Income Tax Appellate Tribunal - Jaipur
Dcit, Jaipur vs Prateek Kothari, Jaipur on 16 December, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ ITANo.159/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2012-13
The DCIT, Central Circle-2, Jaipur cuke Shri Prateek Kothari, H-12
Vs. Sukhi Jeewan complex, Jacob
Road, Ajmer Road, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ABIPK 8090R
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by : Shri Vijay Goyal (CA)
jktLo dh vksj ls@Revenue by :Shri Rajendra Singh (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 14.10.2016
?kks"k.kk dh rkjh[k@Date of Pronouncement: 16/12/2016.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the Revenue against the order of Ld. CIT(A)-4, Jaipur dated 23.12.2015 wherein the sole ground of appeal is as under:
"Whether on the facts and in the circumstances of the case, the CIT(A) was right in deleting the addition of Rs. 1,00,27,500/- made by the AO u/s 143(3) of the IT Act, 1961 on account of bogus unsecured loan taken by the assessee from M/s Mehul Gems (P) Ltd. which is a benami concern of Shri Bhanwarlal Jain ignoring the fact that the piece of information that the said company is involved in providing bogus accommodation unsecured loans and advances, was admitted by Shri Bhanwarlal Jain in statement recorded u/s 132(4) of the IT Act, 1961."
2. The facts for the issue under consideration are that during the year under consideration, the assessee took unsecured loan from M/s Mehul Gems (P) Ltd amounting to Rs. 1 crore. During the course of assessment proceedings, the AO was in receipt of information that M/s Mehul Gems (P) ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur Ltd. is a benami company of Shri Bhanwar Lal Jain group who is the leading entry provider in Mumbai. The group provides accommodation entries of bogus unsecured loans and advances from various benami concerns being operated and managed by Shri Bhanwar Lal Jain and his sons. The said information was received by the AO pursuant to search and seizure action by the Investigation Wing, Mumbai on 03.10.2013 where various incriminating documentary evidences were seized and statement of various persons who assisted Shri Bhanwar Lal Jain in providing bogus loans and advances through benami concerns were recorded. It was noted by the AO that in the said search and seizure operations carried out by the Investigation wing, accommodation entries pertaining to bogus loans and advances of Rs. 2,000/- crores were detected. It was further noted by the AO that the entire bogus nature of the transactions has also been admitted by Shri Bhanwar Lal Jain in his statement recorded u/s 132(4) of the IT Act. As per this information, the AO noted in the assessment order that name of the assessee is appearing in the list of beneficiary who have taken the accommodation entries in the form of unsecured loans. Basis such information received by the AO, a show cause letter dated 05.11.2014 was issued by the AO and in response, it was submitted by the assessee vide its letter dated 27.11.2014 that he does not know who is Bhanwar Lal Jain and he was never in contact with him. Shri Bhanwarlal Jain group is not known to the assessee, therefore, the modus operandi of this group is not known to the assessee and the assessee has not carried out any transaction through these persons. The assessee actually taken the unsecured loans from M/s Mehul Gems (P) Ltd. and the same was repaid in July, 2014 where the receipt and repayment of loans are through account payee cheque. It was further submitted that based on the ROC records of M/s Mehul Gems (P) Ltd., Shri Mohit Pukhraj Kawadia and Shri Rajesh Chopra were the Directors and shareholders of the company and Shri Bhanwarlal Jain was neither the Director nor shareholder of the company. Therefore, without being a shareholder would anyone can become a director of the company or how anyone can control the affairs of the company. Regarding various incriminating documentary evidences seized during the course of search and statements of Shri Bhanwarlal Jain and other persons were recorded, the assessee submitted that copies of such incriminating documents or statement on the basis of which the AO is forming this opinion has not been provided to 2 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur the assessee. Therefore the contents of such documents and statement is not known to the assessee. Therefore, the assessee requested the AO to kindly to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. It was further submitted that if the entries and material gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries he must disclose the substance of all such material though not sources thereof to the assessee and if this is not done, the principles of natural justice stand violated.
2.1 It was further submitted that the assessee has taken actual loan from M/s Mehul Gems (P) Ltd through a/c payee cheque and no accommodation entry was taken from Shri Bhanwar Lal Jain or his group. In the books of accounts of the assessee, no irregularity has been pointed out by the AO. Therefore, the entries recorded in the books of account of the assessee is evidence under the Evidence Act and should be accepted. It was finally submitted that if the department wants to accept what has been found from the possession of Shri Bhanwar Lal Jain and its group, the burden to prove that the amount attributable to the assessee represents its concealed income would be on the department. This burden cannot be discharged merely on suspicion, surmises and conjectures. The Judicial view has been that there cannot be a presumption against a third party in what a person writes in his account books about him or it. Therefore, the AO was requested to provide the copies of incriminating documents and statements of various persons on the basis of which the belief was drawn and provide an opportunity to confront the material and cross examine the persons. The assessee further submitted the following documents in support of genuineness of loan transaction:
(i) Confirmed copy of a/c of above named party in the books of accounts of the assessee.
(ii) Confirmed copy of a/c of assessee in the books of accounts of above named company.3 ITA No. 159/JP/16
The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur
(iii) Copy of acknowledgement of return of A.Y.2012-13, Balance Sheet, Profit and Loss account of 31.03.2012 of above named company.
(iv) Copy of relevant page of bank statement of above named company showing the entry of cheque given to the assessee.
(v) Copy of PAN card of party.
From examining the bank statement and balance sheet of this company, it was submitted that this company was having sufficient source to advance the money to the assessee. The assessee is trying to get the affidavits from the directors of this company regarding genuineness of the loan and the same will be submitted as soon as the same will be received by the assesee for which the further time may kindly be provided to the assessee.
2.2 In view of above, it was finally submitted by the assessee that he has actually taken the loan from above named party and if the AO treats the entry as accommodation entry than the opportunity to confront the incrementing documents and cross examining the witnesses may kindly be provided to assessee.
2.3 The above submissions of the assessee was considered by the AO but he did not find the same acceptable for the reasons stated as under:
(a) The unsecured loans was received by cheque does not make the transaction genuine. The Hon'ble ITAT Jaipur n the case of M/s Kanchwala Gems vs. JCIT, ITA No. 134/JP/02 dated 10.12.2003, and affirmed by the Hon'ble Supreme Court in 288 ITR 10 (SC) has held that even payment by account payee cheque is not sufficient to establish the genuineness of the transaction.
(b) The contentions of the assessee that neither Bhanwarlal Jain nor his sons are directors of the company, is also not relevant to the material fact that in the statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list 4 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the asseesse.
(c) The assessee had requested for cross examination of such persons. In this regard, it is pointed out that the Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) (3 Judge Bench) had observed that "
the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard."
(d) The right of cross examination is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question whether the assessee is entitled to cross examination is a question which may largely depends on the facts and circumstances of the case (ef. Shyamlal Biri Merchant vs. UOI (1993) 68 ELT 548, 551(All.) In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee, further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns.
(e) The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) has held that "there is no provision for permitting the cross examination of the persons whose statements were recorded during survey."
Thereafter, the AO noted that as per the ROC records there exist a nexus among the various companies right from M/s Mehul Gems to M/s Roshan Gems (P) Ltd. to M/s Manish Floor Mills (P) Ltd. through common directors and 5 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur in the last mentioned company, Shri Bhanwarlal Jain and Shri Manak Chand Jain were directors.
2.4 Finally, the AO held that based on the information with the investigation department, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the said group on 03.10.2013, and the existence of nexus as briefed above cannot be considered as a coincidence specially when Shri Bhanwarlal Jain has categorically admitted that his group was indulged in providing accommodation entries of bogus unsecured loans and advances through Benami concerns (70) operated and managed by him and his sons. Thus, under such facts and circumstances M/s Mehul Gems (P) Ltd. is nothing but a Benami concern of Shri Bhanwarlal Jain group.
Based on case laws and discussions, it was further stated by the AO that:
(a) The primary onus is on the assessee to establish the genuineness of the transaction claimed by it.
(b) If the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction.
(c) Payment by account payee cheque is not sacrosanct.
In light of the various judicial pronouncements and the above discussions it is to be seen whether the assessee was able to establish the genuineness of the transactions claimed by it or it has failed in discharging this onus. The information received from investigation wing and statement of Shri Bhanwarlal Jain and group clearly explains the modus operandi of this bogus transactions.
In the present case, assessee has shown unsecured loans of Rs. 1,00,00,000/- from M/s Mehul Gems (P) Ltd. a benami concern of Shri Bhanwarlal Jain group, and this party is only providing bogus accommodation unsecured loans and advances for the reasons given in detail in the above para. Therefore, the unsecured loans from M/s Mehul Gems (P) Ltd. was treated as unexplained cash credit u/s 68 of the IT Act, 1961 and an addition of Rs. 1,00,00,000/- to the declared income of the asessee was made u/s 68 of the IT Act, 1961.
6 ITA No. 159/JP/16The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 2.5 Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A). The ld. CIT(A) after considering the assessee's submissions deleted the entire addition and his findings are as under:
"3.1.3 I have duly considered the assessee's submission and also taken a note of judicial pronouncements relied upon by the AO and appellant. I have also carefully gone through the assessment order and also perused the assessment record. The AO made the addition by applying the provisions of section 68 of IT Act and the action of AO is based on information received from Investigation Wing Mumbai. During the assessment proceedings in compliance to the show cause notice issued, assessee filed following documents:
(i) copy of confirmation letter of the above named cash creditor
(ii) copy of acknowledgement of return
(iii) Copy of Balance sheet and profit and loss account of the cash creditor
(iv) copy of bank statement of the cash creditor
(v) copy f Pan card of the cash creditor and
(vi) sworn affidavit of the director of the company Further, on examination of the profit and loss account of the cash creditor M/s Mehul Gems Pvt. Ltd. it is seen that the turnover of the company as per the P&L is more than 58 crores and on careful perusal of bank statement of the cash creditor, the said entry of withdrawal of money is appearing in the name of assessee in the bank statement.
It is also pertinent to mention that the source of payment as per the bank statement is also deposits of cheque by clearing. On careful perusal of bank statement of M/s Mehul Gems Pvt. Ltd. no instances of cash deposit prior to issue of cheque to the assessee by the cash creditor have been found. Further, the assessee has also filed sworn affidavit of the director of the cash creditor company.
On receipt of these documentary evidences, it is also seen that AO has not brought on record any positive material to controvert the evidence and documents furnished by the assessee. Instead AO insisted on physical presence/attendance of the directors of the cash creditor company particularly when they are not based in Jaipur. It is true that 7 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur cheque does not make the transaction genuine but in this case the assessee has submitted several documents including the bank statement and sworn affidavit of cash creditors, which have not been controverted by AO on the basis of positive evidence. Merely on the basis of statement of Shri Bhanwarlal Jain before Investigation Wing, Mumbai, the addition cannot be confirmed particularly when the copy of the sworn statement of Shri Bhanwarlal Jain was not provided to the assessee and the AO has not brought any positive material to show nexus of the cash creditor company with Shri Bhanwarlal Jain. As per finding given by the AO in assessment order even Shri Bhanwarlal Jain and the directors of the cash creditor company is not the common director in the said company. The AO alleged that the cash creditor company is a benami company of Shri Bhanwarlal Jain. It is well settled law that the onus to prove benami is on the person who alleges. The AO has not brought any positive material to show that cash creditor company is benami company of Shri Bhanwarlal Jain. Further, on carefully examination of assessment records, it is seen that the AO has issued a letter dated 06.01.2015 u/s 133(6) of Act (by speed post) for direct enquiry to the cash creditor company. From the perusal of assessment records, it is also seen that the aforementioned cash creditor company has complied with its letter dated 19.01.2015 to the notice issued by the AO and the same was received in the office of AO on 21.01.2015.
From the above it is seen that AO has not controverted the documentary evidences submitted by the assessee nor conducted any fruitful enquiry on that. Even compliance from M/s Mehul Gems Pvt. Ltd. was not taken into cognizance when the same was received in the AO's office in the month of Jan 2015 and finally assessment order was passed on 23.03.2015 i.e. after a lapse of almost 55 working days. Mere on the basis of surmises and suspicion, addition made by the AO cannot be sustained in view of judicial pronouncements relied upon by the assessee.
In view of the above facts and circumstances of the case, the addition cannot be sustained in the hands of the assessee and the AO is directed to delete the addition of Rs. 1,00,00,000/- and Rs. 27,500/-(towards interest paid) made by the AO by applying the provisions of section 68 of IT Act, 1961. Assessee's appeal stands allowed."
2.6 The Ld. AR of the appellant submitted that the appeal relate to the issue of alleged unexplained cash credit of Rs. 1,00,00,000/- from M/s Mehul 8 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur Gems Pvt Ltd and disallowance of interest of Rs. 27500/- paid by assessee to above named cash creditors. In this regard, the submissions made before the ld CIT(A) were reiterated and it was submitted as under:
a) The assessee relies on findings of ld CIT(A) given at pg 14-21 of appeal order.
b) During the year under consideration the assessee has taken unsecured loan of Rs. 1,00,00,000/- from M/s Mehul Gems Pvt. Ltd, 228-229, Majestic Shopping Centre, Girgoan Road, Mumbai. PAN:- AAGCM9256M on 20.03.2012 through a/c payee cheque and paid interest of Rs. 27,500/- thereon after deducting TDS of Rs. 2,750/-.
c) The assessee has submitted before the ld AO that the assessee does not know who is Shri Bhanwar lal Jain and never be in contact of Shri Bhanwar lal Jain. The Bhanwar lal Jain group not known to the assessee, therefore the modus operandi of this group is not known to the assessee and assessee not carried out any transaction through this person. The assessee has actually taken the unsecured loan from M/s Mehul Gems Pvt. Ltd and the same repaid in July-14. The receipt and repayment of loan both are through account payee cheques.
d) The assessee explained to ld AO that he has taken loan from M/s Mehul Gems Pvt. Ltd and during the FY 2011-12 Shri Mohit Pukhraj Kawadiya, 702, Satyam Apartments, Opp. Navyug College, Surat and Shri Rajesh Chopra, 204, Nilpa Apt., Kalpeshi Street, Timliyawas, Nanpura, Surat were director and shareholders of this company. This information is taken as per ROC record of this company. Thus Shri Bhanwar lal Sharma was neither director nor shareholder of this company, therefore without being shareholder/director of a company how anyone can control the affairs of the company. The name of 9 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur the son of Shri Bhanwar Lal Sharma is not known to the assessee, therefore no comments can be made on the controlling of son of Shri Bhanwar lal Sharma in this company. Further the AO has not brought any positive material to prove that M/s Mehul Gems Pvt Ltd is benami company of Shri Bhanwar Lal Jain Group. The Ld AO has listed name of various companies in para 4.5, and your honor would find that the directors of M/s Mehul Gems Pvt Ltd and Shri Bhanwar lal Jain are not common partner in any company.
e) As regard to contention of ld AO that various incriminating documentary evidences were seized during the course of search on Bhanwar Lal Jain and statement of several persons were recorded which proves that the entry of the assessee is accommodation entry this is to submit that the ld AO has not provided the copy of so called incriminating document or statement the assessee and opportunity of confrontation was not given to assessee. The assessee has specifically demanded to ld AO to provide the copy of so called incriminating documents and statements but the same was not given to assessee.
f) The assessee has submitted following documents before ld AO in support of genuineness of loan taken from this party: -
i) Confirmed copy of a/c of above named party in the books of accounts of the assessee.
ii) Confirmed copy of a/c of assessee in the books of accounts of above named company.
iii) Copy of acknowledgement of return of AY 2012-13, Balance sheet, profit & loss a/c of 31.03.2012 of above named company.
iv) Copy of relevant page of bank statement of above named company showing the entry of cheque given to the assessee.
v) Copy of PAN card of party.
vi) Affidavit of director of the company
10
ITA No. 159/JP/16
The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur From examining the bank statement and balance sheet of this company ld CIT(A) has found that this company was having sufficient source to advance the money to the assessee. The assessee company is turnover is 58.31 crores.
g) The ld CIT(A) has examined the assessment records of the assessee and found that the AO has made direct inquiry from the cash creditor and the cash creditor has confirmed the giving of loan to the assessee in response to direct inquiry of the AO. The ld CIT(A) has reproduced the copy of inquiry letter of AO and reply of cash creditor to the AO in the appeal order, which proves that the ld AO has no material to hold that the cash credit was unexplained.
h) The assessee has discharged his initial onus.
The assessee has discharged his initial onus laid down u/s 68 of Income Tax Act. The assessee has filed confirmation letters and affidavit of cash creditors before the AO who has admitted giving of money to the assessee as a loan. The ld AO has erred in making addition of Rs.1,00,00,000/- even in the facts and circumstances of the assessee and the learned AO has no material to reject the evidences filed before him.
(i) Identity:-
The identity of cash creditor stood proved in as much as copy of PAN card and copy of Income Tax return were filed. Hon'ble Rajasthan High Court in the case of Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199 has held that once the existence of the creditors is proved and such persons own the credits, the assessee's onus stands discharged and the assessee is not required to prove the source from which the creditors could have acquired the money deposited with him. Hon'ble jurisdictional High Court has held that merely because the depositors' explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to the assessee itself.
(ii) Genuineness of Transaction:-
The assessee has filed confirmation letter and affidavit of director of the company who admit the giving of loan. The assessee filed copy of bank statement of cash creditors where the amount of payment is reflected in bank statement. The assessee has filed sworn affidavit of Shri Mohit Pukhraj Kawadiya director of cash creditor company wherein he has admitted the 11 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur giving of money to the assessee as loan. Further, the assessee has paid interest and deducted TDS. Furthermore, the assessee has repaid the loan by account payee cheque. The AO has not rebutted the contents of the affidavits. The contents of affidavits, which are not vague should be accepted correct. Reliance is placed on the following decisions:-
(i) Mehta Parikh & Co v CIT [1958] 30 ITR 181 (SC)
(ii) Dilip Kumar Rao Vs CIT (1974) 94 ITR 1 (Bom);
(iii) Malwa Knitting Works Vs CIT (1977) 107 ITR 379, 381 MP and
(iv) Sri Krishna Vs CIT (1983) 142 ITR 618 (All).
(iii) Capacity proved:-
The assessee has filed copy of balance sheet and profit and loss account of the company. The turnover of the company is 58.13 crores. The assessee has also filed copy of bank statement of the company which shows huge number of transaction of high value. There is no onus of the assessee to prove source of source. Once the assessee able to establish that he has in fact received money from third party, it can't be burdened with a further onus of establishing the source from which such third party had been able to obtain the money. Reliance is placed on the following decisions: -
(i) Sideways Investment Pvt. Ltd. Vs DCIT 24 Tax World 146 (JP ITAT)
(ii) CIT Vs. Daulat Ram Rawatmal 87 ITR 349 (SC)
(iii) Saraogi Credit Corp. Vs. CIT 103 ITR 344 (PAT)
(i) The assessee relies on the following decisions:-
(i) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC)
The assessee had given named and addresses of the cash
creditors, who were income tax assessees. Revenue apart from issuing summon u/s 131 notices to creditors, did not pursue the matter further- it did not examine creditworthiness of the creditors- assessee could not, under the circumstances do anything further. Held that the additions were rightly deleted.
(ii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.12 ITA No. 159/JP/16
The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur
j) The ld AO mentioned that cheque transaction is not sufficient to prove the genuineness of transaction. But in the case of assessee, the assessee is claiming the genuineness of the transaction not merely on the strength of cheque but he has submitted several other evidences such as sworn affidavit, income tax return and bank statement of cash creditor and Profit and loss account and balance sheet of cash creditor, which prove that the transaction of assessee is genuine.
k) The ld AO held that M/s Mehul Gems Private Ltd is benami company of Shri Bhanwar Lal Jain but the ld AO has not brought any positive material to show that M/s Mehul Gems Pvt Ltd is benami of Shri Bhanwar Lal Jain. To hold a person as Benami of another, one ought to have concrete evidences in contrast to sheer presumptions and suspicion and in such cases initial burden lies on revenue. The ld AO failed to appreciate the facts, evidence and the tests laid down by Apex Court and High Court. The assessee relies on the following decisions:
a) CIT vs Daulat Ram Rawatmull 87 ITR 349 (SC)
b) Jaydayal Poddar vs. Bibi Hazra, AIR 1974 SC 171
Hon'ble Supreme Court has held that it is well settled that the burden of proving that a particular sale is Benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so.
c) Prakash Narain Vs CIT 134 ITR 364 (ALL)
d) Lal Chand Agarwal vs. ACIT 21 Tax World 213 Hon'ble ITAT Jaipur Bench
has held that to hold a person as benami of another, one ought to have concrete evidences in contrast to sheer presumptions and suspicion and in such cases initial burden lies on revenue ;
e) ITO vs. Shree Ladani Family Trust 21 Tax World 351 Hon'ble ITAT Jaipur Bench has held that burden to prove Benami nature heavily lies on the department.
f) DCIT vs. PSM Family Trust 21 Tax World 553 To hold benami Character of a business, it is essential to prove interlocking, interlacing and inter controlling between the two business.
13 ITA No. 159/JP/16The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur
g) Ravi Mathur & Others vs. ACIT 22 Tax World 245 Held that burden to prove Benami nature of transaction heavily lies on the department.
h) Ramjas Nawal vs. ACIT 22 Tax World 126 Held that A person cannot be held to be Benami of assessee simply because the vehicle along with its registration papers were recovered from the possession of assessee in absence of some positive evidence.
i) S.S. Gupta vs. ACIT 22 Tax World 337 Held that to hold Benami character of a business, it is essential to prove interlocking, interlacing and inter linking between the two or more businesses.
j) Sandeep Loomba vs. ACIT 26 Tax world 288 held that burden to prove Benami nature heavily lies on the department.
k) ITO vs. Suresh Chand Gupta 26 Tax World 224 held that burden to bring material evidence on records to prove a person to be benami of another heavily lies on the revenue.
l) Manju Devi Kogta vs. ITO 27 Tax World 385 held that burden to prove Benami nature heavily lies on the department.
m) Smt Kesar Devi vs. ITO 28 Tax world 157 held that burden to prove Benami nature heavily lies on the department and what is apparent has to be treated as real in absence of any contrary material
n) Uttam Chand Nahar vs. ITO 28 Tax World 435 held that burden to prove benami nature heavily lies on the department.
o) Vijendra Kumar Mamodia vs. DCIT 29 Tax World 51 held that burden to prove Benami nature heavily lies on the department and burden to prove an investment as Benami is on the person who alleges as such.
p) Rajesh Jain vs. ITO 32 Tax World 72 held that burden to prove benami transaction lies on the person who asserts its and sharing of same business place and employees is not sufficient to hold one person as Benamidar of another.
q) Radhey Shyam Ojha vs. ACIT 32 Tax World 81 held that it is the duty of AO to bring on record sufficient material to prove Benami nature.
(l) The AO appeared to be bent upon making the addition under the influence of some report without application of mind.
The AO cannot be guided for his decisions by what the officer preparing the report says. As per section 119 (1) (a) even the CBDT cannot issue directions or 14 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. The SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said that an assessment order is the result of a judicial proceedings. According to the Apex Court an assessment proceeding a judicial proceeding. Obviously, no one can have influence or say in the course of judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried away under some report. Hon'ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-" that one who hears must decide the case."
2.7 The ld DR is heard who has vehemently argued the matter and supported the order of the AO.
2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the 15 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn't provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that "in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the asseesse." Further, regarding cross-
16 ITA No. 159/JP/16The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross- examination and if this is not done, the principles of natural justice stand violated.
2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and 17 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur explain its position especially when the assessee has requested the same to the Assessing officer.
2.10 In this regard, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) has held that "The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it." It was held in that case that "In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing."
18 ITA No. 159/JP/16The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard."
The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was 19 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him."
2.10 In light of above proposition in law and especially taking into consideration the decision of the Hon'ble Supreme Court in case of C. Vasantlal & Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the 20 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed.
In the result the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 16/12/2016.
Sd/- Sd/-
(KUL BHARAT) (VIKRAM SINGH YADAV)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 16/ 12/2016
Pillai
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT, Central Circle-2, Jaipur
2. izR;FkhZ@ The Respondent- Shri Prateek Kothari, Jaipur
3. vk;dj vk;qDr@ CIT(Central), Jaipur
4. vk;dj vk;qDr¼vihy½@The CIT(A)-4, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.159/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 21 ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 22