Income Tax Appellate Tribunal - Indore
Malwa Laminators, Indore vs Assessee on 21 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA, AM
IT(SS)A Nos.3 to 7/Ind/2011
AYs: 2002-03 to 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
M/s. Narmada Extrusion Ltd., Indore
PAN - AAACN 5983 C ... Respondent
CO Nos. 25 to 29/Ind/2011
(Arising out of IT(SS)A Nos.3 to 7/Ind/2011)
AYs: 2002-03 to 2006-07
M/s. Narmada Extrusion Ltd., Indore
PAN - AAACN 5983 C ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A Nos.12 & 14/Ind/2011
AYs: 2003-04 & 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Mahesh Mittal, Indore
PAN - ACVPM 4802 B ... Respondent
CO Nos. 21 & 22/Ind/2011
(Arising out of IT(SS)A Nos.12 & 14/Ind/2011)
AYs: 2003-04 & 2006-07
Mahesh Mittal, Indore
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PAN - ACVPM 4802 B ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A No.17/Ind/2011
AY: 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Mahesh Mittal HUF, Indore
PAN - ACGHM 2046 G ... Respondent
CO No. 20/Ind/2011
(Arising out of IT(SS)A No.17/Ind/2011)
AY: 2006-07
Mahesh Mittal HUF, Indore
PAN - ACGHM 2046 G ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A Nos.23, 24 & 15/Ind/2011
AYs: 2003-04, 2005-06 & 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Smt. Vandana Mittal, Indore
PAN - AIWPM 1000 A ... Respondent
CO Nos. 35, 34 & 33/Ind/2011
2
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(Arising out of IT(SS)A Nos.23, 24 & 15/Ind/2011)
AYs: 2003-04, 2005-06 & 2006-07
Smt. Vandana Mittal, Indore
PAN - AIWPM 1000 A ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A Nos.21 & 22/Ind/2011
AYs: 2003-04 & 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Kapil Mittal, Indore
PAN - AFIPM 2508 Q ... Respondent
CO Nos. 13 & 12/Ind/2011
(Arising out of IT(SS)A Nos.21 & 22/Ind/2011)
AYs: 2003-04 & 2006-07
Kapil Mittal, Indore
PAN - AFIPM 2508 Q ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A No.16/Ind/2011
AY: 2006-07
ACIT, Circle-2(1), Indore ... Appellant
3
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Vs.
Pravin Mittal, Indore
PAN - AFDPM 4586 R ... Respondent
CO No. 31/Ind/2011
(Arising out of IT(SS)A No.16/Ind/2011)
AY: 2006-07
Pravin Mittal, Indore
PAN - AFDPM 4586 R ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A Nos.10 & 11/Ind/2011
AYs: 2003-04 & 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Smt. Shardadevi Mittal, Indore
PAN - ACVPM 4511 B ... Respondent
CO Nos. 14 & 15/Ind/2011
(Arising out of IT(SS)A Nos.10 & 11/Ind/2011)
AYs: 2003-04 & 2006-07
Smt. Shardadevi Mittal, Indore
PAN - ACVPM 4511 B ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
4
-: 5: -
IT(SS)A Nos.8 & 9/Ind/2011
AYs: 2003-04 & 2005-06
ACIT, Circle-2(1), Indore ... Appellant
Vs.
M/s. Malwa Laminators, Indore
PAN - AAEFM 9597 L ... Respondent
CO Nos. 23 & 24/Ind/2011
(Arising out of IT(SS)A Nos.8 & 9/Ind/2011)
AYs: 2003-04 & 2005-06
M/s. Malwa Laminators, Indore
PAN - AAEFM 9597 L ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A No.25/Ind/2011
AY: 2005-06
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Omprakash Mittal HUF, Indore
PAN - AAGHM 2046 G ... Respondent
CO No. 19/Ind/2011
(Arising out of IT(SS)A No.25/Ind/2011)
AY: 2005-06
Omprakash Mittal HUF, Indore
5
-: 6: -
PAN - AAGHM 2046 G ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
IT(SS)A Nos.27 to 29/Ind/2011
AYs: 2003-04, 2005-06 & 2006-07
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Smt. Urmila Mittal, Indore
PAN - ABMPM 6200 B ... Respondent
CO Nos. 18, 16 & 17/Ind/2011
(Arising out of IT(SS)A Nos.27 to 29/Ind/2011)
AYs: 2003-04, 2005-06 & 2006-07
Smt. Urmila Mittal, Indore
PAN - ABMPM 6200 B ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
ITA No.79/Ind/2011
AY: 2003-04
ACIT, Circle-2(1), Indore ... Appellant
6
-: 7: -
Vs.
Pravin Mittal, Indore
PAN - AFDPM4586R ...Respondent
CO No. 32/Ind/2011
(Arising out of ITA No.79/Ind/2011)
AY: 2003-04
Pravin Mittal, Indore
PAN - AFDPM4586R ... Objector
Vs.
ACIT, Circle-2(1), Indore ... Respondent
ITA No.89/Ind/2011
AY: 2007-08
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Kapil Mittal, Indore
PAN - ACVPM4802B ... Respondent
ITA No.90/Ind/2011
AY: 2007-08
ACIT, Circle-2(1), Indore ... Appellant
Vs.
Narmada Extrusion Ltd., Indore
PAN - AAACN5983C ... Respondent
7
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Department by :Shri Keshave Saxena, CIT(DR)
Assessees by :S/Shri S.N. Agrawal and
Ritesh Jain, CAs
Date of Hearing : 21.10.2011
Date of Pronouncement : 30.12.2011
ORDER
PER BENCH These appeals & cross-objections are filed by the Assessees and Revenue against the different orders of ld. CIT(A)-Ujjain, dated 22.3.2011 for the Assessment Years as mentioned above in the matter of orders passed u/s 153A r.w.s. 143(3) of the I.T. Act, 1961.
2. In departmental appeals, the following common grounds have been raised: -
"On the facts and in the circumstances of the case, the ld. CIT(A) erred in: -
1. Deleting the addition made by the AO on account of unsecured loan u/s 68 of the I.T. Act by way of accommodation entries obtained by the assessee from Lunkad Group.
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2. Deleting the addition made by the AO on account of interest expenses being paid for accommodation entries obtained from Lunkad Group which has been received back in cash from the operator.
3. Deleting the addition made u/s 69A of the I.T. Act on account of unexplained source of expenses incurred for the payment of commission to Lunkad Group for providing accommodation entries @5% as out of book expenditure."
3. Whereas, in the cross-objections, the following common grounds have been raised: -
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the act of AO in issuing notice u/s 153A of the I.T. Act for the years under consideration even when no incriminating documents were found and seized from the possession of the assessees during the course of search. Thus the notices as issued u/s 153A of the I.T. Act and assessments framed accordingly require to be quashed on this account.
2. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the act of AO in making additions in the case of assessees in respect of cash credit even when the entire amounts of cash credit were duly recorded in the regular books of accounts of the assessees prior to the date of search and no incriminating documents were found and seized from the possession of the assessees. Thus, the additions made in the case of the assessees in respect of cash credits on the basis of inferences and presumptions and that too in the 153A proceedings are wrong. The same require to be deleted in full."
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4. Common grounds raised by the Revenue in all the years relates to deletion of addition on account of unsecured loan u/s 68 of the Income-tax Act, 1961, which was alleged to be taken by the assessee by way of accommodation entries from Lunkad Group.
5. Facts in brief are that a search u/s.132 of the Income tax Act, 1961, was conducted at the business and office premises of assessee group [known as Mittal group] on 05.10.2006. During the course of search, the assessee group surrendered additional income of Rs. 2 crores and disclosed the same under various heads in the hands of Shri Mahesh Mittal and Shri Praveen Mittal in A.Y.2007 -
08. The additional income on those heads so surrendered were accepted as it is. However, while completing the assessment, in pursuance to notices u/s.153A following the search, further additions were made on account of loan received by them through accommodation entries from Lunkad group of companies. Those additions were made on the 10
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basis of a survey u/s. 133A which was undertaken at the business premises (13, Race Course Road, Indore) of the various companies of the Lunkad group on 02.05.2006 i.e. few months prior to the date of search in assessee group [Mittal group] of cases. The survey had revealed the modus operandi adopted by Lunkad group in providing accommodation entries to various needy persons i.e. beneficiaries.
6. During the course of assessment u/s 153A for assessment year 2002-03 in case of Narmada Extrusion Limited, the AO observed that unsecured loan received by the assessee was as under :-
S.No. Name of the Company Unsecured Interest on it loans during assessment year 2002-03
1. Rajvir Marketing & Rs. 22,00,000 16,701 Investment Pvt.Ltd.
2. Rajvir Biotech (P)Ltd. Rs. 38,00,000 41,983 Total Rs. 60,00,000 58,684 11
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That during the course of assessment proceedings the assessee vide order sheet entry was asked to produce the directors of above companies for ascertaining the sources of loan taken and to prove the genuineness and creditworthiness of the loan, transaction/creditor as per Section 68 of the Income-tax Act, 1961. The assessee could not produce the creditors and submitted as under :-
(i) That you have asked from the assessee to produce the Director of Rajvir Marketing and Investment P.Ltd. and Rajvir Biotech (P) Ltd. from whom unsecured loan were taken during the year. In this respect, we have to submit as under :-
(i) Confirmations letters in respect of loan taken from the above party is enclosed.
1.
(ii) Affidavit of the above party duly notarized confirming the above/transactions are enclosed.
(iii) That the assessee has received the entire amount of loan through account payee cheques. That when the amounts of loan were received by the assessee 12
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through account payee cheques and confirmation letters duly signed by the creditors have been filed and more so when they are assessed to tax, the assessee has discharged its onus lying on him. That if you have any doubt about the genuineness of the said transaction, you are requested to directly collect necessary information from both the parties.
Without Prejudice to the above
(iii) That Hon'ble Jurisdictional High Court has consistently held that once the assessee has furnished confirmation letters duly supported by Affidavits and identity of the creditors stands proved. in that case if the A.O. is not satisfied about the capacity of the said creditors, the amount should be added to the income of the creditors and not in the case of the assessee. "
The assessee has failed to produce the above party which is very well known as Lunkad Group, even after specific opportunity Thus, the assessee failed to prove the identity, 13
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genuineness and creditworthiness of parties providing unsecured loans.-Merely submitting confirmations, along with postal address and PAN do not confirm the creditworthiness and genuineness of the transactions.
7. The AO further observed that the department on 2.5.2006 conducted survey on the business premises of Lunkad Group of the companies, and after post survey investigations several incriminating facts about the business of Lunkad Group came to the light of the department. The loans received from the above parties were merely accommodation entries as they have given loans after receiving cash from the concerned parties. These accommodation entries came to the light of the department only after the above survey.
Detail of companies involved :-
3(A) Lunkads' Companies :-
During the survey and in post survey investigation details of several companies were found. In these companies 14
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Shri Vijay Lunkad, Shri Sanjeev Lunkad, Shri Ritesh Lunkad, their family and staff members were found to be involved as directors.
These alleged companies are :-
S.No. Name of Company Directors Correspondence/ Remarks Regd.Office
01. Lunkad Securities Ltd. Sanjeev/ Lunkad House, Lunkad/Ritesh 13, Race Course, Lunkad Indore.
02. Lunkad Media & Sanjeev/ Lunkad House, Entertainment Lunkad/Sneha 13, Race Course, Limited/Lunkad Real Estate Lunkad/Rachna Indore.
Limited Lunkad
03 Parkson Securities Limited
04 Lagoon Resorts (P)Ltd. Vijay Lunkad House,
Lunkad/Sharad 13, Race Course,
darak Indore.
05 Parth Credit & Capital Market Sanjeev 21-Amber,
Limited Lunkad/Sanjay M.G. Road,
Bindal Indore.
06 Saokar Investment & Finance Vijay Lunkad House,
Limited Lunkad/G.Jagtap 13, Race Course,
Indore
07 Historic Arts & Exports Vijay Lunkad House,
(P)Ltd. Lunkad/G.Jagtap 13, Race Course,
Indore
08 Rajveer Marketing & Sanjeev/ Lunkad House,
Investment Ltd. Lunkad/Ritesh 13, Race Course,
Lunkad Indore
09 West-End Management Vijay Lunkad House,
Technologies (P) Ltd. Lunkad/Sanjav 13, Race Course,
Bindal Indore
10. Rajveer Biotech (P) Ltd. Sanjeev/ Lunkad House,
Lunkad/Ritesh 13, Race Course,
Lunkad Indore
11 Prateek Reality (P) Ltd. Sanjeev/ Lunkad House,
Lunkad/Ritesh 13, Race Course,
Lunkad Indore
12. Alpine Eisen Limited Sanjeev/ Lunkad House,
Lunkad/Sneha 13, Race Course,
Lunkad Indore
13. Indore Biosoft(P)Ltd.
14. Ritesh Investment (P) Ltd Vijay Lunkad House,
Lunkad/G.Jagtap 13, Race Course,
Indore
15. Celerity Capital Market & Vijay Lunkad House,
Finvest (P) Lgtd. Lunkad/G.Jagtap 13, Race Course,
Indore
16 Alpine Agrotech Limited Sanjeev/ Lunkad House,
Lunkad/Sneha 13, Race Course,
Lunkad Indore
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17 Alpine Infosys Ltd Sanjeev/ Lunkad House,
Lunkad/Sneha 13, Race Course,
Lunkad Indore
18 Himalya Grah Nirman
Sahakari Samiti Maryadit
The impounded documents so found at Lunkad Group was reproduced by Assessing Officer as Under :- More examples from Lunkad Companies Impounded material .
DATE NAME Cash Cash
Payments Receipts
3/4/2006 Sandeep 50,000
3/4/2006 Tulsiyan 1,00,000
3/4/2006 Ritesh 1,00,000
3/4/2006 Bank 5,10,000
3/4/2006 Darak 5,00,000
3/4/2006 Bank 3,50,000
3/4/2006 Chopraji 5,00,000
4/4/2006 Ritesh 4,000
4/4/2006 Bank 19,000
4/4/2006 Ticket sunil 4,700
4/4/2006 Darak 1,000,000
4/4/2006 Darak 1,000,000
4/4/2006 Bank 150,000
4/4/2006 Chopraji 500,000
4/4/2006 Bhabhi 10,000
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4/4/2006 Bank 1,000
4/4/2006 Bindal 19,000
4/4/2006 Bank 99,000
4/4/2006 Daddy 33,500
4/4/2006 Petrol getz 1,000
4/4/2006 Recharge 2,000
(1850)
4/4/2006 dewas 10,000
5/4/2006 darak 300,000
5/4/2006 bindal 650,001
5/4/2006 Darak 1,400,000
5/4/2006 Bank 975,000
5/4/2006 Bank 775,000
5/4/2006 Bank 12,000
5/4/2006 Bank 1,700,000
5/4/2006 Daddy manali 10,000
7/4/2006 Mehtaji 1,800,000
7/4/2006 Sunil 30,000
7/4/2006 Darak 1,800,000
7/4/2006 mehtaji 3,200,00
7/4/2006 Darak 7,50,000
7/4/2006 Ritesh return 4,000
7/4/2006 Ritesh 5,000
personal
7/4/2006 Banthiaji 29,800
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7/4/2006 Bank 9,75,000
7/4/2006 Bank 9,50,000
7/4/2006 Bank 5,50,000
7/4/2006 Bank 5,00,000
7/4/2006 p.g. 5,50,000
7/4/2006 Anilji 2,00,000
8/4/2006 mehtaji 2,000,000
8/4/2006 Darak 500,000
8/4/2006 Bank 2,530,000
8/4/2006 Bank 700,000
8/4/2006 Darak packet 10,000
ret
8/4/2006 Laxminarayan 7,000
8/4/2006 Ananya bus 5,000
8/4/2006 Sanju 2,000
personal
10/4/2006 Mehtaji 2,000,000
10/4/2006 Darak short 10,000
re
10/4/2006 Bank 990,000
10/4/2006 Bank 995,000
10/4/2006 Audit 2,000
10/4/2006 Air 1,000
conditioner
10/4/2006 Ritesh 1,000
personal
10/4/2006 Form 1,000
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10/4/2006 Cable 500
10/4/2006 Bindal 2,000
10/4/2006 Dhar 25,000
12/4/2006 mehtaji
12/4/2006 Bank
12/4/2006 Darak car
12/4/2006 Sunil
12/4/2006 Salary ghan
12/4/2006 Tennis racket
12/4/2006 Rajesh
12/4/2006 p.g.
12/4/2006 Petrol getz
13/4/2006 Darak
13/4/2006 Anilji
13/4/2006 Darak
13/4/2006 Bank
13/4/2006 Cricket ticket
13/4/2006 Daddy
13/4/2006 Bank
14/4/2006 A shah
14/4/2006 Anilji ticket
14/4/2006 Diesel innova
14/4/2006 Corolla petrol
14/4/2006 Rachana
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ticket
14/4/2006 Hukumdas
14/4/2006 Sanjeev
personal
14/4/2006 Hotel
14/4/2006 Bantihiaji
14/4/2006 Sanjay bindal
15/4/2006 Bank 980,000
17/4/2006 Darak 2,500,000
17/4/2006 Anilji 1,500,000
17/4/2006 Darak 500,000
17/4/2006 Darak 1,500,000
17/4/2006 Bank 3,585,000
17/4/2006 Sunil 500,000
18/4/2006 Darak 43,000
18/4/2006 200 pack rec 10,000
18/4/2006 p.g. 200,000
18/4/2006 Darak 957,000
18/4/2006 Bank 1,990,000
18/4/2006 a.shah 300,000
18/4/2006 Farm nanu 2,000
18/4/2006 Kuber 5,100
18/4/2006 Bank 475,000
18/4/2006 Bank 50,000
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18/4/2006 p.g. 2,000,000
19/4/2006 Tulsiyan 100,000
19/4/2006 p.g. 1,000,000
19/4/2006 p.g. 5,00,000
19/4/2006 Bank 17,95,000
19/4/2006 Bank 30,000
19/4/2006 Note short 10,000
pack modern
19/4/2006 Mehtaji 5,000
20/4/2006 Bank 500,000.00
21/4/2006 Bank hsbc 25,000
21/4/2006 Narmada 3,500,000
21/4/2006 Daddy 17,700
21/4/2006 Seeds 3,000
21/4/2006 Petrol 2,000
22/4/2006 Mehtaji 2,000,000
22/4/2006 Bank 995,000
22/4/2006 Banthiaji 500,000
22/4/2006 Ritesh 2,500
personal
22/4/2006 Bracket 3,000
24/4/2006 Darak 1,050,000
24/4/2006 Bank 1,990,000
24/4/2006 Sunil 250,000
24/4/2006 Plants dhar 10,000
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24/4/2006 Sanju dhar 8,000
24/4/2006 Getz pet 2,000
25/4/2006 Narmada 300,000
25/4/2006 Bank 1,795,000
25/4/2006 Bank 50,000
25/4/2006 Opel repair 2,000
25/4/2006 Sunshine 10,000
society
25/4/2006 ICICI Bank 25,000
25/4/2006 Dhar 30,000
25/4/2006 p.g. 500,000
25/4/2006 p.g. 1,500,000
25/4/2006 Swati ticket 5,000
26/4/2006 Ajay 1,000,000
26/4/2006 Darak 4,000,000
26/4/2006 Bank 995,000
26/4/2006 Anjli challan 2,000
26/4/2006 Sanju 50,000
26/4/2006 Bank 750,000
27/4/2006 Bank 1,990,000
27/4/2006 Bank 10,000
27/4/2006 Sanjay 41,000
Agrawal on
a/c
27/4/2006 p.g. 354,350
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28/4/2006 Darak 450,000
28/4/2006 Mehtaji 1000,000
28/4/2006 Bank 2,350,000
28/4/2006 Sunil 300,000
28/4/2006 Dewas 200,000
28/4/2006 Bank 250,000
28/4/2006 Uncle 50,000
29/4/2006 Dewas garlic 41,500
29/4/2006 Narmada 900,000
29/4/2006 Narmada 1,100,000
29/4/2006 Narmada 5,00,000
29/4/2006 Uncle 50,000
29/4/2006 Bank 950000
29/4/2006 Sachin 608000
29/4/2006 Amit 100,000
29/4/2006 Sunil 300,000
1/5/2006 Narmada 850,000
1/5/2006 Amit 100,000
1/5/2006 Sanjay return 26,000
1/5/2006 Narmada 150,000
1/5/2006 Bank 995,000
1/5/2006 MOBILE 1,100
RECHARGE
1/5/2006 P.G. 500,000
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1/5/2006 Corolla petrol 2,250
1/5/2006 Bank 950,000
1/5/2006 Ritesh rel. ipo 26,000
5. List of Bank Accounts :
S.No. Name of Company Bank Account No.
01. Lunkad Securities Centurion Bank,
Ltd. HSBC Bank, IDBI
Bank
02 Lunkad Media & Bank of Rajasthan,
Entertainment Centurion Bank,
Limited/Lunkad Real HSC Bank, IDBI Estate Limited Bank 03 Parkson Securities Centurion Bank Ltd 04 Lagoon Restorts (P) Bank of Rajasthan Ltd.
Parth Credit & Centurion Bank
05 Capital Market Ltd.
Saokar Investment & Centurion Bank,
06
Finance Ltd. Bank of Rajasthan
Historic Arts &
07 Bank of Rajasthan
Exports (P) Ltd.
Raiveer Marketing &
08 Bank of Rajasthan
Investment Ltd.
West-End
09 Management Centurion Bank
Technologies (P) Ltd.
Rajveer Biotech (P)
10 Centurion Bank
Ltd.
Prateek Reality (P) Centurion Bank,
11
Ltd. Bank of Rajasthan
Indore Biosoft (P)
13 Centurion Bank
Ltd.
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Ritesh Investment
14 Bank of Rajasthan
(P) Ltd
Celerity Capital
Bank of Rajasthan,
15 Market & Finvest (P)
Centurion Bank
Ltd.
Alpine Agrotech
16 Centurion Bank
Limited
Alpine Infosys Bank of Rajasthan,
17
Limited Centurion Bank
Himalya Grah
Bank of Rajasthan,
18 Nirman Sahakari
Centurion Bank
Samiti Maryadit
8. In view of the above discussion, the AO held that the loan transactions with M/s. Rajvir Marketing & Investment P.Ltd. and M/s. Rajvir Biotech (P) Ltd, are merely accommodation entries. The cash has been received by the said company from the assessee and after being routed through various companies, this amount was given by cheques to the assessee. The assessee's submission that loan received is genuine is not at all admissible. The non attendance/non co-operation and failure to explain the source of the fund utilized by the loan creditor further confirm the mens rea. Hence, the amount of 25
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Rs. 60,00,000/- received from the said companies (Calculated on the basis of Peak credit as discussed here under ) is treated as unexplained cash credit and shall be added to the income of the assessee u/s 68 of Income-tax Act.
9. By the impugned order, the ld. CIT(A) deleted the addition by observing as under :-
4.2.3 In the context of the facts and findings as given in the Lunkad Group of cases, It has been held that the Lunkad group had failed in discharging its onus to explain the source of huge share capital introduced year after year in their group companies. The documents impounded during the survey in the Lunkad group of cases, though, for the limited period only, do suggest the modus operandi adopted by them in providing entries to the beneficiaries. But this has not been accepted by the Lunkad group so far. Rather, they (Lunkad group) have issued confirmatory letters to the various beneficiaries in support of having given genuine loan and share application money. Had 26
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they accepted the modus operandi of providing only entries, then the required course would have been confirming the additions made in the hands of beneficiaries. But this has not been done so. Rather the Lunkad group had tried to reinforce the stand of beneficiaries by way of issuing confirmatory letters to them but in their own cases they have utterly failed to discharge the primary onus of explaining the source. Therefore, in the circumstances, the additions made on this issue were sustained on substantive basis in the cases of Lunkad group of companies itself. Confirming addition on the same issue in the hands of beneficiaries would I amount double addition [ though on different hands] . Further in the facts of the case, the decision of Hon'ble jurisdictional High Court in the case of Metachem Industries Limited supports the grounds of the assessee. Accordingly, keeping in view the findings which has been given by me in Lunkad Group of cases 27
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and following the principal of consistency, the addition made u/s 68 on this issue, can not be sustained in the cases of beneficiaries."
10. Aggrieved by the above order of the CIT(A), the Revenue is in further appeal before us and assessee had also filed cross objections.
11. Rival contentions have been heard and records perused. From the record, we found that there was search at business and office premises of assessee group (known as Mittal Group) on 5.10.2006. On the basis of incriminating documents found during search, the assessee has surrendered additional income of Rs. 2 crores and disclosed the same in the hands of Shri Mahesh Mittal and Shri Pravin Mittal in assessment year 2007-08. While completing the assessment u/s 153A, the AO found that during the years covered by the search, the assessee has taken loan from various companies of Lunkad Group. The AO observed that on 2.5.2006, there was survey at Lunkad Group i.e. few months prior to the date of search in assessee's group. The survey had revealed that Lunkad Group was involved in providing accommodation entries to various 28
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needy persons i.e. beneficiaries. The incriminating documents so found during survey at Lunkad Group even though pertaining to one month only indicated receipt of cash from companies/ persons to whom amount was again passed through cheques either in the form of share capital or unsecured loans or capital gains. The AO observed that the Lunkad Group did not cooperate during survey proceedings in explaining the entries found in incriminating documents regarding receipt of cash and giving of cheques to various beneficiaries. The Directors of Lunkad Group did not appear to substantiate the entry of loans given to the group companies of assessee. The documents so found during survey conducted at Lunkad Group shows that Lunkad Group has acted as accommodation entry provider. Even during course of assessment proceedings, the assessee had filed loan confirmation letters alongwith affidavit of Lunkad Group to substantiate the loan taken and repaid by it, but could not produce the alleged creditors in person to substantiate the same. It was contended by the ld. CIT DR that since Lunkad Group could not be produced before any of the authorities, the 29
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source of huge cash deposits in their Bank account could not be explained, so as to establish the genuineness and creditworthiness of loans advanced by them to assessee. From the record, we also found that the assessee Mittal Group is engaged in manufacturing of HDPP/PE Bags and one of the leading concerns in this line of business. The ld. CIT DR also drew our attention to the fact that loose papers found during search in this group dated 5.10.2006 showed huge cash loan of Rs. 1.20 crores advanced by it. It was also submitted that huge investment was found in land. The ld. CIT DR also contended that unaccounted cash was given to the Lunkad Group and received back through cheques in various groups of assessees as unsecured loans. Ld. CIT DR also harpened on the income returned by the group concerns of the assessee M/s. Narmada Extrusion Private Limited in assessment year 2002-03 at Rs. 15,96,958/-, in the assessment year 2006-07, the returned income of M/s. Narmada Extrusion Pvt. Limited was Rs. 42,16,870/-. On the other hand, he placed on record the return of income of Lunkad Group M/s. Lunkad Media & Entertainment in assessment year in 2004-05 at Rs. 30
-: 31: -
1,22,110/- and Rs. 14,120/- in the assessment year 2002-03. In view of these submissions, the ld. CIT DR highlighted that the assessee group was financially very sound, earning and declaring huge income, whereas Lunkad Group has no sound business existence and declaring only meager income, therefore, the alleged loan shown to have been given by Lunkad Group was merely an accommodation entry to the assessee after accepting cash from it. He further submitted that even during search, the assessee group has accepted income of Rs. 2 crores and also paid tax thereon, whereas Lunkad Group has surrendered nothing nor paid any tax. Our attention was also invited to unsecured loan remained static at Rs. 4.82 crores in the assessment year 2010-11 and were never paid back to the Lunkad Group. Similarly, share capital in case of Narmada Extrusion Private Limited was Rs. 3.30 crores. He submitted that in case of M/s. Lunkad Group, entire share capital was found to be unexplained because it was received in cash and no details of share applicants was ever furnished by Lunkad Group as is clear form assessment order of M/s. Lunkad Media and Entertainment Limited for 31
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the assessment year 2001-02. In view of these facts, he contended that Mittal Group is a leading business group whereas Lunkad Group is merely an accommodation entry provider earning commission on such accommodation from beneficiaries, out of which Mittal group was one of the beneficiaries. We found that in various different bank account of Lunkad Group in which cash was deposited prior to issue of cheques to the beneficiaries. In some instances, the cheques were not directly issued to the concerned parties, who has given cash but was routed through various concerns of Lunkad Group but ultimately credited in the account of beneficiaries. List of Bank account held by the Lunkad Group was also given in the assessment order where cash is deposited.
12. The ld. CIT(A) in his appellate order in the case of Narmada Extrusion Limited for assessment year 2002-03 relied on his order passed in the case of M/s. Lunkad Media and Entertainment Limited for the assessment year 2004-05, wherein entire addition was sustained by the ld. CIT(A) in the hands of Lunkad Group on the plea that they have failed to 32
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explain source of huge share capital received by them and they have issued confirmation letters to various parties to whom loan was given. Following this decision, the addition of unsecured loan to the assessee Mittal Group including that of Narmada Extrusion Limited were deleted by CIT(A). The CIT(A) observed that since addition made in the hands of Lunkad Group has been sustained on substantive basis in the case of Lunkad Group of Companies, confirming the addition on same issue in the hands of beneficiaries would amount to double addition though in different hands. Accordingly, he deleted the additions so made by the Assessing Officer in the hands of the assessee.
13. On the other hand, the contention of the ld. Authorized Representative was that the assessee has discharged its obligation casted u/s 68, it has paid interest on loan and also deducted tax thereon. Our attention was drawn to the confirmation of unsecured loans creditors, affidavits of Directors of the creditor companies, copy of balance sheet of loan creditors, copy of assessment order passed in the case of Lunkad Securities Limited. In view of these documentary 33
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evidence, he contended that the assessee has discharged its onus of proving not only identity but also genuineness and creditworthiness of loan creditors. He also argued that In view of the C.B.D.T. circular no.1493 dated 18.1.1982, the Department should not have filed the appeals.
14. The contention of the ld. Authorized Representative was as under :-
A) The ld. AO has added entire amount of unsecured loans as received from the Lunkad Group of companies on the basis of alleged cash book found and seized during the course of survey from the premises of Lunkad, whereas during the course of search conducted u/s 132 of the Income-tax Act, 1961, on different premises of the Narmada Extrusions Group nothing incriminating was found and seized.
34
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B) The assessee group during the course of post search inquiry. Search assessment proceeding and Appellate proceeding extended its full cooperation with Income Tax Department and also provided the following information :-
(i) Confirmation of Loan creditors duly signed by them confirming the loan advanced to them.
(ii) Audited final accounts of the
Unsecured loan creditors
highlighting the name of the
assessee.
(iii) Copy of affidavit of the director
of the Loan Creditors
companies confirming the
amount of Loans advanced by
them.
35
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C) The AO himself has not doubted
about the amount as received by the assessee however, the search assessment order was passed in the case of assessee group by the Assessing Officer prior to the survey order passed in the case of Lunkad Group. For this reason, the AO in the case of Assessee group i.e. Narmada Extrusion Group has added entire amount of loan as income of the assessee by treating the same as non-
genuine. That reason for disbelieving the loan amount was the presence of alleged cash book D) That it is settled position of law that the assessee can explain source of its credit however it cannot be expected from the assessee to explain the source of source. The assessee in the 36
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present case has properly explained the source of credit appearing in its books of account and the same was also substantiated with the Confirmation Letters and Balance sheet of the loan creditors. The assessee has filed affidavits simply to reconfirm its contention otherwise it has filed affidavit simply to reconfirm its contention otherwise it has properly discharged its onus by filing the confirmation letter and balance sheet of the loan creditors. Thus, there is no reason to tax the loan amount as received from different companies of the Lunkad Group in the case of the assessee.
E.1) The AO while passing the order in the case of Lunkad Group of companies for survey year after detailed examination of 37
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papers impounded form its premises has added the entire amount of credit as reflected in the Balance sheet and entire credit as shown in the alleged cash book as found from its premises as income of the Lunkad Securities Limited on substantive basis.
E.2) As we understand the assessment order of the survey year was passed with the prior approval of the JCIT/Addl. CIT. That once the Department has taxed the entire credit as reflected in the alleged cash book, in that case there is no reason to tax the loans as received by the assessee group from Lunkad group of companies as its income.
F) That as explained before the Hon'ble Bench at the time of hearing on 21.10.2011 that Mr. Lunkad has
challenged the survey action conducted by 38
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the Income Tax Department before the Hon'ble High Court in its Group. Since, the writ as filed by Lunkad Group is pending before the Hon'ble High court in its matters for the reason he has grievance with the Income Tax Department and, therefore, he is not appearing before the CIT-I, charge Indore in his own cases.
However, he has provided confirmation, affidavit duly notarized and Balance Sheet of its different companies as to justify the amount of loan advanced by his various companies to the assessee group.
G) That cash book as found during the course of survey proceeding was for limited period and in which the name of the person was not written. The Department has considered the same in the case of Lunkad Securities Limited. Copy of order as passed in the case of Lunkad Securities Limited. 39
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has also been filed during the course of hearing on 21.10.2011. That when cash book as found and seized during the course of hearing on 21.10.2011. That when cash book as found and seized during the course of survey was considered in the case of Lunkad Securities Limited and ownership of the said alleged cash book was considered in the case of Lunkad Securities Limited. In that case, there is no justification for making separate addition in the hands of the person, actually receiving the amount of loan from Lunkad group of companies.
H) The ld. CIT(A) simultaneously decided the appeal as filed by the Lunkad Group of also of the assessee. The ld. CIT(A) confirmed the additions in the case of 40
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Lunkad Group of companies and deleted the additions in the case of the assessee company and other members of the Mittal group. List of the appeal of Lunkad Group as discussed by the ld. CIT(A) in his order as passed for the assessment year 202-03 in para 2.2 on page no.5 of the appellate order.
I) That in view of the above and as explained by us vide our earlier submission it is once again submitted that the ld. AO is not right in adding the amount of loan as received by the assessee from Lunkad group of companies even when the assessee has properly discharged onus lying on it.
J) We would also like to draw your honour's kind to the last para in respect of decision of Agrawal Coal Corpn. P.Ltd.(I.T.A.No. 151/Ind/2009) as relied upon by the ld.
CIT DR in his submission dated
41
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21.11.2011 filed before the Hon'ble Bench.
We respectfully like to submit the said decision is in fact in favour of the assessee since the identity of the Lunkad Group is beyond doubt and Department has rather conducted a survey at its premises on 02.05.2006 which confirms the identity of Lunkad Group."
15. First, we take up the preliminary objection raised by the ld. Authorized Representative to the effect that since question of fact has been decided by the CIT(A), the Revenue should not have filed the appeal before the Tribunal. For this purpose, he relied on various circular of C.B.D.T. From the order of the CIT(A), it is clear that he has deleted the addition in the hands of the assessee company on the plea that addition in the hands of creditor company (Lunkad Group) has been confirmed on substantive basis. As per CIT(A), if he confirmed the same addition in the hands of the assessee company, it will amount to double addition in respect of the same amount of income. We found that additions have been made in the 42
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hands of Lunkad Group on the plea that the source of share capital received by them could not be explained. However, addition has been made in the hands of the assessee company on the plea that genuineness of the loan transactions has not been established in view of the incriminating documents found during course of survey at Lunkad Group. Incriminating documents was found pertained to the month of April, 2006, which indicated that Lunkad Group was in receipt of cash from various beneficiaries including assessee and which has again been given to the beneficiaries through cheques. There is no dispute to the well settled legal proposition that in case of cash credit, assessee is not only required to prove the identity of the loan creditor but also the genuineness of transaction of loan as well as capacity of the loan creditor to advance the said amount of loan. In the instant case, there is no dispute to the identity in so far as Lunkad Group is also on Department's record and a survey has been carried out at premises of Lunkad Group. The genuineness of transaction of the loans become doubtful in view of the incriminating documents found during survey at Lunkad Group. Even 43
-: 44: -
though the assessee has filed loan confirmation alongwith affidavit of Director of the creditor company (Lunkad Group) but they could not produce the Director of Lunkad Group to substantiate the contents of affidavit as well as confirmation so filed. The CIT(A) has deleted the addition on the plea of double addition by stating that confirming addition in the hands of assessee company in respect of loans received by it amounts to double addition. In this regard, there is a direct decision of Hon'ble Supreme Court in the case of ITO vs. CH Atchaiah, 218 ITR 239, wherein it was observed that no option has been given under the 1961 Act, and it has been specifically provided that tax has to be levied on right person notwithstanding the fact that the amount has already been added in the hands of some other person. Meaning thereby addition should be made in the hands of the right person and the same cannot be deleted only on the plea that the same amount has been added in the hands of some other person. It was observed by the Supreme Court that there is no option under the 1961 Act, unlike the one given under 1922 Act and the AO must tax the right person and right person only. By 44
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"right person" is meant the person, who is liable to be taxed according to the law with respect to a particular income. The expression "Wrong Person" is obviously used as opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact, which course is more beneficial to the Revenue. A person lawfully liable to be taxed can claim no immunity because the Assessing Officer has taxed the said income in the hands of another person contrary to law. Similar provision has been laid down by the Hon'ble Supreme Court in the case of Smt. Taradevi, 88 ITR
323. The proposition so discussed above as laid down by the Hon'ble Supreme Court has been followed by the I.T.A.T. Special Bench in the case of Pradeep Agencies, 111 TTJ 346.
16. Applying the above proposition of law to the facts of the instant case, we can safely conclude that the ld. CIT(A) was not justified in deleting the addition in the hands of the assessee company merely on the plea that the same amount has been added in the hands of the creditor company. We 45
-: 46: -
found that in case of Lunkad Group addition was made in respect of cash received by it from persons, whose name, address and other particulars could not be furnished before Assessing Officer. This addition is mothering to do with the genuineness of loan received by assessee from Lunkad Group. Before reaching to the third criteria of creditworthiness, assessee have to cross the barrier of genuineness of loan transaction, which has become doubtful in view of the incriminating material found during course of survey at Lunkad Group with regard to receipt of cash from the assessee company and issue of cheque against such cash in favour of the assessee company. Thus, a legally wrong view has been taken by the ld.CIT(A), which made the Department entitled to file an appeal against such order of CIT(A). Thus, there is no merit in the argument of ld. Authorized Representative to the effect that the Department had wrongly come in appeal against the order of CIT(A). As we have reversed the order of CIT(A) with respect to deletion of addition made u/s 68, we also uphold the action of Assessing Officer for disallowing interest expenses and for making addition on account of unexplained 46
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source of expenses incurred for the payment of commission on such accommodation entry.
17. In view of the above discussion, we reverse the order of CIT(A) and allow all the appeals of the Revenue in its favour.
18. Now coming to the cross objections raised by the assessee with regard to confirming act of the Assessing Officer in making addition in the case of the assessees in respect of cash credit even where the entire amount of cash credits were duly recorded in the regular books of account prior to the search and no incriminating documents were found and seized from the possession of the assessee. Accordingly, the additions made in the hands of the assessee in respect of the cash credit were contended to be not justified.
19. We have considered the rival contentions and found from record that the assessee company has taken loan from Lunkad group since assessment year 2002-03 onwards. Not only loan was taken but it was also repaid either during the year or in subsequent year. The assessee has taken loan through account payee cheques as per its business requirement, paid interest thereon and also deducted TDS on such interest 47
-: 48: -
payment. In all these years, the assessee had filed loan confirmation letters. These loan transactions have been accepted by the Department either u/s 143(1) or 143(3) of the Income-tax Act, 1961. The whole problem arose due to the survey at business premises of Lunkad Group on 2.5.2006, wherein certain documents for the month of April, 2006, was found and impounded, which indicated that Lunkad Group had received cash from various persons including assessee. Even though full name of assessee was not mentioned on the papers so impounded but the Assessing Officer inferred that name of "Narmada" as relating to assessee company, namely, "Narmada Extrusion Limited". The Lunkad Group was asked to explain these incriminating documents indicating receipt of cash from various parties, but the Lunkad Group could not explain the same and dispute arose between the Lunkad Group and Department with regard to survey conducted at Lunkad Group. The Lunkad Group has also filed a writ petition in the M.P.High Court against the Department for the survey so conducted and the records so impounded. This writ petition is still pending in the Court. It was also brought to our 48
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notice that High Court has directed for issue of copy of documents so impounded alongwith copy of books of accounts to Lunkad Group, but as per assertion of Lunkad Group, the same have still not been furnished to it. When the assessment of the assessee company was framed with respect of the search conducted at business premises u/s 153A on 5.10.2006, the Department found that the assessee group had also taken loans from Lunkad Group. The assessee was again asked during proceedings u/s 153A to substantiate the loan transaction for which the assessee had furnished confirmation letter as well as affidavits of creditors. The Department also asked to produce the Director of Lunkad Group before them.
The assessee had produced loan confirmation letters and affidavit of Lunkad Group to substantiate the loan transaction, but the assessee failed to produce the Directors of Lunkad Group in person. Under these circumstances, the Department has taken a view that all the transaction of loan starting from financial year 2001-02 till date of search were not genuine and it was assessee's own money, which has been given back to the assessee in the form of loan entry. Here the contention of 49
-: 50: -
the ld. Authorized Representative was that Mr.Lunkad had challenged the survey action conducted by Income Tax Department before the Hon'ble High Court. Since the writ as filed by Lunkad Group is pending before the Hon'ble High Court for the reasons he has grievance with the Income Tax Department. Due to dispute of Lunkad Group with Department and pendency of writ petition in the Hon'ble High Court, assessee could not persuade the Lunkad Group to appear in person before the Department. His further contention was that impounded document from Lunkad Group only pertained to the month of April, 2006, and there was no incriminating material for any period other than month of April, 2006, indicating that the assessee has given any cash to Lunkad Group for taking loan entry from 1.4.2001 to 31.3.2007. He further contended that at the most additions could be made only with respect to the entries in the impounded documents, which indicated any cash being given by the assessee to Lunkad Group and not beyond it. He further contended that Assessing Officer had no where related the cash entries on these documents as having been deposited 50
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in bank account for issue of cheque to assessee, nor made any efforts to relate such cash deposit as having been utilized for issue of cheque in assessee's favour nor anything was brought on record by Assessing Officer suggesting return of cash to assessee whenever assessee had repaid the loan so taken from Lunkad Group. On the other hand, contention of the ld. CIT DR was that incriminating documents as mentioned by Assessing Officer in his assessment order even though pertained to one month, it indicated the modus operandi of Lunkad Group for advancing loans to the assessee , therefore, the Department has applied the same conclusion even with respect to the loans, which were taken and also repaid in earlier years for which no incriminating document was found either at the business premises of the assessee or at Lunkad Group.
20. After analyzing all the documents placed on record, we found that additions have been made by Assessing Officer in respect of all the loans which even though taken and repaid by assessee in earlier years starting from 1.4.2001. Conention of Assessing Officer was that since the assessee could not 51
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produce the creditor in person, therefore, the confirmation and the affidavits filed by the creditors cannot be relied upon. We found that all the necessary documentary evidence to substantiate the loan transaction have been filed by the assessee, which indicated receipt and repayment of loan, payment of interest thereon and deduction of tax at source in respect of the interest paid thereon. It appears that due to the dispute between the Department and the Lunkad Group and the writ petition filed by Lunkad Group in the High Court, assessee could not persuade the Lunkad Group to appear in person before the Department. It is also not in dispute that no incriminating document was found by Department in assessee's premises either during course of search or on subsequent inquiry suggesting any cash given by assessee to Lunkad Group in consideration of loans so taken nor receipt of any cash whenever there was repayment of loan by assessee to Lunkad Group. Under these circumstances and in the interest of justice, one more opportunity should be given to assessee for producing the loan creditor for confirming the contents of confirmation and affidavits so filed. Keeping in view 52
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incriminating documents found during the course of survey at Lunkad Group for the period 1.4.2006 to 1.5.2006 pertaining to the assessment year 2007-08, even though related to one month only, the Department was justified in making addition in the hands of the assessee company in the assessment year 2007-08 by disbelieving the loan transactions. As per our considered view, addition should be made with respect to the amount of cash found to be given by the assessee to the Lunkad Group as per incriminating documents so found at Lunkad Group during survey after giving opportunity to assessee for cross examination. Mere presumptions without any material on record to the effect that even in respect of all the earlier years, the assessee might have given cash to the Lunkad Group for getting unsecured loan, is not justified. All the loans were received by assessee through account payee cheques and also repaid through account payee cheques. Assessee had also filed even confirmation letters and affidavits to substantiate the loan transactions. Only because of incriminating document pertaining to period 1.4.2006 to 1.5.2006, the Department doubted the genuineness of all the 53
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loan transactions pertaining to period starting from 1.4.2001 to 31.3.2007. Before making addition or disallowing the cash credit, on the plea of genuineness, the Department is required to bring on record some evidence to indicate that the assessee has paid cash in consideration of the cheques so issued. Without any evidence, much less a cogent evidence, it is not legally justified to doubt the genuineness of loan transaction or make addition in the hands of the assessee company for which no material much less a cogent material is in possession of Department. In the interest of justice and fair play, we restore the grounds raised by the assessee in the cross objection to the file of the Assessing Officer for deciding afresh in terms of our above discussion and as per law.
21. Notwithstanding the above, as per our considered opinion, the addition in the hands of assessee company should be restricted with respect to the peak amount of loan outstanding during the entire period ranging from 1.4.2001 to 31.3.2007, rather than taking total of the loans received and paid back. Since the transactions pertains to taking the loan and repaying the same, again taking the loan and repaying the same, total of all these transactions cannot be said to be unaccounted money of the assessee. For example, if the 54
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assessee had unaccounted money of Rs. 2 lakhs by paying which he gets the loan entry, after sometime if the assessee gets back cash by reversing the loan entry, same cash is available to him for any further transaction unless the Department brings any material on record to say that the cash so available has been spent somewhere else and not available with assessee for further routing as a loan transaction. In all these years, the assessee had taken loan and again repaid the same, therefore, the addition should be made only to the extent of peak amount of loan outstanding at any point of time falling during the period starting from 1.4.2001 to 31.3.2007. The Assessing Officer has prepared annexure I, which is forming part of its assessment order in case of Narmada Extrustion indicating party-wise and assessment-wise details of peak credit in respect of loans from Lunkad Group of companies. As per Annexure I, we found that the peak amount of loan was in the assessment year 2005-06 amounting to Rs. 2.58 crores, however, the total addition in respect of total peak credit as made by the Assessing Officer amounts to Rs.
7,59,50,000/- starting from assessment year 2002-03 to 2007-08. Thus, as per this Annexure the peak amount of the credit was Rs. 2.58 crores. The peak credit of Rs. 2.58 lacs as mentioned by Assessing Officer in Annexure I appears to be wrong. In the paper book, we find one more date-wise statement of loan taken by the assessee (Narmada Extrusions Limited) from various Lunkad Group Companies starting from 55
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10th July, 2001 to 31st March, 2007. As per this statement, the peak amount of loan is Rs. 6,44,37,338/- as on 29th June, 2006. We, therefore, direct the Assessing Officer to reverify and recompute the peak amount of loan and to restrict the addition to the extent of peak amount of the loan. We direct accordingly.
22. In the result, all the appeals of the Revenue are allowed, whereas cross objections are allowed in part for statistical purposes, in terms indicated hereinabove.
This order has been pronounced in the open court on 30th December, 2011.
(JOGINDER SINGH) ( R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 30th December, 2011.
CPU*
2912
56