH KHANDELWAL
• Keywords: Set aside; Accommodation entries; Bogus Share capital; Bogus
• Section: 147; 143(3); 143(2); 143(1); 68; 208; 22

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1329/JPR/2024 fu/kZkj.k o\"kZ@Assessment Years : 2013-14 Smt. Maanwati Agarwal 237, Sonkhiyon Ka Rasta, Kishanpole, Bazar, Jaipur. cuke Vs. The ITO, Ward-1(4), Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABHPA4353J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Khandelwal, C.A. jktLo dh vksj ls@ Revenue by : Shri Gautam Singh Choudhary, JCIT-Sr. DR a lquokbZ dh rkjh[k@ Date of Hearing : 19/02/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 01 /04/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of the ld. Addl. CIT(A)-6, Chennai dated 25-10-2024 for the assessment year 2013-14 raising therein following grounds of appeal. “1. That the Ld. CIT (A), NFAC has erred in confirming the action of the ld. AO in disallowing interest of Rs. 6,75,000/- paid to M/s. Megha Gems, M/s. Astha Gema and M/s. Navkar India claimed by the appellant out of interest income, considering the same to be accommodation entries, without considering that the matter of consideration of loans taken from above named three parties as accommodation entries is yet to be decided by the CIT (A). ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 2 2. That without prejudice to ground no. 1 the ld. CIT (A) has further erred in not allowing the alternate claim of the appellant in adjusting the alleged accommodation entries of interest of Rs. 6,75,000/- out of unclaimed interest of Rs. 5,94,369/- in the ITR of the appellant.’’ 2.1 Apropos grounds of appeal of the assessee, it is noticed that the ld. CIT(A) has dismissed the appeal of the assessee by observing at para 4 to 4.11 and 5 of his order as under:- “4. Decision: 4.1 The above appeal was instituted on 09.06.2016 against the order u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the \"Act\") dated 08.03.2016 passed by Income Tax Officer, Ward-1(4), Jaipur for the A.Y. 2013-14. There is a delay in filing of the appeal by the appellant. The same is admitted and delay is condoned. The appellant has filed ROI for A.Y. 2013-14 on 27.10.2013 admitting total income of Rs 15,170/-, The same was processed u/s 143(1) of the Act by AO. Subsequently the case was selected for scrutiny through CASS and AO passed the order u/s143(3) of the Act on 08.03.2016 assessing total income of Rs. 6,90,170/-by making an addition of Rs. 6,75,000/- on account of disallowance of interest paid on bogus unsecured loans. Aggrieved by the order, the appellant has filed the present appeal raising 3 grounds of appeal and all are related to the above addition of the AO. There is a delay in filing the appeal. Considering the facts of the case and reasons submitted, the delay is condoned and appeal is admitted. 4.2 Since Ground 1 and 2 are related to disallowance of interest payment on account of bogus unsecured loans as held by AO, the same is adjudicated in the following paras. The AO in his order had elaborated in detail that a search and survey action was carried out in the case of Sri Bhanwarlal Jain and his Group by the Investigation wing, Mumbai and a key person of the group concern, in his sworn statement admitted that he and his group were engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application and bogus sales etc. It was ascertained from the information received that Smt. ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 3 Maanwathi Agrwal was one of the beneficiaries and had obtained accommodation entries in the form of unsecured loans of Rs.25,00,000/- each from Megha gems, Navkar India and Astha Impex. 4.3 The AO, further, explained that the assessee had failed to discharge the onus put on her to produce the persons for examination or prove the genuineness of the unsecured loans through some other concrete evidence and pointed out that to make a transaction genuine not only the very existence of the business is required but business structure is also equally required and the assessee failed to establish the same. Further, by relying on the decision of the CIT V. Precision Finance (P) Ltd 208 ITR-465(Cal.) he quoted that the claim of the assessee that the amount was paid by cheque is concerned, it does not make the transaction as genuine. He stated that in the all such cases of entry provision, such formalities are duly performed to show the transaction appear genuine. 4.4 It was also mentioned by the AO that under section 101, 102 and 106 of the Evidence Act, onus lies upon the assessee to prove all the expenses to the satisfaction of the assessing officer, which was not discharged by the assessee as she failed to produce the persons from whom the unsecured loans were taken. He elaborately explained that the above 3 parties didn't have any proper business structure and no evidence of them carrying out any proper business/ having a business structure was presented to him by the assessee. The very existence of such parties was questioned thereby the identity and credit worthiness of the lender were not proved. 4.5 Accordingly, during the assessment proceedings the AO held that the assessee failed to discharge the onus put upon her to produce the person for examination or prove the genuineness of unsecured loan through concrete evidence and hence the interest claimed on these loans amounting to Rs. 6,75,000/-(2,25,000/-*3) was disallowed. 4.6 The appellant considered this action of AO as arbitrary, as the same information was not shared to her for rebuttal. During the appellate proceedings, the appellant in her response dated 01.08.2022 and 11.10.2024, submitted that the Id. AO did not share the relevant information which he had received from Mumbai so that the appellant could not submit his response thereon. The relevant paras of her submission are reproduced as under:- ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 4 The details of the submissions are available at page 4 to 7 of ld. CIT(A)’s order……………………………………’’ 4.7 The facts of the case, the observations of the AO and averments of the appellant have been considered. It is seen that the AO has explained, in detail, in his order that the disallowance of interest paid by the appellant was purely on the basis on the information provided by the creditors themselves. When the creditors themselves, in their own sworn statements, are accepting that they had provided accommodation entries to the appellant, the appellant can't, but to accept the same. If the appellant had any different opinion, she should have disproved it by providing sufficient evidence including by producing them before the AO and by proving their creditworthiness before the AO. 4.8 Further, as raised in Ground No 1, the appellant can't say that she has not been given the opportunity by AO to cross examine by sharing all the information in her possession. This is because the appellant was very well informed that her own creditors, during a search operation, have accepted that they were merely accommodation entry providers to her and disowned their credit worthiness. Since the entire assessment proceedings were based on the sworn statements and information provided by the creditors of the appellant, the appellant can't say that she has not been informed and was not given the opportunity. She had all the time in the world to bring the creditors in front of the AO and prove their genuineness and credit worthiness. But by not availing that opportunity during the assessment proceedings, the appellant now can't blame the AO and the AO has rightly pointed out that the appellant didn't discharge her onus of disproving the information of her creditors that they were her accommodation entry providers. The appellant failed to prove the credit worthiness of her creditors. 4.9 Further, it was observed that even during the appellate proceeding, the appellant did not submit any evidences and supporting documents to substantiate her claim. Therefore, the genuineness of the same is held not proved. Hence, considering all the points as discussed in the preceding para, it is held that the creditors of appellant held themselves as accommodation entry providers, which couldn't be disproved by the appellant. Hence, the decision of AO in holding the unsecured loans taken by the appellant as bogus and disallowing the interest of Rs.6.75,000/- paid by the appellant to the entry providers is held correct. Thus, the grounds of appeal 1 and 2 are rejected. 4.10 Ground 3 is related to AO not setting off of the unclaimed interest of Rs.5,94,369/- against the disallowance of Rs.6,75,000/-. The appellant in her written submission stated that, \"the appellant had paid total interest of Rs. ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 5 45,96,353 during this relevant year and had claimed deduction of following amounts only (amounting to Rs. 40,01,984) in following way- Out of Income from Business and Profession 16,90.226/- (Against interest recd. from Mis. Arun Udyog as partner) Out of Income from other sources 23,11,758 Thus the appellant suo motto did not claim interest of Rs. 5,94,369. The Id. AO should have allowed set off the unclaimed interest against the above said disallowance of Rs. 6,75.000 and should have only disallowed balance amount of Rs. 70,631. By disallowing the whole amount of Rs 6,75,000 the appellant has become interest burden of Rs. 12.69,369 which is without any basis and is unjustified\". 4.11 This issue is found to have been dealt by AO. It is not known as to why the interest was not claimed by the appellant, if it was a genuine transaction. It is also not known whether the said unclaimed interest comes under the parameter of Sec 40(a)(la) of the Act, whether the said interest was an allowable expenditure as per the provisions of the Act. Hence, in the event of uncertainty about the said unclaimed interest, the above disallowance can't be telescoped. It is pertinent to note that even during the appellate proceedings, the appellant didn't provide any explanation as to why the interest amount of Rs.5,94,369/- was not claimed by her. Hence, the disallowed interest can't be allowed to set off and the ground in this regard is rejected. 5. Conclusion: In the result, the appeal is treated as dismissed.” 2.2 During the course of hearing, the ld.AR of the assessee has filed a detailed written mainly praying therein to set aside the case to the file of the AO and to wait till order of the ld. CIT(A) in A.Y. 2009-10 and 2010- 11 to pass orders thereafter as per observations of the ld.CIT(A). The submissions so advance before this Bench is reproduced as under:- ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 6 “The appellant had filed her ITR on 27.10.2013 vide e filing acknowledgement no. 825841790271013 declaring a taxable income of Rs. 15,170/- The case was selected for scrutiny and notice u/s 143(2) was issued on 03/09/14 The Id. AO had received information from investigation wing. Mumbai about a search conducted on Bhanwar Lal Jain and group revealing that the loan of Rs. 75,00.000/- taken by the appellant from three concerns namely M/s. Megha Gems, M/s. Navkar India and M/s. Astha Impex for Rs. 25,00,000/- each during PY 2008-09 and 2009-10 are accommodation entries as the said concerns are controlled by Bhanwar Lal Jain who had given statement that the said concerns were engaged into providing accommodation entries and based on such report the Id. AO disallowed the interest paid by the appellant to above named three concerns totaling to Rs. 6,75,000/- Later on the Id AO issued reassessment notices dated 15.03.2016 to the appellant for AY 2009-10 and 2010-11 and in the assessments framed in consequence thereto such loans were considered as accommodation entries (Rs. 50,00,000/- in the AY 2009-10 and Rs. 25,00,000 in the AY 2010-11) and additions were made u/s 68 of the Income Tax Act, 1961. The appellant is in appeal against both the assessment orders and both the appeals are pending for disposal before the Ld. CIT (A), NFAC. The appeal numbers are CIT (A). Jaipur 1/11090/2016-17 (for AY 2009-10) and CIT (A), Jaipur 1/11091/2016-17 (for AY 2010-11) and in both the appeals the appellant has already filed all submissions. The main challenge of the assessee in both the appeals are that these loans had been received in regular course and the same were not accommodation entries. 1st Appeal In first appeal the Id. CIT (A) sustained the order of the Id. AO. Present appeal: Your honour, I would request your good self to kindly allow me to take ground no. 2 prior to ground no.1 and oblige. Ground No. 2: That without prejudice to ground no. 1 the Id. CIT (A) has further erred in not allowing the alternate claim of the appellant in adjusting the alleged accommodation entries of interest of Rs. 6,75,000/- out of unclaimed interest of Rs. 5,94,369/- in the ITR of the appellant. Without prejudice to ground no. 1. The appellant had paid a sum of Rs. 45,96,353/- on account of interest to various parties during the year under consideration out of which she had claimed a sum of Rs. 40,01,984/- from her income (viz. Rs. 16,90,226/- out of Income from Business and Profession and Rs. 23,11,758/ out of matching interest income declared under Income from other sources) and balance sum of Rs. 5,94,369/- ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 7 was not claimed anywhere in the ITR. It was claimed by the appellant during the assessment proceedings that unclaimed interest to the extent of Rs. 5,94,369/- may be considered as covered in the sum of Rs. 6,75,000/- being disallowed by her and only disallowance of Rs. 80,631/- may be made. However the Id. AO declined to such request by holding that since the appellant had declared total interest income of Rs. 40.01,984/- and after disallowance of Rs. 6,75,000/- out of total interest payment of Rs. 45,96,353/- allowed interest amount comes out to be Rs. 39,21,353/- which is below total interest income declared at Rs. 40,01,984/- Such decision of the id. AO is wrong as she has compared the interest income with interest payment without considering that depending upon circumstances interest payment can be more than interest income also. The Id. CIT (A) also sustained the action of the Id. AO by holding that appellant failed to demonstrate as to why she did not claim the interest of Rs. 5,94,369/-. In this regard this is to submit that the appellant claimed the interest expenditure to the extent of interest income only to avoid any dispute during assessment and further to cover up the same with any disallowance that may be made in scrutiny proceedings. There is no dispute about the fact that the appellant had incurred expenditure on interest for Rs. 45,96,353/- Therefore the Id. AO may be directed to allow set off of the unclaimed interest amount of Rs. 5,94,369/-out of total disallowance of Rs 6,75,000/- and oblige Ground No. 1: That the Ld. CIT (A), NFAC has erred in confirming the action of the id. AO in disallowing interest of Rs. 6,75,000/- paid to M/s. Megha Gems, M/s. Astha Gema and Mis. Navkar India claimed by the appellant out of interest income, considering the same to be accommodation entries, without considering that the matter of consideration of loans taken from above named three parties as accommodation entries is yet to be decided by the CIT (A). The Id. CIT (A) sustained the action of the Id. AO without considering that the appeals of the appellant before the CIT (A) for the AY 2009-10 and 2010-11 are pending for disposal wherein the appellant has challenged the very action of the Id. AO in treating the above loans as accommodation entries. The id. AO for passing the reassessment orders for both the years relied only on the information coming to her from investigation wing and did not undertake any independent enquiries before reaching on the conclusion, did not share any material in the form of documents found during search in Bhanwar Lal Jain group and statements of Shri Bhanwar Lal Jain and other persons, did not allow any opportunity to cross examine all such parties, not sharing any material received by him on any notice sent by him to above named parties and hence in the above appeals there are fait chances that his action in considering the above loans as accommodation entries will be quashed and the disallowance in this year shall also go The appellant has enclosed confirmations, ITRVs, bank statements of above parties to prove genuineness of the loans to obtained ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 8 at APB 1-23, which further supports the contention of the appellant that all the above loans were genuine ones and were not accommodation entries. Therefore the Id. CIT (A) was supposed to wait for disposal of the relevant appeals which he did not do and sustained the order. Your honour, it is understood that decision about above loans whether they are to be considered as genuine or accommodation entries will only be taken in the relevant years and same can not be considered in this appeal and therefore your honour is sincerely requested to set aside the case to the file of the Id. AO and to wait till order of the Id. CIT (A) in AY 2009-10 and 2010-11 and to pass orders thereafter as per observations of the Id. CIT (A).” The ld. AR of the assessee to support his contentions has filed the following paper book S. No. Description Page No. 1. ITRV of Shri Abhishek Lodha Prop. Aastha Impex 1 2. P& L Account and Balance Sheet as at 31.03.2010 of Aastha Impex 2-6 3. Copy of relevant Page of bank statement showing clearance of the cheque issued to the appellant 7 4. Confirmation of Aastha Impex 8 5. ITRV of Shri Gaurav Rajendra Jain Prop Navkar India 9 6. P& L Account and Balance Sheet as at 31.03.2009 of Navkar India 10-13 7. Copy of relevant Page of bank statement showing clearance of the cheque issued to the appellant 14 8. Confirmation of Navkar India 15 9. ITRV of Shri Mitesh Prakash Chand Prop Megha Gems 16 10. P& L Account and Balance Sheet as at 31.03.2009 of Megha Gems 17-21 11. Copy of relevant Page of bank statement showing clearance of the cheque issued to the appellant 22 12. Confirmation of Megha Gems 23 13. Profit and Loss Account of the appellant for the A.Y. 2013-14 24 14. Assessment order u/s 147 in Appellant's case for the AY 2009-10 25-27 15. Assessment order u/s 147 in Appellant's case for the AY 2010-11 28-33 ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 9 2.3 On the other hand, the ld. DR has relied upon the orders of the lower authorities. 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the ITR of the assessee was selected for scrutiny on the reason that the assessee had claimed deductions of interest payment of Rs.6,75,000/- to three concerns viz. M/s. Astha Impex, M/s. Navkar India and M/s. Megha Gems which concerns were controlled by one Shri Bhanwar Lal Jain of Mumbai in whose case search proceedings were undertaken by the Department and it was opined that the loan taken by the assessee from these concerns were accommodation entries and thus the AO during assessment disallowed the claim of the assessee for the above said sum of Rs.6,75,000/- by alleging the same to be accommodation entry. In first appeal, the ld. CIT(A) has confirmed the view of the AO in holding the above interest paid as accommodation entries and confirmed the disallowance thereof. As it is a case of disallowance of interest on the alleged non-genuine loan of the assessee and it is noted that the assessee had claimed interest of Rs.6.75 lacs which were considered pursuant to the findings that loan upon which interest paid is bogus. Since the year under consideration, the assessee has taken loan is not decided and appeal for the year under consideration is also argued by both the parties and the same cannot be kept pending in ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 10 abeyance. Thus in the light of overall fact and circumstances available on record, the Bench noted that the assessee vide ground no. 2 argued that they have remained with unclaimed interest of Rs.5,94,369/- in the ITR so filed and since the issue of bogus entries is not decided, alternatively the set off that disallowed interest be given to the unclaimed interest of Rs. 5,94,369/- to that extent which is claimed vide ground no.2 raised by the assessee. Considering the fact of the matter, we are of the view that though the disallowability of interest to the extent of Rs.6.75 lacs is premature at this stage at the principal amount being accommodation entries or not is yet decided and, therefore, we allow set off of interest to the extent of Rs.5,94,369/- against disallowance of interest so made and thereby confirm the addition to the extent of Rs.80,631/- and Ground No. 1 so raised is set aside to the issue and it is left open for which the assessee may claim by filing requisite application before the AO when the matter for the year under consideration in which the principal amount is considered as accommodation entries. ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 11 3.0 In the result, the appeal of the assessee is partly allowed as indicated hereinabove. Order pronounced in the open court on 01/04/2025. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksMdeys'kt;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/04/2025 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Maanwati Agarwal, Jaipur. 2. izR;FkhZ@ The Respondent- ITO, Ward-1(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 1329/JPR/2024} vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar ITA No. 1329/JPR/2024 Maanwati Agarwal vs. ITO 12 "