JAICO TEXTILES P.LTD, MUMBAI v. ITO 9(2)(1), MUMBAI

ITA 6368/MUM/2014 | 2010-2011
Pronouncement Date: 28-09-2016 | Result: Allowed

Appeal Details

RSA Number 636819914 RSA 2014
Assessee PAN AAACJ3155A
Bench Mumbai
Appeal Number ITA 6368/MUM/2014
Duration Of Justice 1 year(s) 11 month(s) 14 day(s)
Appellant JAICO TEXTILES P.LTD, MUMBAI
Respondent ITO 9(2)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 28-09-2016
Assessment Year 2010-2011
Appeal Filed On 14-10-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO.6368/M/2014 ASSESSMENT YEAR: 2010-11 M/S. JAICO TEXTILES PVT. LTD. 329 SANDESARA HOUSE JAWAHAR NAGAR GOREGAON (WEST) MUMBAI 400 062 PAN: AAACJ 3155A VS. INCOME TAX OFFICER 9(2)(1) 225 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SUNIL M. LALA A.R. REVENUE BY : SHRI ALOK JOHRI D.R. DATE OF HEARING : 30.06.2016 DATE OF PRONOUNCEMENT : 28.09.2016 O R D E R PER SANJAY GARG JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 02.09.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE SOLE ISSUE AGITATED BY THE ASSESSEE THROUGH ITS GROUNDS OF APPEAL IS REGARDING THE CONFIRMATION OF ADDITION OF RS.26 02 00 000/- MADE BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) UNDER SECTION 68 OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAD SHOWN SUBSTANTIA L UNSECURED LOAN TO THE EXTENT OF RS.26 02 00 000/- AND HAD INVESTED THE SA ME WITH GROUP CONCERN M/S. STERLING OIL RESERVES LTD. THE ASSESSEE WAS THEREF ORE ASKED TO EXPLAIN THE GENUINENESS OF LOAN AND ALSO TO ESTABLISH THE IDENT ITY AND CREDITWORTHINESS OF THE CREDITORS. THE ASSESSEE EXPLAINED THAT DURING THE RELEVANT YEAR THE ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 2 ASSESSEE RECEIVED UNSECURED LOANS AMOUNTING TO RS.2 6.02 CRORES. THE ASSESSEE RECEIVED FUNDS FROM TWO COMPANIES NAMELY VED INVES TMENTS LTD. AND NIRANWAL CREDIT AND HOLDING PVT. LTD. AND THAT THIS FACT WAS ALSO EVIDENT FROM ITS BANK ACCOUNT. THE RECEIPT OF LOAN WAS RECORDED IN THE BOOKS OF THE ASSESSEE IN THE NAME OF FLAIR AND WISDOM PURSUANT TO REQUES T LETTERS ISSUED TO THE ASSESSEE BY VED INVESTMENTS LTD. AND NIRANWAL CREDI T AND HOLDING PVT. LTD. ASKING THE ASSESSEE TO RECORD THE LOANS IN FLAIR AN D WISDOMS NAMES IN VIEW OF THE RESPECTIVE SCHEMES OF AMALGAMATION. THE AO HO WEVER OBSERVED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. HE OBSERVED THAT THOUGH THE LOAN WAS APPEARING IN THE NAME OF FLAIR ENGINEERING PVT. LTD. AND WISDOM ENGINEERING PVT. LTD. HOWEVER THESE TWO COMPANIES HAD BEEN FLOATED FOR ROTATING THE ACCOMMODATION ENT RIES IN QUESTION. THE DIRECTORS OF THE SAID COMPANIES WERE MEN OF MEAGER MEANS. FURTHER THE CLAIM OF THE ASSESSEE THAT SUCH AMOUNT OF RS.26.02 CRORE WAS RECEIVED FROM VED INVESTMENTS AND TRADING COMPANY PVT. LTD. AND NIRAN WAL CREDIT AND HOLDING PVT. LTD. WAS FOUND TO BE FALSE BECAUSE ASSESSEE HA D FAILED TO ESTABLISH THE LEGAL IDENTITY OF SUCH COMPANIES. HE OBSERVED THAT THE ADDRESSES OF THESE COMPANIES GIVEN TO REGISTRAR OF COMPANIES WERE APPA RENTLY DUBIOUS ONE; THAT THE PERSONS RELATED TO THE ASSESSEE COMPANY WERE TH E INTRODUCERS AT THE TIME OF OPENING OF THE BANK ACCOUNTS OF VED INVESTMENTS AND TRADING COMPANY PVT. LTD.; THAT IN THE ANNUAL REPORT SUBMITTED IN THE NA ME OF VED INVESTMENTS LTD. AND NIRANWAL CREDIT AND HOLDING PVT. LTD. TO THE RE GISTRAR OF COMPANIES THERE WAS NO MENTION OF ADVANCE GIVEN TO THE ASSESSEE COM PANY; THAT SUCH LOAN OF RS.26.02 CRORE SHOWN TO HAVE BEEN TAKEN FROM FLAIR ENGINEERING PVT. LTD. AND WISDOM ENGINEERING PVT. LTD. OR IN THE NAME OF VED INVESTMENTS AND TRADING COMPANY PVT. LTD. OR NIRANWAL CREDIT AND HOLDING PV T. LTD. WAS NOT FROM ANY EXPLAINED SOURCE NOR WAS THERE ANY GENUINE TRANSACT ION; THAT THE PROPER IDENTITY OF SUCH PARTIES HAD ALSO NOT BEEN ESTABLISHED. THE AO THEREFORE FOUND THAT ALL THESE COMPANIES H AD BEEN FLOATED IN CONNIVANCE WITH EACH OTHER TO CHANNELIZE BLACK MONE Y THROUGH BANK AND ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 3 UTILIZE THE SAME BY GIVING WHITE COLOUR BY WAY OF F ILING RETURN OF INCOME FILING ANNUAL A/C WITH ROC AND BY FILING OF OTHER R ELATED DOCUMENTS. THE AO CAME TO THE CONCLUSION THAT THESE COMPANIES HAD BEE N FLOATED FOR ENTRY OPERATION AND DID NOT HAVE ANY BUSINESS OF THEIR OW N. ALL THE MONEY APPEARING IN THEIR BANK ACCOUNTS ORIGINATED FROM SOME OTHER A CCOUNTS. HE HELD THAT THE ASSESSEE HAD INTRODUCED ITS OWN UNACCOUNTED FUNDS/I NCOME IN THE NAME OF THESE FLOATED COMPANIES. HE THEREFORE MADE ADDIT ION OF THE ABOVE AMOUNT INTO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CRED ITS UNDER SECTION 68 OF THE ACT. 4. BEING AGGRIEVED BY THE ABOVE ORDER THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). HOWEVER THE LD. CIT(A) HELD THAT THE AO HAD MADE ADEQUATE ENQUIRIES TO UNEARTH THE TRUTH AND THAT TH E ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTH INESS OF THE CREDITORS. HE THEREFORE CONFIRMED THE ADDITIONS SO MADE BY THE A O. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE HAS COME IN A PPEAL BEFORE US. 5. THE LD. A.R. OF THE ASSESSEE BEFORE US HAS SUB MITTED THAT THE ASSESSEE HAS HAD SUBMITTED THE BANK STATEMENTS CONFIRMATION S ITR PAN AMALGAMATION REQUEST LETTERS LEDGER ACCOUNTS FINA NCIALS GROUPING OF ASSETS AND LIABILITIES AND THE SCHEME OF AMALGAMATION OF A LL PARTIES INVOLVED IN THE LOAN TRANSACTION. EVEN THE PARTIES HAD RESPONDED TO NOTICES ISSUED U/S 133(6)OF THE ACT. IN RESPECT OF LOAN TAKEN FROM VED/WISDOM AMOUNTING TO RS.16.02 CRORES THE ASSESSEE EXPLAINED THAT THE NAME OF THE ASSESSEE WAS NOT REFLECTED IN THE BALANCE SHEET OF VED IN VIEW OF THE LETTER RECE IVED BY THE ASSESSEE FROM VED COUNTER SIGNED BY WISDOM WHEREIN VED REQUESTE D THE ASSESSEE TO RECORD THE LOAN TRANSACTION IN THE NAME OF WISDOM DUE TO T HE IMPENDING AMALGAMATION BETWEEN VED AND WISDOM. FURTHER THE PAYING PARTY VIZ. VED HAD RECEIVED FUNDS FROM 4 COMPANIES VIZ. AIM INFRAS TRUCTURE PVT. LTD. POWERLINKS PROJECTS & ENGINEERING PVT. LTD. RELISH INFRASTRUCTURE PVT. LTD. AND SHINY INFRASTRUCTURE PVT. LTD. WHICH IN TURN W AS FURTHER PAID TO THE ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 4 ASSESSEE. SINCE VED WAS TO BE AMALGAMATED WITH WIS DOM THE BALANCE IN THE ACCOUNTS OF THESE FOUR PARTIES ALONG WITH THE BALAN CE IN THE ACCOUNT OF THE ASSESSEE WAS TRANSFERRED TO THE ACCOUNT OF WISDOM WHICH HAS BEEN REFLECTED IN THE GROUPING OF ASSETS AND LIABILITIES OF BOTH THES E COMPANIES. IN RESPECT OF LOAN TAKEN FROM FLAIR ENGINEERING PVT. LTD. AND NIR ANWAL CREDIT AND HOLDING PVT. LTD. AMOUNTING TO RS.10 CRORES THE LD. A.R. E XPLAINED THAT THE NAME OF THE ASSESSEE WAS NOT REFLECTED IN THE BALANCE SHEET OF NIRANWAL IN VIEW OF THE LETTER RECEIVED BY THE ASSESSEE FROM NIRANWAL COUN TER SIGNED BY FLAIR WHEREIN NIRANWAL REQUESTED THE ASSESSEE TO RECORD THE LOAN TRANSACTION IN THE NAME OF FLAIR DUE TO THE IMPENDING AMALGAMATION BETWEEN NIR ANWAL AND FLAIR. FURTHER THE PAYING PARTY VIZ. NIRANWAL HAD RECEIVE D FUNDS FROM SULABHYA ENGINEERING PVT. LTD. SINCE NIRANWAL WAS TO BE AMA LGAMATED WITH FLAIR THE BALANCE IN THE ACCOUNT OF SULABHYA ALONG WITH THE B ALANCE IN THE ACCOUNT OF THE ASSESSEE WAS TRANSFERRED TO THE BOOKS OF FLAIR WHI CH HAS BEEN REFLECTED IN THE GROUPING OF ASSETS AND LIABILITIES OF BOTH THESE CO MPANIES. HE HAS THEREFORE STRESSED THAT DUE TO THE AMALGAMATION BETWEEN NIRAN WAL AND FLAIR THE ACCOUNTS OF THE CREDITORS AND DEBTORS IN NIRANWALS BOOKS WERE SQUARED OFF AND TRANSFERRED TO FLAIR AND THEREFORE MERELY BECAUSE T HE NAME OF THE ASSESSEE WAS NOT REFLECTED ON THE FACE OF THE BALANCE SHEET OF N IRANWAL THE GENUINENESS OF THE LOAN TAKEN BY THE ASSESSEE COULD NOT BE DOUBTED . HE HAS FURTHER SUBMITTED THAT THE ASSESSMENT ORDERS HAD BEEN PASSED UNDER SE CTION 143(3) OF THE ACT IN THE CASE OF VED FLAIR & NIRANWAL AND A NOTICE UNDE R SECTION 148 OF THE ACT HAS BEEN ISSUED IN THE CASE OF WISDOM. THOUGH AS P ER SETTLED LAW THE ASSESSEE IS NOT OBLIGED TO EXPLAIN THE SOURCE OF SOURCE THE ASSESSEE HAS SUBMITTED THE BANK STATEMENTS ITR PAN LEDGER ACCOUNTS FINANCI ALS EVEN OF THE SOURCE OF SOURCE IN ITS PAPER BOOK. FURTHER THAT NONE OF IT S BANK STATEMENTS OR THE BANK STATEMENTS OF THE PARTIES INVOLVED REFLECT THE LOAN AS A CASH DEPOSIT AND THAT THE LOAN RECEIVED BY THE ASSESSEE FROM ITS LENDERS HAS TRAVELLED THROUGH BANKING CHANNELS WHICH ARE HIGHLY REGULATED. FURTHER THE FACT THAT THE NAME OF THE ASSESSEE HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNT S OF WISDOM AND FLAIR ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 5 SHOWS THAT THE LENDERS HAD THE CAPACITY TO LEND. I N SUPPORT OF THE ABOVE HE HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS: 1. CIT V TANIA INVESTMENT P. LTD. (2010) 322 ITR 3 94 (BOM) 2. YAMUNA SYNTHETICS PVT. LTD. (2004) 3 SOT 35 (DE L) THE LD. COUNSEL THEREFORE HAS SUBMITTED THAT AS P ER SETTLED LAW THE ONUS OF THE ASSESSEE UNDER SECTION 68 OF THE ACT IS DISCHAR GED WHEN THE ASSESSEE PROVES THE IDENTITY OF CREDITORS CREDITWORTHINESS/CAPACIT Y OF CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS. HE HAS FURTHER CO NTENDED THAT COURTS HAVE CONSISTENTLY HELD THAT WHERE THE ASSESSEE SUBMITS T HE NAME ADDRESS PAN AND CONFIRMATION OF THE CREDITORS THE ONUS UNDER SECTI ON 68 OF THE ACT GETS DISCHARGED AND NO ADDITION CAN BE MADE. THE LD. CO UNSEL RELIED UPON VARIOUS CASE LAWS TO STRESS THAT WHERE THE ASSESSEE WHO IS THE RECIPIENT OF AN UNSECURED LOAN FURNISHES THE PAN OF ITS CREDITORS CONFIRMAT IONS ISSUED BY THE CREDITORS AFFIRMING THE GRANT OF LOAN THEIR INCOME TAX RETUR NS/ACKNOWLEDGEMENT OF FILING INCOME TAX RETURNS BANK STATEMENTS AND BALANCE SHE ETS (WHEREIN ALL CORRESPONDING TRANSACTIONS WERE RECORDED) HE IS CO NSIDERED TO HAVE SUCCESSFULLY DISCHARGED HIS ONUS UNDER SECTION 68 O F THE ACT AND NOTWITHSTANDING NON-APPEARANCE OF THE CREDITORS NO ADDITION CAN BE MADE UNDER THE SAID SECTION. FURTHER THAT WHERE THE BOO KS OF ACCOUNTS OF THE CREDITORS RECORDED THE CORRESPONDING ENTRIES OF CRE DITS THE BOOKS OF ACCOUNTS ITSELF WOULD INDICATE CAPACITY OF THE PARTY TO ADVA NCE LOAN AND THERE WAS NO FURTHER NEED FOR THE ASSESSEE TO PROVE CAPACITY OF THE CREDITORS. HE IN THIS RESPECT HAS FURTHER RELIED UPON THE FOLLOWING CASE LAWS: 1. CIT VS. DHARAMDEV FINANCE PVT. LTD. (2014) 43 TA XMANN.COM 395 (GUJ) 2. ACIT VS. SANJAY M JHAVERI (2015) 61 TAXMANN.COM 28 (MUM) 3. CIT V TANIA INVESTMENT P. LTD. (2010) 322 ITR 39 4 (BOM) 4. CIT V PITHAMPUR CONZIMA P LTD. (2000) 112 TAXMAN 353 (MP) 5. CIT V MEERA ENGG & COMMERCIAL CO. P. LTD. (1998) 96 TAXMAN 234 (JABALPUR) (MAG) 6. KAMAL ENGINEERING WORKS V ITO (1995) 52 TTJ 75 ( DEL) 7. GG FILMS V ITO (1993) 45 TTJ 0644 8. SUBBIAH RAMANATHAN AND RM JANAKI V ITO TS-352-IT AT-2015 (CHNY) ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 6 9. DCIT V OVERSEAS INFRASTRUCTURE ALLIANCE (I) PVT. LTD. (ITA NO.1470/MUM/2011) THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMI TTED THAT IN ORDER TO FASTEN LIABILITY ON THE ASSESSEE BY INCLUDING SUCH CREDITS AS INCOME FROM UNEXPLAINED SOURCE A NEXUS HAS TO BE ESTABLISHED T HAT THE SOURCES OF CREDITORS DEPOSIT FLOW FROM THE ASSESSEE. IN THE ABSENCE OF ANY SUCH LINK ADDITIONS OF CASH CREDITS FOUND IN THE BOOKS OF ACCOUNT OF THE A SSESSEE COULD NOT BE CONSIDERED TO BE UNEXPLAINED INCOME OF THE ASSESSEE . THAT WHERE THE AO HAS DRAWN ADVERSE INFERENCE FINDING SOME DISCREPANCIES THE ISSUE COULD NOT BE CONVERTED INTO AN ADDITION OF INCOME UNDER SECTION 68 OF THE ACT IN THE HANDS OF THE ASSESSEE AND APPROPRIATE CAUSE WAS THAT THE AO OF THE ASSESSEE COULD HAVE INFORMED THE CONCERNED ASSESSING OFFICER ASSE SSING THE RESPECTIVE CASH CREDITORS FOR APPROPRIATE ACTION IN THEIR CASE. HE IN THIS RESPECT HAD RELIED UPON THE FOLLOWING CASE LAWS: 1. ARAVALI TRADING CO. V ITO (2010) 187 TAXMAN 338 (RA J) 2. CIT V. JAI KUMAR BAKLIWAL (2014) 45 TAXMANN.COM 203 (RAJ) 3. CIT V METACHEM INDUSTRIES (2001) 116 TAXMAN 572 (MP ) 4. JAWAHAR LAL V ITO (2014) 35 ITR (TRIB) 0071 (CHAND) 6. THE LD. D.R. ON THE OTHER HAND HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES AND HAS VEHEMENTLY STRESSED THAT THE AO HAD MADE INQUIRIES AND HAD COME TO THE CONCLUSION THAT THE CREDITORS C OMPANIES WERE PAPER ENTITIES OF THE ASSESSEE AND THAT THE MONEY WAS INT RODUCED BY THE ASSESSEE FIRSTLY INTO THE PAPER COMPANIES AND THEN TRAVELLED TO THE ASSESSEE COMPANY THROUGH BANKING CHANNEL. HE THEREFORE HAS STRESS ED THAT THE AO HAD RIGHTLY MADE ADDITIONS IN THE HANDS OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE ASSESSING OFFICER (HEREINAFTER REFERRE D TO AS THE AO) IN THIS CASE HAS TREATED THE TRANSACTIONS OF LOAN BY THE ASSESSE E AS SHAM TRANSACTIONS FOR THE TWO REASONS I.E. NON ESTABLISHMENT OF THE GENUINENE SS OF TRANSACTIONS AND SECONDLY FOR NOT PROVING THE CREDITWORTHINESS OF T HE CREDITORS. ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 7 SO FAR AS THE GENUINENESS OF THE TRANSACTIONS IS CO NCERNED AS SUBMITTED BY THE LD. A.R. ALL THE FUNDS WERE TRANSFERRED TO THE ASSESSEE THROUGH BANKING CHANNEL CONFIRMATION FROM THE RESPECTIVE PARTIES H AVE ALSO BEEN FILED THE PARTIES HAVE RESPONDED TO THE SUMMONS ISSUED UNDER SECTION 133 OF THE ACT BY THE AO THEIR PAN NUMBER AND COPY OF INCOME TAX RET URNS HAVE ALSO BEEN SUBMITTED. THE AMOUNT ADVANCED TO THE ASSESSEE HAS ALSO BEEN REFLECTED IN THEIR BOOKS. THE MORE PECULIAR FACT IS THAT THERE WAS NO CASH DEPOSITED IN THE ACCOUNTS OF THE CREDITORS. THE CREDITORS HAVE ALSO EXPLAINED THEIR SOURCE. THE ASSESSEE HAS ALSO PRODUCED EVIDENCES REGARDING THE AMALGAMATION OF THE VED INVESTMENTS AND TRADING COMPANY PVT. AND NIRANWAL C REDIT AND HOLDING PVT. INTO WISDOM ENGINEERING PVT. LTD. AND FLAIR ENGINEE RING PVT. LTD. RESPECTIVELY. THE ASSESSEE THEREFORE HAS EXPLAINED THE REASONS FOR RECORDING THE NAME OF CREDITORS AS WISDOM ENGINEERING PVT. LT D. AND FLAIR ENGINEERING PVT. LTD. IN ITS BOOKS OF ACCOUNT. SO FAR AS CREDITWORTHINESS OF THE OF THE CREDITOR C OMPANIES IS CONCERNED IT HAS BEEN EXPLAINED THAT THE CREDITOR COMPANIES A RE LEGAL ENTITIES AND ARE ALREADY ASSESSED TO INCOME TAX. THE LD. COUNSEL FO R THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER DATED 30.03.1 5 PASSED UNDER SECTION 143(3) OF THE ACT IN THE CASE OF VED INVESTMENTS AN D TRADING COMPANY PVT. WHEREIN AN AMOUNT OF RS.16 02 00 000/- HAS BEEN ADD ED INTO THE INCOME OF THE SAID COMPANY UNDER SECTION 69A OF THE ACT FOR THE A .Y. 2010-11. THE LD. A.R. OF THE ASSESSEE HAS FURTHER BROUGHT OUR ATTENT ION TO THE ASSESSMENT ORDER DATED 03.03.15 IN THE CASE OF FLAIR ENGINEERING PVT . LTD. PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT VIDE WHICH AN ADDITION UNDER SECTION 68 OF THE ACT OF AN AMOUNT OF RS.20 00 00 000/- HAS BEEN MADE IN THE HANDS OF THE FLAIR ENGINEERING PVT. LTD. FOR A.Y. 2010-11. IN THE CASE OF NIRANWAL CREDIT AND HOLDING PVT. THE ASSESSMENT HAD BEEN CO MPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT FOR A.Y. 20 10-11 AND ADDITION OF RS.20 00 00 000/- HAS BEEN MADE BY THE AO. IN THE C ASE OF OTHER PARTY I.E. WISDOM ENGINEERING PVT. LTD. THE LD. COUNSEL HAS IN VITED OUR ATTENTION TO THE ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 8 NOTICE UNDER SECTION 147 OF THE ACT DATED 29.03.16 ISSUED IN THE NAME OF WISDOM ENGINEERING PVT. LTD. AND HAS STATED THAT AS SESSMENT IN THE CASE OF SAID COMPANY HAS BEEN REOPENED AND THE REASSESSMENT PROCEEDINGS ARE IN PROGRESS. THE CONTENTION OF THE LD. COUNSEL IN THIS RESPECT HAS BEEN THAT ALL THE CREDITOR COMPANIES ARE ASSESSED TO INCOME TAX THE ASSESSMENT IN THEIR CASE HAS BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT CERTAIN AMOUNTS WERE FOUND CREDITED IN THEIR ACCOUNTS REGARDING WHICH TH E AO HAD ALSO MADE ADDITIONS. THOUGH THE SAID CREDITORS HAVE THEIR RIG HT TO CHALLENGE OR CONTEST THE ADDITIONS MADE IN THEIR HAND BUT ONE THING IS PROVE D THAT THE SAID CREDITORS WERE HAVING SUFFICIENT CREDIT/FINANCES IN THEIR ACC OUNTS WHICH FACT HAS BEEN PROVED FROM THE FACT THAT THE ADDITIONS HAVE BEEN M ADE BY THEIR RESPECTIVE AOS IN THEIR HANDS. THE SAID CREDITORS HAVE CREDITED T HE IMPUGNED AMOUNTS TO THE ASSESSEE THROUGH BANKING CHANNEL. MOREOVER THE AS SESSEE HAS ALSO EXPLAINED THE SOURCE OF THE CREDITORS ALSO. HE HAS INVITED O UR ATTENTION TO A TABLE TO SHOW THAT AN AMOUNT OF RS.10 CRORES HAD BEEN ADVANCED BY NIRANWAL CREDIT AND HOLDING PVT. TO THE ASSESSEE. THE SAID NIRANWAL CR EDIT AND HOLDING PVT. HAD AMALGAMATED WITH FLAIR ENGINEERING PVT. LTD. AND FU RTHER THAT THE SOURCE OF THIS RS.10 CRORES WAS THE AMOUNT RECEIVED FROM SULA BHYA ENGINEERING PVT. LTD. SIMILARLY AN AMOUNT OF RS.16.02 CRORES WAS A DVANCED TO THE ASSESSEE BY VED INVESTMENTS AND TRADING COMPANY PVT. WHICH HAS AMALGAMATED WITH WISDOM ENGINEERING PVT. LTD. THE ASSESSEE HAS ALSO EXPLAINED THE SOURCE OF CREDITS IN THE ACCOUNT OF VED INVESTMENTS. THOUGH THE AO HAD MADE THOROUGH INVESTIGATIONS BUT THE AO COULD NOT ESTABLISH A LIN K THAT THE MONEY HAD ACTUALLY TRAVELLED FROM THE ASSESSEE TO THE CREDITORS OR EVE N TO THEIR SOURCE COMPANIES. UNDER SUCH CIRCUMSTANCES SO FAR AS THE CREDITWORTH INESS OF THE CREDITORS OF THE ASSESSEE WAS CONCERNED THE SAME IS ESTABLISHED ON THE FILE. WHEN THE ASSESSEE HAS PROVED THAT THE MONEY HAS BEEN CREDITED TO THE ACCOUNT OF ASSESSEE THROUGH BANKING CHANNEL THROUGH LEGAL ENTITIES WHO ARE ASS ESSED TO INCOME TAX AND THEIR ASSESSMENT HAS ALSO BEEN COMPLETED UNDER SCRU TINY ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND THE SAID COMPANIES WERE ALSO ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 9 FOUND TO HAVE POSSESSED OF SUFFICIENT AMOUNT IN THE IR ACCOUNTS THEN UNDER SUCH CIRCUMSTANCES THE ASSESSEE HAS DISCHARGED THE BURDEN ON ITS PART. ONCE THE ASSESSEE HAS DISCHARGED THE BURDEN ON ITS PART THE BURDEN SHIFTS UPON THE AO TO PROVE THAT THE FUNDS HAVE TRAVELLED FROM THE HANDS OF THE ASSESSEE. THE AO HOWEVER HAS FAILED TO ESTABLISH THE LINK OR TH E CHAIN OR ROUTE OF FUNDS FROM THE ASSESSEE TO THE CREDITORS OR EVEN TO THEIR SOURCE DESPITE ADEQUATE INVESTIGATIONS. THE HONBLE RAJASTHAN HIGH COURT I N THE CASE OF ARAVALI TRADING COMPANY (SUPRA) HAS HELD THAT ONCE THE EXI STENCE OF PERSONS IN WHOSE NAMES CREDITS ARE FOUND IN THE BOOKS OF THE A SSESSEE IS PROVED AND SUCH PERSONS OWN SUCH CREDITS WITH ASSESSEE ASSESSEE IS NOT REQUIRED TO PROVE SOURCE FROM WHICH CREDITORS COULD HAVE ACQUIRED MON EY TO BE DEPOSITED WITH IT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE RAJ ASTHAN HIGH COURT IN THE CASE OF JAI KUMAR BAKLIWAL (SUPRA). IN THE CASE OF DHARMADEVI FINANCE PVT. LTD. THE HONBLE GUJARAT HIGH COURT HAS OBSER VED THAT WHERE IT WAS FOUND THAT IN RESPECT OF THE CREDITORS THE ASSESSEE HAD FILED PAN OF CREDITORS THEIR CONFIRMATION AND THEIR BANK STATEMENT WHICH E STABLISHED THEIR CREDITWORTHINESS AND THE TRANSACTIONS WERE MADE THR OUGH BANKING CHANNEL THEN ADDITIONS UNDER SECTION 68 CANNOT BE MADE IN THE HA NDS OF THAT ASSESSEE. ALMOST SIMILAR OBSERVATIONS HAVE BEEN MADE BY THE D IFFERENT HONBLE HIGH COURTS IN VARIOUS DECISIONS AS RELIED UPON BY THE L D. A.R. OF THE ASSESSEE AS MENTIONED ABOVE. THOUGH THE LD. D.R. HAS RELIED U PON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJ MAN DIR ESTATES PVT. LTD. VS. CIT GA NO.509/2016 DECIDED VIDE ORDER DATED 13.05. 16 WHEREIN THE ISSUE WAS REGARDING THE SOURCE OF SHARE APPLICATION MONEY . THE HONBLE CALCUTTA HIGH COURT HAS CONSIDERED VARIOUS FACTS AND CIRCUMS TANCES THAT WHEREIN THE CREDITORS COULD NOT DISCLOSE THE NATURE OF RECEIPTS AT THEIR END AND THE MATCHING AMOUNTS WERE DEPOSITED INTO THE ACCOUNTS OF THE SUB SCRIBERS SHORTLY BEFORE THE CHEQUES ISSUED IN FAVOUR OF THE ASSESSEE WERE PRESE NTED FOR COLLECTION. IT WAS HELD BY THE HONBLE CALCUTTA HIGH COURT THAT THOUGH IDENTITY OF THE SHAREHOLDERS WERE PROVED BUT THE GENUINENESS OF THE TRANSACTIONS WAS NOT ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 10 PROVED. THERE WERE SEVERAL OTHER FACTORS CONSIDERE D BY THE HONBLE CALCUTTA HIGH COURT FOR HOLDING THAT THE GENUINENESS OF THE TRANSACTIONS WAS NOT PROVED. HOWEVER THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE AS DISCUSSED ABOVE ARE ON DIFFERENT FOOTING. MOREOVER WE AT THIS STAGE ARE GUIDED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LOVELY EXPORTS PVT. LTD. (2009) 319 ITR (ST.) 5 WHEREIN IT HAS BEEN H ELD THAT ONCE THE ASSESSEE HAS GIVEN THE COMPLETE DETAILS AND INFORMATION OF T HE INVESTORS WHO HAVE MADE INVESTMENTS IN THE SHARE CAPITAL OF THE COMPANY AND PROVED THEIR IDENTITY THEN NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSE E COMPANY IN RESPECT OF SUCH INVESTMENTS AND THAT THE DEPARTMENT SHOULD PRO CEED AGAINST THE INDIVIDUAL INVESTORS. EVEN THE JURISDICTIONAL HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TANIA PVT. LTD. (SUPRA) HAS H ELD THAT WHEREIN IN THE BOOKS OF THE ACCOUNTS OF THE CREDITORS CORRESPONDING ENT RIES OF ADVANCEMENT OF LOAN HAVE BEEN MADE THE BOOKS OF ACCOUNTS ITSELF WOULD INDICATE THE CAPACITY OF THE PARTY TO ADVANCE LOAN AND THERE WAS NO FURTHER NEED ON PART OF ASSESSEE TO PROVE THE CAPACITY OF CREDITORS. THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS (1987) 163 ITR 249 IN RELAT ION TO THE ISSUE OF ALLEGED BOGUS PURCHASES HAS HELD THAT WHERE THERE WAS NOTHI NG TO INDICATE THAT THE AMOUNT GIVEN BY THE ASSESSEE FOR THE PURCHASES MADE HAD COME BACK TO THE ASSESSEE IN ANY OTHER FORM AND WHERE THERE WAS NO E VIDENCE THAT THE SAID CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE AND EV EN THE STATEMENTS MADE BY THE ALLEGED SUPPLIERS IN NO WAY IMPLICATE THE TRANS ACTION WITH THE ASSESSEE THEN UNDER SUCH CIRCUMSTANCES IT CANNOT BE SAID THAT ENT RIES FOR THE PURCHASE OF GOODS MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE BOGUS AND NO ADDITION IN THIS RESPECT CAN BE MADE. THE FACTS OF THE ASSESSEE AS DISCUSSED ABOVE ARE ON BETTER FOOTING THAN THAT OF THE CASES CITED/DISCUSSED ABOVE. HENCE IN VIEW OF OUR OBSERVATIONS MADE ABOVE AND IN THE LIGHT OF THE CASE LAWS AS DIS CUSSED ABOVE THE ADDITIONS MADE BY THE AO TREATING THE LOANS AS UNEXPLAINED IS NOT HELD TO BE JUSTIFIED. THE SAME IS ACCORDINGLY ORDERED TO BE A DELETED. ITA NO.6368/M/2014 M/S. JAICO TEXTILES PVT. LTD. 11 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 28.09.2016. * KISHORE SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT (A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR ITAT MUMBAI.