PRAHAM INDIA LLP,MUMBAI V. INCOME TAX OFFICER 31(2), MUMBAI

ITA 4422/MUM/2024

AI Insights

The case involves Praham India LLP, which appealed against the order of the CIT(A), National Faceless Appeal Centre, which upheld the addition of Rs. 1 Crore as unexplained cash credit under section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer, who suspected that the unsecured loans taken by the assessee from Josh Trading Pvt. Ltd. and Sumukh Commercial Pvt. Ltd. were accommodation entries linked to a group involved in providing bogus loans. The Tribunal, referencing a similar case (PCIT vs. Bairagra Builders Pvt. Ltd.), found that the assessee had adequately demonstrated the legitimacy of the loans through documentary evidence and proper banking transactions, thus ruling in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33136 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Other Referred Cases: PCIT vs. Bairagra Builders Pvt. Ltd. [2014] 164 taxmann.com 162 (Bom)
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Retraction; Capital Gains; Search and seizure; Accommodation entries; Bogus loan; Bogus
• Section: 143(3); 143(2); 132; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4422/MUM/2024 Assessment Year: 2013-14 Praham India LLP Patel Estate, Off S.V. Road, Patel Estate, Jogeshwari West, Mumbai – 400102 (PAN : AAMFP3204H) Vs. Income-tax Officer – 31(2), Mumbai (Appellant) (Respondent) Present for: Assessee : Shri Madhur Agarwal, Advocate and Shri Mayur Kisnadwala, CA Revenue : Shri Krishna Kumar, Sr. DR Date of Hearing : 25.11.2024 Date of Pronouncement : 19.02.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), vide order nos. ITBA/NFAC/S/250/2023-24/1066307274(1), dated 01.07.2024 respectively, passed against the assessment order by Income Tax Officer, Ward 31(2), Mumbai u/s. 143(3) of the Income-tax Act 2 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 (hereinafter referred to as the “Act”), dated 18.03.2016 for Assessment Year 2013-14. 2. Sole issue raised by the assessee in this appeal is against addition of Rs.1 Crore made u/s.68 by treating it as unexplained cash credit. Facts of the case are that assessee filed its return of income on 31.03,2015, reporting total income at Rs.11,74,31,940/-. Assessee is engaged in the business of finance and investment. In the course of assessment, ld. Assessing Officer observed that assessee has reported closing balance of unsecured loans in its audited balance sheet at Rs.1 Crore for which details and explanations alongwith documentary evidences were called for. Based on details provided by the assessee, ld. Assessing Officer noted that assessee had availed unsecured loan from two concerns- i. Josh Trading Pvt. Ltd. – Rs.50,00,000/- ii. Sumukh Commercial Pvt. Ltd. (Cape Town Mercantile) – Rs.50,00,000/- 2.1. Ld. Assessing Officer alleged that both these entities are controlled and operated by Mr. Pravin Kumar Jain and others in whose case search and seizure action had been carried out u/s. 132 whereby it was established that Shri Pravin Kumar Jain and others had floated various entities which are engaged in business of providing accommodation entries in the form of bogus unsecured loans, bogus purchases/sales, bogus capital gains. According to ld. Assessing Officer, prima facie it is a case of assessee availing accommodation entries in the garb of these unsecured loans. He issued a show cause 3 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 notice on the assessee, to furnish details of the unsecured loans availed to establish identity and creditworthiness of the persons of from whom loans were taken and to prove genuineness of the transaction. 2.2. In this respect, assessee submitted that it had taken loan from these two parties and had repaid the same. Loans were repaid to Josh Trading Pvt. Ltd. on 26.12.2013 and to Sumukh Commercial Pvt. Ltd. on 07.01.2014. To evidently demonstrate the repayment, copies of bank statements were furnished on record. Assessee also furnished income-tax return acknowledgment and bank statements of the two lenders to establish their identity and creditworthiness. Assessee also claimed that addition cannot be made merely on the basis of statements recorded of Shri Pravin Jain in his search. In case, additions are to be made, assessee requested to provide copies of statements recorded of parties on which reliance is placed. 2.3. After considering the submissions made by the assessee, ld. Assessing Officer discussed at length about the search and seizure action in case of Shri Pravin Kumar Jain and group. Thereafter, he discussed about the modus operandi of providing accommodation entries with an example to show how such bogus loan entries are undertaken, relating to one, Anand Diamonds. All these discussions did not bear any direct reference to name of the assessee, so as to establish its involvement in such transactions except for alleging that assessee is a beneficiary by having regard to the statements given by Shri Pravin Kumar Jain in his search and seizure action. From the investigations made on the basis of evidences found during the course 4 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 of search and seizure action in the case of Pravin Kumar Jain group, ld. Assessing Officer arrived at a conclusion that all the entities of the group have carried out activities of accommodation entries in the shape of loans or bills of purchase and sale of diamonds. Based on this, he held that, in similar way assessee has obtained accommodation entry in the shape of loans of Rs.1Crore from two concerns of Shri Pravin Kumar Jain Group, i.e., Josh Trading Pvt. Ltd., and Sumukh Commercial Pvt. Ltd. According to him, assessee has availed the accommodation entry to introduce its own ill-gotten money in its business as a loan from the said group concernes of Shri Pravin Kumar Jain. Accordingly, amount of Rs. 1 Crore towards unsecured loans from the two entities was treated as unexplained cash credit in the hands of assessee u/s. 68 of the Act. 3. In the first appeal, assessee reiterated all its submissions along with documentary evidences, emphasising on the fact that the loans taken having duly repaid through proper banking channel. However, disregarding the submissions made by the assessee, ld. CIT(A) held that these transactions are bogus and upheld the addition made by ld. Assessing Officer. 4. Before us, ld. Counsel for the assessee referred to various documentary evidences corroborating the transaction undertaken by the assessee which are placed in the paper book containing 63 pages. Reference was made to the submission of audited profit and loss account of one of the entities, i.e., Sumukh Commercial Pvt. Ltd. which had substantial revenue from operations. He also referred to bank statements and income-tax return acknowledgement of the two entities. Ld. Counsel emphasised on the fact that ld. Assessing Officer 5 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 has merely relied on the information relating to search and seizure action u/s. 132 in the case of Shri Pravin Kumar Jain and group and statement recorded in the course of their search. According to him, ld. Assessing Officer has not made any independent enquiry by issuing summons or notices u/s. 131/133(6). Further, he claimed that reliance placed on the statement of Shri Pravin Kumar Jain was retracted and hence is not a good evidence for the purpose of treatment given by Assessing Officer in the case of the assessee. Furthermore, name of the assessee is nowhere specified except stating assessee being a beneficiary for accommodation entry as alleged by ld. Assessing Officer. 4.1. What ld. Assessing Officer has discussed in the entire assessment order is general modus operandi adopted for executing transactions relating to accommodation entries and could not establish nexus with what assessee has undertaken by obtaining unsecured loan from two entities which were subsequently repaid through proper banking channel. On the repayment aspect of unsecured loans taken by the assessee, it was categorically pointed out that repayment occurred on the dates which are much prior to selection of case of assessee for scrutiny assessment. The two loans were repaid by the assessee on 26.12.2013 and 07.01.2014 whereas notice u/s. 143(2) was issued on 28.08.2015, served on the assessee on 03.09.2015. All these facts are noted in the impugned assessment order. For the repayment of loans, it was corroborated by bank statements placed on record. 6 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 4.2. Reliance was placed on the decision of the Hon’ble Jurisdictional High Court of Bombay in the case of PCIT vs. Bairagra Builders Pvt. Ltd. [2014] 164 taxmann.com 162 (Bom). Hon’ble Court had an occasion to deal with similar fact pattern as in the case of the assessee. In this case also, assessee had taken an unsecured loan which was alleged to be an accommodation entry from one of the group entities of Shri Pravin Kumar Jain. Addition was made towards the unsecured loan by treating it as accommodation entry based on statement record of Shri Pravin Kumar Jain, ignoring the fact of retraction and other documentary evidences brought on record. Hon’ble Court took note of the finding arrived at both, by ld. CIT(A) and ITAT in this case, whereby it was held that assessee had discharged its onus explaining the transactions and that the addition had been made merely on conjecture and surmise. Hon’ble Court by considering evidences on record, dismissed the appeal of the Revenue, holding it in favour of the assessee. 4.3. Ld. Counsel thus, submitted that the ratio which emanates from this decision is that where assessee had taken unsecured loan from two companies and had submitted all the evidences to substantiate loan including confirmation from the lenders and the loans taken was repaid through banking channels, Assessing Officer is not justified in treating said unsecured loan as bogus and unexplained cash credit. Per contra, ld. Sr. DR placed reliance on the order of the authorities below. 5. We have heard both the parties and perused the material placed on record. Assessee has taken unsecured loan from two entities for which all the corroborative material is placed on record to demonstrate identity and creditworthiness of the lenders and genuineness of the 7 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 transaction. Assessee has also evidently demonstrated that the said loan taken from two parties were repaid by it through proper banking channel which is much prior to selection of case for scrutiny assessment. 5.1. From the perusal of impugned assessment order, it is noted that no independent enquiry has been undertaken by the ld. Assessing Officer by exercising powers vested u/s.131/133(6). Ld. Assessing Officer has placed strong reliance on the statements recorded in the search and seizure action in the case of Shri Pravin Kumar Jain and others to allege assessee being one of the beneficiary of the entire gamut of activities undertaken by Shri Pravin Kumar Jain by generalising the modus operandi of the activities carried out for undertaking accommodation entries. 5.2. We draw force from the decision of Hon’ble Jurisdictional High Court of Bombay in the case of Bairagra Builders Pvt. Ltd. (supra) which has dealt with similar fact pattern. In this decision also, fact of retraction of the statement of Shri Pravin Kumar Jain is taken note of. Further, this decision refers to various documentary evidences which were brought on record but were negated by ld. Assessing Officer for treating the unsecured loans as fake. Hon’ble Court took note of factual findings of ITAT and dismissed the appeal of the Revenue holding in favour of the assessee. 5.3. Considering the facts on record, documentary evidences furnished by the assessee forming part of the paper book and force of Hon’ble Jurisdictional High Court of Bombay having dealt with similar fact pattern, we delete the addition of Rs. 1 Crore made by ld. Assessing Officer u/s. 68 of the Act, treating the unsecured loans as 8 ITA No.4422/MUM/2024 Praham India LLP, AY 2013-14 unexplained cash credit. Accordingly, grounds raised in this respect are allowed. 6. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 19 February, 2025 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 19 February, 2025 MP, Sr.P.S. Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "