Swastik Realtors v. Assistant Commissioner of Income-tax-15(3), Mumbai
[Citation -2019-LL-0813-48]

Citation 2019-LL-0813-48
Appellant Name Swastik Realtors
Respondent Name Assistant Commissioner of Income-tax-15(3), Mumbai
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 13/08/2019
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags business of construction • deductible expenditure • accommodation entries • interest expenditure • financial condition • payment of interest • evidence on record • claim of deduction • investigation wing • piece of evidence • loan transaction • initial burden • initial onus • hawala • unexplained cash credit • fictitious expenses • genuineness of loan • genuineness of transaction
Bot Summary: On perusal of the balance-sheet of the Appellant, the Assessing Officer observed that the Appellant had shown to have borrowed a sum of Rupees One crore from an entity by name M/s. Moxdiam. The Appellant took a stand that the amount was a loan from Moxdiam. The Appellant claimed that the loan transaction with Moxdiam was genuine and produced a confirmation letter. ITXA 634.17.doc looking at the financial condition of Moxdiam it is not believable that M/s. Moxdiam could give a loan of Rupees One crore to the Appellant. The Tribunal assessed the evidence on record and concurred with the finding of fact rendered by both the authorities that the loan stated to be availed by the Appellant from Moxdiam was not a genuine loan. Mr. Andhyarujina contended that the Appellant had satisfactorily explained the loan of balance amount for M/s. Moxdiam in its Books of Account. ITXA 634.17.doc Whether on the facts and circumstances of the case, action of addition on account of providing accommodation entries should have been made in the hands of the lender and not the Appellant in the light of the Appellant discharging the initial onus placed upon it Whether on the facts and circumstances of the case, the Interest expenditure of Rs.93,000/- on loans taken for the purpose of business on the aforementioned loan cannot be held to be genuine interest when it was actually paid after deducting TDS via banking channels and duly accounted for in the books of the lender 10.


IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 634 OF 2017 AND INCOME TAX APPEAL NO. 635 OF 2017 Swastik Realtors 312, Swastik Disha Corporate Park, Kohinoor Textile Printing Compound Opp. Shreyas Cinema, LBS Marg, Ghatkopar (West), Mumbai 86. Appellant V/s. Assistant Commissioner of Income Tax 15(3), Mumbai, Matru Mandir, I.T. Office, Nana Chowk, Grant Road, Mumbai. ... Respondent. Mr. Firoz Andhyarujina, Senior Advocate a/w. Manek Andhyarujina & Sameer Dalal for Appellant. Mr. A.R. Malhotra a/w. N.A. Kazi for Respondent. CORAM : M.S. SANKLECHA & NITIN JAMDAR, JJ. DATE : 13 AUGUST 2019. P.C. :- Swastik Realtors, Assessee, has filed these two Income Tax Appeals challenging common order passed by Income Tax Appellate Tribunal, Mumbai dated 27 October 2016. 2 11. ITXA 634.17.doc Income Tax Appellate Tribunal, by impugned order has dismissed appeals filed by Appellant- Assessee. 2. Appeal No. 634 of 2017 relates to Assessment Year 2007-08 and Appeal No.635 of 2017 relates to Assessment Year 2008-09. Appellant urges same questions of law in these two Appeals, and Appeals are disposed of by this common order. 3. Appellant Assessee, is engaged in business of construction and development of real estate. Appellant filed its return of income on 26 October 2007 declaring total income of Rs.11,23,490/-. notice was issued under Section 143(2) of Income Tax Act, 1961 to Appellant, calling for various details, and information was supplied. On perusal of balance-sheet of Appellant, Assessing Officer observed that Appellant had shown to have borrowed sum of Rupees One crore from entity by name M/s. Moxdiam. investigation wing of Income Tax Department initiated action under Section 133(A) of Income Tax Act at premises of Moxdiam. Inquiries were made and it was noticed by Department that Moxdiam was indulging into network of several bank accounts and conducting in activity of accommodation entries, in popular parlance known as hawala entries. statements of persons concerned with Moxdiam were recorded under Section 131 of Income Tax Act, who admitted that we are in business of providing hawala entries. ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 3 11. ITXA 634.17.doc Appellant was called upon to explain why Rupees One crore should not to be treated as unexplained cash credit. Appellant took stand that amount was loan from Moxdiam. Assessing Officer disbelieved version of Appellant and held that loan was fictitious and sum of Rupees One crore needs to be credited as it is not satisfactorily explained. Further, interest of Rs.93,000/- purportedly paid by Appellant was not genuine and was disallowed being fictitious expenditure. Assessing Officer passed order regarding Assessment Year 2007-08 on 26 November 2009. 4. Appellant filed Appeal before Commissioner of Income Tax Appeal. In proceedings before Commissioner (Appeals), Appellant filed affidavit of partners of Moxdiam retracting statement made before Investigating Officer. Appellant claimed that loan transaction with Moxdiam was genuine and produced confirmation letter. Appellant also filed two affidavits of partners of Moxdiam dated 22 August 2008 and 18 February 2011. Commissioner (Appeals) called for report from Assessing Officer. 5. Upon remand report received from Assessing Officer, Commissioner (Appeals) considered case of Appellant regarding theory of loan. Commissioner (Appeals) noted financial position of Moxdiam and held that ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 4 11. ITXA 634.17.doc looking at financial condition of Moxdiam it is not believable that M/s. Moxdiam could give loan of Rupees One crore to Appellant. Commissioner (Appeals) also referred to activities of accommodation entries (Hawala Entries) regularly indulged by Moxdiam and concluded there was nothing wrong with finding of Assessment Officer that loan of Rs.1.00 crore was not genuine. commissioner dismissed appeal. 6. In respect of Assessment Year 2008-09, Assessing Officer had passed order on 16 December 2010. In respect of Rs.9,00,000/- claimed as interest on Rupees One crore was also considered as fictitious by Assessing Officer Appellant filed Appeal against this assessment. Commissioner (Appeals) dismissed Appeal relying on order passed regarding Assessment Year 2007-08. Commissioner (Appeals) held that claim of deduction interest on loan found to be fictitious could not be allowed as deductible expenditure and disallowances by Assessing Officer was justified. 7. Appellant challenged these orders before Income Tax Appellate Tribunal. Tribunal assessed evidence on record and concurred with finding of fact rendered by both authorities that loan stated to be availed by Appellant from Moxdiam was not genuine loan. Tribunal also relied on statement made by partners of Moxdiam, overall ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 5 11. ITXA 634.17.doc circumstances and financial position and dismissed appeals by impugned order. 8. We have heard Mr. Firoz Andhyarujina, learned Senior Advocate for Appellant -Assessee and Mr. Malhotra, learned Counsel for Respondents-Revenue. 9. Mr. Andhyarujina contended that Appellant had satisfactorily explained loan of balance amount for M/s. Moxdiam in its Books of Account. This substantiated all ingredients of Section 68 of Income Tax Act could not be included in present facts. He submitted that though there is evidence on record that Moxdiam was indulging into accommodation entries it cannot ipso facto mean that loan given by Moxdiam to Appellant was not genuine. He submitted that Appellant had produced loan confirmation from Moxdiam, copy of bank statement of Moxdiam reflecting payment, copy of acknowledgment of Return of Income filed by Moxdiam. He further submitted that amount was received through crossed cheques and was repaid by Appellant by crossed cheques. He submitted that tax was deducted at source which all will show that loan was genuine. He submitted that Appellant had discharged burden and onus had shifted on Revenue to show that transaction was not genuine, which Revenue has failed ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 6 11. ITXA 634.17.doc to discharge. He submitted that Tribunal has not considered various decisions relied upon by them. learned Counsel submitted that following questions of law as framed in memo, therefore, arise for consideration in these Appeals:- (1) Whether on facts and circumstances of case and in law order of Tribunal was justified in confirming addition of Rs. 1.00 crore u/s. 68 of Income Tax Act, 1961, when Appellant has discharged its burden by producing lender, bank statements showing impugned transactions and financial statements, returns of income of lender, payment of interest with tax deducted thereon ? (2) Whether on facts and circumstances of case and in law order of Tribunal was right in not appreciating that when Assessee satisfies ITO as to identity of third party and also supplies such other evidence which will show, prima facie, that entry is not fictitious initial burden which lies upon him can be said to be discharged by him and that burden shall then shift to revenue to prove contrary with sufficient and adequate material ? (3) Whether on facts and circumstances of case and in law order of Tribunal was perverse in as much it dealt with judgments relied upon by Appellant without discussing applicability of ratios laid down in each case to facts of Appellants case in summery fashion using common reasoning for different propositions of law put forth by Appellant ? ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 7 11. ITXA 634.17.doc (4) Whether on facts and circumstances of case, action of addition on account of providing accommodation entries should have been made in hands of lender and not Appellant in light of Appellant discharging initial onus placed upon it ? (5) Whether on facts and circumstances of case, Interest expenditure of Rs.93,000/- on loans taken for purpose of business on aforementioned loan cannot be held to be genuine interest when it was actually paid after deducting TDS via banking channels and duly accounted for in books of lender ? 10. questions as raised can be summarized into two: findings of genuineness of loan i.e. questions (1), (2), (4) and (5) and second, case-law cited by Appellant before Tribunal, i.e. question (3). Re : questions (1), (2), (4) and (5) 11. Section 68 of Income Tax Act 1961 governs fact situation. It reads at relevant time as under : 68. Where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof or explanation offered by him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income-tax as income of assessee of that previous year. ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 8 11. ITXA 634.17.doc Thus where any sum is found credited in books of assessee; for which assessee offers no explanation about nature and source, or explanation is not satisfactory, sum so credited may be charged to Income tax as income of assessee. question before authorities and Tribunal was whether explanation offered by Appellant was satisfactory. 12. statement of partner of Moxdiam, Mr. Basant Jain was recorded under Section 131 of Income Tax Act. To question regarding financial position, Mr. Jain stated under:- Due to my unsound financial conditions and to earn bread and butter I used to issue accommodation bills, and therefore, I do not have equipment and apparatus used in diamond trade and under these circumstances, there is no stock or place for stock found in this premises, I have also no capacity to invest such huge sum or huge amount in purchase/import of diamonds. In real sense all investment made belong to other, and I am not in position to tell you their names and address as I disclose their identity there will be danger to my life. Thus, Mr. Jain has admitted that he cannot invest any considerable sum, and due to his unsound financial condition and to earn bread and butter, accommodation bills had to be issued. Though sought to be retracted, this admission before officers is significant circumstance. Further, Mr. Jain retracted his statement after two ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 9 11. ITXA 634.17.doc years and eight months. Such retraction was rightly held as not bonafide. admission made during survey of such proceedings can be relied upon by Assessing Officer. 13. Further, assessed income of Moxdiam for year 2007-08 was Rs. 2,49,530/- and for year 2008-09 it was Rs.1,64,596/-.Capital of partners was Rs.1,00,000/-. as against stated loan of Rs. 1 crore. This is another circumstance relied upon by Tribunal and authorities. 14. Appellant had relied upon decision of Co- ordinate Bench of Tribunal wherein one transaction of another person with Moxdiam was held to be genuine transaction. learned Counsel for Appellant has sought to justify financial position of Moxdiam trying to explain nature of its activities. learned Counsel submitted that once genuineness of lender and transaction is proved, then that should accrue to benefit of assessee. 15. It is now admitted position that Moxdiam was indulging in accommodation entries. Majority of activities of Moxdiam are of accommodation entries. It is Appellant which seeks to assert deviation from Moxdiam's regular activity of accommodation entry to contend that in Appellant s case it was not ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 10 11. ITXA 634.17.doc accommodation entry, but genuine loan. burden on Appellant to show genuineness of entry was thus heavier than situation where no such established evidence regards lender indulging into accommodation entries exists. Such burden cannot be casually shifted as contended. Merely because certain entries have been shown in books of accounts of Moxdiam, they cannot be held to be conclusive and must be construed in light of all surrounding circumstances. genuineness of loan transaction, financial capacity, and surrounding circumstances are some criteria for determination in such matters. 16. It is in this background that claim of Appellant it is dealing with Moxdiam was not for accommodation entry, but genuine loan transaction, had to be tested by authorities. Two authorities and Tribunal have evaluated each piece of evidence to conclude that this transaction was not genuine loan transaction. If Tribunal has given more weight to some pieces of evidence vis-a-vis others, conclusion is in realm of assessment of evidence. It cannot be said that pieces of evidence relied upon by Tribunal are irrelevant. view taken by Tribunal is thus on assessment of evidence is not perverse, and merely because another view by re-appreciating evidence is possible, it cannot give rise to question of law as envisaged under Section 260A of Income Tax Act. ::: Uploaded on - 19/08/2019 ::: Downloaded on - 20/08/2019 10:26:17 ::: 11 11. ITXA 634.17.doc Re : question (3) 17. Tribunal has noted decisions referred to by Appellant and also by Revenue. Following principles laid down in decisions in case of CIT v. Durga Prasad More1 and Sumati Dayal v. CIT 2, that nature of transaction will depend on facts and circumstances, Tribunal rightly did not get weighed down by multiplication of decisions dealing with separate sets of fact. This approach adopted by Tribunal would not lead to substantial question of law as proposed by Appellant. 18. Thus none of questions raised by appellant can in present facts be called substantial questions of law for consideration of appeal. 19. Appeals are dismissed. NITIN JAMDAR, J. M.S. SANKLECHA, J. 1 (1971) 82 ITR 540 (SC) 2 (1995) 214 ITR 801(SC) Swastik Realtors v. Assistant Commissioner of Income-tax-15(3), Mumbai
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