TaxTMI 
TaxTMI 
2019 (1) TMI 344
X X X X Extracts X X X X
X X X X Extracts X X X X
....13-14 are taken as a separate group of cross appeals due to the reason that the assessments for these four assessment years were not pending as on the date of search and hence the objection raised by the assessee against the additions made by the AO is required to be considered separately for these four assessment years. For the purpose of recording the facts and grounds raised by the assessee as well as department, the appeal for the assessment year 2010-11 is taken as a lead case. 3. For the assessment year 2010-11 the assessee as well as the department have raised the following grounds :- Assessee's grounds : 1. On the facts and in the circumstances of the case and in law the order passed u/s 153A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The ld. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for acade....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed Jalsagar Commerce Pvt. Ltd. 12,36,49,999 Shri Anand Sharma 6. On the facts and in the circumstances of the case and in law the ld. CIT (A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds. 7. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. Department's grounds : 1. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of Rs. 12,36,40,000/- made by the AO u/s 68 of the IT Act on account of unexplained unsecured loans allegedly obtained by the assessee from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd. and M/s. Sangam Distributors Pvt. Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans by observing that the alleged lenders M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd. and M/s. Sangam Distributors Pvt. Ltd. were not shell companies without considering the financial statements of these companies. 3. Whether on the facts and circumstanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en casted upon u/s 68 of the IT Act to explain nature and source of the transaction had been discharged by the assessee. 8. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of partner's capital despite the fact that alleged partners were never produced before the AO for examination. 9. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in ignoring the fact that business of the assessee firm is the business of the partners constituting it and the assessee firm is a mere "mutual agency" of the partners and therefore, mere filing of documentary evidences without producing the partners for verification was not sufficient for holding the partner's capital as genuine. 10. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in holding the partner's capital as genuine despite the fact that CIT (A) in the subsequent year on the basis of evidences available on record held M/s. Doshi Management Pvt. Ltd. a company in which 3 alleged partners namely M/s. Banshidhar Management Pvt. Ltd., M/s. Vasundhara Advisory Pvt. Ltd., and M/s. Prithvi Vinimay Pvt. L....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee has submitted that in compliance to notice under section 153A of the IT Act, the assessee submitted its e-return of income on 9th March, 2016 declaring total income which was same for the assessment year 2010-11 though there were some variations in some of the assessment years. The assessee objected to the proposed addition on the ground that the said statement recorded by the department is behind the back of the assessee and, therefore, the same cannot be used against the assessee without giving opportunity of cross examination of the witnesses. Further it was contended since there is no incriminating material found during the course of search and seizure action, therefore, the AO is not empowered to make any addition in the total income of the assessee. It is a settled position of law that there cannot be a review under the garb of reassessment proceeding under section 153A of the Act and, therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15. 2. Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) SLP filed before the Hon'ble Supreme Court was dismissed vide order dated 2nd July, 2018. 3. Jai Steel (India) vs. ACIT (2013) 219 Taxman 223 (Raj.) Thus the ld. A/R has submitted that the Hon'ble Jurisdictional High Court has held that the requirement of assessment or reassessment under section 153A has to be read in the context of section 132 or 132A of the IT Act, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined purpose of making assessment of total income under section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The assessment or reassessment proceedings which have already been completed and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when search or requisition is made, there is no question of any aba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isclosed and unexplained cash credit introduced by the assessee in the garb of unsecured loans and partners' capital. Once the insurmountable evidences unearthed by the Investigation Wing Kolkata which is the basis of the additions made by the AO, the assessee was required to discharge its onus by producing the contrary evidence or by producing alleged creditors for verification. The ld. CIT D/R has further submitted that the information received from the Investigation Wing Kolkata is also the incriminating material found during the search and pertains to the assessee disclosing undisclosed income. Therefore, it is not a case of reassessment framed by the AO under section 153A without any incriminating material. The AO even conducted further investigation during the course of assessment proceedings through the Investigation Wing Kolkata and, therefore, the addition is fully based on the evidence in the possession of the AO. As per the provisions of section 132 read with section 153A of the IT Act, the AO has to assess or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terial relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Inform....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the orig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under subsection (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jai Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a searc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while maki....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while framing the assessment under section 153A of the Act for the assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68. b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evide4nces to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wherein the details of year-wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during search action has been accepted to be bogus by all family members in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y notice u/s 274 rws 271(1)(c) is issued separately." The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon'ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :- "3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis supplied by me). (The decisive words used in the provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urse of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was also dismissed by the Hon'ble Supreme Court, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted. We order accordingly. Now on merits : Ground No. 3 to 5 : 7. On merits of the addition made under section 68 of the IT Act, the AO made the addition of the entire amount of unsecured loans received from 5 (five) persons and partners' capital from 4 (four) persons for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port of the transactions which remained uncontroverted by the AO during the assessment or appellate proceedings. Therefore, the veracity of documentary evidence forming part of the assessment record is not doubted. The AO has relied upon statement recorded by the Investigation Wing Kolkata behind the back of the assessee and much before the date of search. The ld. A/R has submitted that the AO was having only one statement of Shri Anand Sharma who has stated that the accommodation entries were given to M/s. Jalsagar Commerce Pvt. Ltd. by M/s. Royal Crystal Dealers Pvt. Ltd. Therefore, even Shri Anand Sharma has nowhere stated that cash was given by the assessee. During the course of assessment proceedings, the assessee produced the following documents of M/s. Jalsagar Commerce Pvt. Ltd :- S. No. Particulars of Documents Paper book page 1 Copy of Ack. of ITR of AY 2010-11 704 2 Copy of balance sheet and annexure of loans & advance of AY 2010-11 705-706 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 707-775 4 Confirmation of loan given to assessee from books of accounts of party. 776-783 5 Confirmation of loan given to asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y assessment under section 143(3) wherein the transactions of loan were accepted by the AO then the creditworthiness of the loan creditor was also accepted. The ld. A/R has also referred to the availability of the funds with loan creditor being share capital which is much more than the loan given to the assessee. The AO has not found any discrepancy in the accounts of the loan creditor and particularly the bank statement of the loan creditor. Hence treating the transaction as bogus and in the nature of mere entry provided against the cash without any material is not sustainable in law. The creditor has given the confirmation of the loan amount and, therefore, admitted the loan given to the assessee. The assessee has paid interest after deduction of TDS and the interest expenditure was accepted by the AO as a genuine claim in the assessment framed under section 143(3) as well as in the assessment framed under section 153A of the IT Act. Once the interest payment is accepted, then the loan amount cannot be treated as bogus and unexplained credit. The ld. A/R has pointed out that even the assessee has repaid the loan amount in the subsequent years which proves the genuineness of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO to disprove the documents produced by the assessee in support of the claim. The AO has relied upon the statement of Shri Anand Sharma and no material was brought on record to controvert the documentary evidence filed by the assessee. Thus the ld. A/R has stated that the addition made by the AO and sustained by the ld. CIT (A) be deleted. 10. On the other hand, the ld. CIT D/R has submitted that the AO has received the information from Investigation Directorate, Kolkata regarding involvement of the assessee group in obtaining entries of bogus unsecured loans, share capital, special deposits etc. detected in the investigation carried out by the DIT Kolkata. Such information was received even prior to initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Once the AO has confronted the assessee with the report of the Investigation Wing Kolkata as well as the statement of Shri Anand Sharma and other persons who have admitted to have provided accommodation entries of bogus unsecured loans, share capital, special deposits etc. to the various parties through their companies and concerns and assessee has shown the unsecured loans ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions of section 68 of the IT Act. The ld. D/R has further submitted that the repayment of loan for credit entries also does not in itself prove the transactions to be genuine. Shell companies are used to provide accommodation entries and even reversal of an entry does not ipso facto prove the genuineness of the initial credit entry. In support of his contention, he has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd., 226 Taxman 190 (Mag.) and submitted that the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (SC). Thus it is evident that the assessee has failed to discharge its onus to rebut the evidence unearthed by the Investigation Wing Kolkata which shows that the transactions of unsecured loans as well as partners' capital are nothing but bogus accommodation entries wherein the assessee's own undisclosed income has been routed in the garb of unsecured loan and partners' capital. As regards cross examination of the witnesses, since the witnesses belong to Kolkata and statements were also recorded at Kolkata by the Investigation Wing, therefore, it was not possible for the AO t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....33(6) of the Act was issued to this company, either by the Ld. AO or by the concerned AO or by the DDIT (Inv.) Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Order. However, the relevant documents including the Ledger a/c showing the transactions with appellant company, Source sheet of funds of transactions made with the Appellant, Copy of bank statement showing the transactions, etc. stand submitted for confirmation of the transaction of loan with the Appellant. 5.3 In my considered view, as the name of M/s Jalsagar Commerce Pvt. Ltd. is clearly mentioned as beneficiary company in the statement of Shri Anand Sharma, and Shri Anand Sharma is mentioned that some of such paper company are sold to beneficiary party, in view of fact that name of M/s Jalsagar Commerce Pvt. Ltd. Is mentioned in the reports as discussed in para 4.4.7 above, a genuine doubt is raised on the identity and genuineness of company. Further, the adverse facts pointed out in the reports as discussed in para 4.4.7 above for established background of al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttled law that burden is upon the assessee to prove ingredients of section 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions. The assessee has, however, failed to prove the creditworthiness of the creditors who were having only meager income. No details of their savings have been filed. The assessee has never shown his willingness to produce the remaining creditors for examination before the AO. Therefore, the genuineness of the transaction could not have been examined by the AO. The smallness of the bank balance in the bank accounts of the creditors prior to issue of cheques would clearly reveal that they were not having any source and it was the money of the assessee which was routed through the bank accounts of the creditors for the purpose of giving credits to the assessee. These were, therefore, accommodation entries only and as such, could not be considered as genuine transactions. Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. On consideration of the facts of the case in the light of above discussion and decision, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 declaring loss of Rs. 1,58,035/- on 20th October, 2002, which was processed under Section 143(1) of the Act. Subsequently, on the basis of a report submitted by the Investigation Wing that the assessee was a recipient of accommodation entries in form of share application money/share capital/share premium, notice under Section 147 read with Section 148 of the Act was issued and served on 25th March, 2009..................................................................................................................... ........................................................................................................... 7. Summons under Section 131 of the Act were sent to the alleged shareholders and they were asked to furnish details on 10th December, 2009. Directors/Principal officers were required to personally come and depose. The summonses, as per the assessment order, were received back unserved. At the same time, the assessee filed details and confirmations of the alleged share capital. Earlier on 8th December, 2009, a detailed show cause notice was issued, fixing the hearing on 14th December, 2009. The assessee was asked to produce the shareholders along with their ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the share holder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee-company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. In A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, this argument advanced by the assessee was rejected by the Supreme Court. Venkatarama Iyer, J., speaking for the court observed as under (@ page 810):- "Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ares of the assessee-company. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company. The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also fell into the same error. If such material had been kept in view, the Tribunal could not have failed to draw the appropriate inference. 16. In the said case, the Division Bench had also examined the decision of the Supreme Court in Lovely Exports P. Ltd. (supra) and other cases in which the assessee had succeeded. It was noticed that in the case of Lovely Exports P. Ltd. affidavits/confirmations of shareholders were filed and income tax record numbers of the shareholders were made available, but the Assessing Officer, who had sufficient time, failed to carry out inquiry and examination. reference was made to the observations in Divine Leasing (supra) to the effect that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness of the shareholders. 19. In N.R. Portfolio Pvt. Ltd. (supra), it has been held as under:- "18. In the remand report, the Assessing Officer referred to the provisions of Section 68 of the Actand their applicability. The word "identity" as defined, it was observed meant the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them." 20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced the order of the Commissioner of Income Tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its coordinate bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court vide its judgment in C.I.T vs. MAF Academy P.Ltd [ (2014) 206 DLT 277). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er surprising factor is that the entire investment happened during a short span of time and re-transfer of the shares to the four Promoters/Directors of the company at Rs. 35 /- per share by different parties also happened during a short span of few days. The modus operandi and the manner in which cash is deposited in a bank and then utilized by way of an account payee cheque for purchase of shares for a premium of Rs. 100 /- to Rs. 200/- per share and then the sale of shares at a loss clearly establishes that the said transaction was a camouflage transaction. The Assessee has clearly attempted to camouflage the accommodation entries and tried to give it a colour of purchase of share capital and then sale of the same at a loss. Thus the Assessee's capital increased or was enhanced by a substantial figure through these dubious transactions. This should be and has to be checked. 36. Out of Rs. 4.35 crores received as share capital including premium, only Rs. 92 lacs has been received from the directors or their family members and the remaining amount has been received from parties totally unrelated to the Assessee. Notices to some of the investors could not be served and even th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessing officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000/- at a share premium of Rs. 1,35,00,000/-......... ....................................................................................... 2.1 The AO asked the appellant to furnish details of such share holders mentioning their identity, genuineness of transaction and credit-worthiness. Appellant produced confirmation of deposit from directors of the respective company, copies of income tax return filed and copies of bank statement reflecting the above transactions. In order to verify the entire transactions in the Asstt. year 2005-06 light of genuineness and creditworthiness, he issued summons u/s 131 of the Act to all the above 15 persons. They were asked to produce the copies of return for AY. 2005-06 and their ledger accounts from which the source of above share application money could have been verified. All the above summons were returned unserved with the comments from the postal authorities as "no such person in the above address". The AO accordingly brought this fact to the notice of the counsel of the assessee vide order sheet entry dated 18.12.2007 and he was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egularly to visit banks and do other spade work like collection of cash etc., most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Some of the entry operators have also roped in their own relatives for operation of entry accounts and filing the income tax returns. Interestingly most of these concerns / individuals have obtained PAN from the department and are filing returns as well. What is shown in the returns is not the actual state of affairs. For example with one PAN several bank accounts are simultaneously Asstt. year 2005-06 operated and only one account might be shown for the purpose of audit and filing income tax returns. The entry operators provide entry in the garb of share application money, gifts, loans etc. through these accounts, in lieu of cash, to any person who is having unaccounted money. 2.1.2.1 The AO observed that some of the companies show above by the appellant as its share holders were found to have stated before investigation wing that they were mere name lender for advancing money. To quote some of them, Shri Rajesh Bansal, Director of M/s. Rubicon Associat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee company is stated to have issued shares at premium 9 times its face value. The assessee is a private limited company. It has not issued prospectus for issue of shares nor under the Companies Act 1956, it can invite the public to apply for and allot the shares. The company is prohibited from making any invitation for allotment of shares. How the premium was fixed is not forth coming. Looking to the balance sheet or past history of assessee, the assessee company has never declared dividend in the past. The company has no business plans which can raise its profitability in the near future. The income declared by the assessee is only by way of short term capital gain and the assessee do not seem to have carried on any business. Asstt. year 2005-06 In such circumstances the share premium is not found to be justified by any of the act on the part of assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s upon the Assessee to show the absence of fraud and this is not discharged by the Assessee tendering an incredible and fantastic explanation. The Court also held that every explanation given by the Assessee need not be accepted. 27. In Kamdhenu (supra), this Court categorically held that the initial burden lies on the Assessee to establish the identity of the shareholders, the genuineness of the transaction and the creditworthiness of the shareholders. It is only after the initial burden is discharged that the onus shifts to the Revenue. This Court in Kamdhenu (supra) referred to CIT v. Sophia Finance, 205 ITR 98 which had held to the same effect. The Divine leasing (supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 is well settled. ............................................................................................................................... 43. The transactions in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate eco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for cross-examination of same accommodation entry providers. Any way in the rejoinder submission to remand report the appellant is absolutely silient on cross-examination and by such conduct he has forgone his right to cross-examine. Therefore, the principles of natural justice have been followed. As discussed in preceding paras, under the facts and circumstance of the case, it could not be said that AO did not followed the binding decision of the Hon'ble Supreme Court and the Hon'ble jurisdiction Court. Therefore, in view of above facts discussed in Para 4.1 & 4.4.7, 5.1 to 5.3 and legal position apprised in Para 5.5 to 5.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to Rs. 12,36,49,999/- from M/s Jalsagar Commerce Pvt. Ltd. sustainable and the same is confirmed." Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata. We find that the report of the DDIT (Inv.) Kolkata is also based on the statements of various persons recorded during their investi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan creditor M/s. Jalsagar Commerce Pvt. Ltd. there was no suspicious transaction of receiving any entry or any deposit of an equal amount prior to giving the loan to the assessee. The assessee has paid interest to the creditor, which was duly accepted by the AO as business expenditure. Undisputedly, the assessee has produced the income-tax record of the loan creditor, bank statement, financial statements including Balance Sheet, copy of ROC master data showing the status of loan creditor company as "active", confirmation of loan given to the assessee. Further, the AO issued summons and also got the summons served through DDIT Kolkata under section 131 of the IT Act which were duly responded by the loan creditor. Except the statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata, the AO has not brought on record any other material to controvert or disprove the documentary evidence produced by the assessee. It is pertinent to not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and not on any tangible material disclosing the non-genuineness of the transactions. The AO has not disputed the transactions routed through banking channel having sufficient funds which is also supported by the financial statements and further the assessments of the loan creditor were completed under section 143(3). The details of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and repayment of loan amount as well as closing balance are as under :- Name of Company AY Opening Balance Loan taken during the year Interest credited in loan a/c during the year Interest credited in interest Paid /payable a/c Loan repayment/ TDS/transfer in partner capital during the year Closing balance Jalsagar Commerce Private Ltd 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Jalsagar Commerce Private Ltd 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Jalsagar Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose oflevy of excise duty. Whether the goods were, in fact, sold to the said dealers.witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this court in CCE v. Andaman Timber Industries Ltd., order dated 17.3.2005 waws passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." Thus the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination in para 11 to 17 as under :- "11. We have therefore proceeded to hear and decide the matter unassisted by the revenue. In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather & Platt (India) Ltd.(supra) and submitted that merely because a person is not found at an address after several years it cannot be held that he is non exis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case. 16. In the instant case although the appellant assessee has called upon us to draw an inference that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thers. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee. Ground No. 6 is regarding denial of benefit of telescoping, recycling and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of assessee. 496 6 Copy of affidavit of Neelam Gautam director of company. 497-500 7 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 501-507 8 Copy of assessment order passed in the case of above named company for AY 2006-07,AY 2012-13, AY 2013-14, AY 2014-15 508-530 9 Copy of ROC master data. 531-532 10 Copy of PAN card. 533 11 Copy of Order Passed by Calcutta High Court regarding amalgamation of other companies in this company. 534-560 2. M/s Teac Consultants Pvt. Ltd 1 Copy of Ack. of ITR of AY 2010-11 561 2 Copy of balance sheet of company and Annexure of loans & advances of AY 2010-11 562-563 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 564-574 4 Confirmation of loan given to assessee from books of accounts of party. 575-577 5 Confirmation of loan given to assessee from books of accounts of assessee. 578-579 6 Copy of affidavit of Jitendra Sharma director of company. 580-583 7 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 584-590 8 Copy of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these three concerns as under :- Assessment orders passed u/s 143(3) : Name of Company Assessment year Income Assessed M/s Birla Arts Pvt. Ltd 2012-13 44,76,461 M/s Birla Arts Pvt. Ltd 2013-14 1,15,36,592 M/s Birla Arts Pvt. Ltd 2014-15 47,95,890 M/s Teac Consultants Pvt. Ltd 2005-06 13,980 M/s Teac Consultants Pvt. Ltd 2006-07 45,395 M/s Teac Consultants Pvt. Ltd 2012-13 49,91,290 M/s Teac Consultants Pvt. Ltd 2014-15 10,14,150 M/s Sangam Distributors Pvt.Ltd 2006-07 Nil M/s Sangam Distributors Pvt.Ltd 2007-08 9,600 M/s Sangam Distributors Pvt.Ltd 2013-14 6,79,400 M/s Sangam Distributors Pvt.Ltd 2014-15 Nil The ld. A/R has then referred to the copies of the Master data of ROC of all three companies and submitted that the status of these three companies have been shown by the ROC as "active" and, therefore, these companies cannot be treated as Shell company. Further, as per financial statements of these companies, they are having more than sufficient funds to give the loan. In support of his contention, he has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Aravali Trading Company vs. ITO, 8 DTR (Raj.) 199. Thus t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s issued by DDIT, Kolkata u/s 131 to these companies which was duly complied with and relevant documents were filed. There is no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed providing unsecured loan to the Appellant and source of providing the said loan. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators. 6.4 For these three creditors namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, which are available at page no.443 to 644 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA), CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that no notice u/s 131 or 133(6) of the IT Act were issued to M/s Birla Arts Private Limited, however as far as the companies M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited are concerned, these have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 6.6 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n is discharged u/s 68 of the Act, no addition u/s 68 of the Act is justifiable in the hands of the Assessee in view of the judgments in case of Shree Barkha Synthetics Ltd. V/s Assistant Commissioner of Incometax (2006) 155 TAXMAN 289 (RAJ.), COMMISSIONER OF INCOME-TAX, JAIPUR -II V. MORANI AUTOMOTIVES (P.) LTD. [2014] 264 CTR 86 (RAJASTHAN-HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel Ramniklal Hirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Income-tax-4 v. G & G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon'ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/Del/2012 vide its order dated 10.02.2016. Further, Hon'ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of cred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] In the instance case before me , the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujrat High Court (supra). 6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the Appellant Firm as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in case of the Appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of any incriminating material found during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of unsecured loan u/s 68 of the Act is legally untenable and unjustified. 6.14 In view of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3-2004 2002-2003 50,00,000 2004-2005 2003-2004 2,74,40,000 2005-2006 2004-2005 3,69,50,000 2007-2008 2006-2007 3,26,00,000 2010-2011 2009-2010 250,00,000 2011-2012 2010-2011 20,00,000 2014-2015 2013-2014 67,57,37,000 M/s Teac Consultants Pvt. Ltd Assessment Year Financial Year Share capital raised 1996-1997 1995-1996 26,00,000 2001-2002 2000-2001 73,98,000 2003-2004 2002-2003 1,00,00,000 2005-2006 2004-2005 4,85,50,000 2007-2008 2005-2006 3,35,00,000 2010-2011 2009-2010 2,76,00,000 2011-2012 2010-2011 94,00,000 M/s Sangam Distributors Pvt. Ltd. Assessment Year Financial Year Share capital raised 2005-2006 2004-2005 2,47,50,000 2006-2007 2005-2006 10,50,00,000 2007-2008 2006-2007 7,93,50,000 2011-2012 2010-2011 2,50,00,000 2013-2014 2012-2013 13,00,00,000 These details clearly show that at the time of granting of loans to the assessee these companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the report/inspection report was also not shared with the assessee during the assessment proceedings, therefore, the ld. CIT (A) deleted the addition. 17. Before us, the ld. CIT D/R has reiterated his contention as made in respect of the other issues raised in the assessee's appeal as well as in the department's appeal. He has relied upon the order of the AO. 18. On the other hand, the ld. A/R of the assessee has also submitted that the contentions and submissions made in respect of the assessee's appeal as well as in respect of the ground nos. 1 to 6 of the revenue's appeal may be treated as the submissions for these grounds of the revenue's appeal. 19. Having considered the rival submissions as well as the relevant material on record, we note that the AO has made the addition of the amount of partners' capital from these four corporate entities on identical reasoning as the addition was made on account of unsecured loans. During the year under consideration, the assessee firm received Rs. 42,47,25,000/- on account of partners' capital from the corporate partners as under :- S. No. Name of the Partner Addition of Capital during AY under Appeal 1 M/s Bansidhar Advisory P....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 947-958 20 * Copy of affidavit executed by Mr. Ravi Mundra director of Doshi Management Pvt. Ltd on behalf of amalgamated Company M/s Prithvi Vinimay Pvt Ltd, 959-962 21 * Copy of order of Calcutta High Court regarding amalgamation of company in Doshi Management Pvt. Ltd 963-987 22 * Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013. 988-991 23 * Copy of assessment order passed in the case of above named company for AY 2006-07 and 2014-15. 992-1000 24 * Copy of ROC master data. 1001-1002 25 * Copy of certificate dated 08.02.2013 issued by registrar of companies regarding modification of charges/mortgage. 1003 26 * Copy of PAN card. 1004 27 * Copy of Summon No. 1440 dated 13.10.2017 and reminder notice No. 1578 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. 1005-1008 28 * Copy of reply submitted by the company in response to summon/notice issued to it along with displaced proof 1009-1011 M/s Macro Soft Technology Pvt. Ltd. 29 * Copy of ledger a/c of partner from books of accounts of assessee. 1012-1013 30 * Copy of Ack. of ITR of AY 2010 and computatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f PAN card. 1141 56 * Copy of Summon No. 1438 dated 13.10.2017 and reminder notice No. 1580 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. 1142-1145 57 * Copy of reply submitted by the company in response to summon/notice issued to it along with dispatched proof 1146-1148 Thus it is apparent that in support of the claim of identity of the corporate partners, their capacity and genuineness of the transactions, relevant documentary evidences were already filed before the AO. The assessee has also produced the assessment orders passed under section 143(3) for various assessment years in case of these four corporate partners who have introduced the partners' capital in the assessee firm. The details of the assessment orders passed under section 143(3) are as under :- Assessment u/s 143(3) Name of Company Assessment year Paper Book page no. M/s Vasundhara Advisory Pvt. Ltd. 2014-15 905 M/s Prithivi Vinimay Pvt. Ltd. 2006-07 992 M/s Prithivi Vinimay Pvt. Ltd. 2014-15 998 M/s Macro Soft Technology Pvt. Ltd. 2009-10 1048-1050 M/s Macro Soft Technology Pvt. Ltd. 2011-12 1052-1053 M/s Macro Soft Technology....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y was duly examined by the bank. The ld. CIT (A) has considered all these facts while deciding this issue in para 7.3 to 7.3.9 as under :- 7.3 It may be mentioned that same procedure of remand report have been done as discussed in para 4.3 above and the same is not repeated here. Similarly, as discussed in para 4.4.3 this matter too was referred by the AO for verification by issuing commission u/s 131(1)(d) to the Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata vide same letters and same reports as discussed in para 4.4.4 were received from The Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata. As observed in para 4.4.5 & 4.4.6, the two reports dated 28.11.2017 and 06.12.2017 from The Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata are capable to findout where the appellant has employed foul means and where the transaction are of rutine business requirements. From the careful perusal of these the two reports dated 28.11.2017 and 06.12.2017 from the Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata. I don't find adverse findings alongwith eloquent evidences in the form of statement on oath of relevant entry operators in respect of capital contributions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed accounts for F.Y. 09-10 to 12-13, source of fund, copy of certificate of incorporation & PAN Card, copy of ledger & copy of assessment order u/s 143(3) for the A.Y. 14-15. 07.11.2017 14. PRITHVI VINIMAY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) Transactions details, copy of ledger along with supporting documents incl. Share applications, share allotment, account confirmation from Kota Dall Mill, Form-2, audited accounts for F.Y. 09-10 to 12-13, copy of assessment order u/s 143(3) for A.Y. 14-15, copy of certificate of incorporation and PAN card, details regarding source of fund, bank statement depicting the transactions details & copy of Hon'ble High Court order in respect of Amalgamation. 07.11.2017 No summons were issued for M/s Macro soft Technology Pvt. Ltd by DDIT (Inv.) Unit 1(3) Kolkata ".......this office has also verified the companies as per database of paper/shell companies/entities prepared by Directorate of Investigation Wing, Kolkata on the basis of statements of various entry operators at different occasions before the Income Tax Department. On verification, the following facts has been emerged out from the database which reveals that some comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....business of providing accommodation entries by appointing various dummy directors by known entry operators whose names has been mentioned in the under mentioned table. S. No. Name of company Name of Director(s) Period Name of Entry Operator 1. VASUNDHARA ADVISORY PVT LTD PUNAM RAMANI 28.02.2011- TILL DATE NAWAL KISHORE JALAN 2. PRITHVI VINIMAY PVT LTD DEEPAK TIBREWAL 28.03.2014- TILL DATE PANKAJ AGARWAL 3. BANSIDHAR ADVISORY SHASHI KUMARI 09.01.2009- 16.03.2012 ANKIT BAGRI PVT LTD RAMANI It may be mentioned here that three companies namely; M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited were amalgamated with M/s Doshi Management Pvt Ltd in July 2014 in accordance with permission from Kolkata High Court, whereas the statements entry operator Anand Sharma are dated 02.07.2013 and 06.02.2017 i.e. prior to March 2014 by which M/s Doshi Management Pvt Ltd. Might have been identified as paper/shell company. Neither statement of Shri Anand Sharma not any list or annexure of said statements indentifying M/s Doshi Management Pvt. Ltd. Is available on r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of the Company to act as Working Partner in the Assessee Firm. 7.3.3 However, the A/R of the Appellant while representing the case has argued the matter in detail and has filed detailed submissions as reproduced above in response to the findings and allegations of the AO. A summarized form of the submissions and arguments put forth by the A/R is given hereunder: a) The Appellant has duly discharged the initial onus cast upon it u/s 68 of the Act by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank Statement and Confirmation from the Partners, Balance Sheet etc. Through the said documents, identity, creditworthiness of the corporate partners along with the genuineness of the transactions carried out with them was duly established. b) The AO has not observed anything in the assessment order regarding any defect or flaw in the documents submitted. c) The capital contributions of the companies that have been treated as unexplained by the AO were introduced in AY 2012-13. In the assessment proceedings of AY 2012-13 which was completed u/s 143(3) of the Act, such capital contributions were treated as genuine. Thus, once in the completed assessment proceedings the capita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs and the said partners do exist in the normal business parlance. 7.3.6 The Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents as well as the relevant assessment orders, which are available at page no. 645 to 867 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to the said companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences fil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llegations as already discussed in Ground No. 2 above, shall mutatis mutandis apply to the findings and allegations of the AO with respect to partner's capital made in this ground of appeal. 7.3.9 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon'ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition of Rs. 42,47,25,000/- on account of partner's capital from M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited is not sustainable and hence the same stands deleted." Thus the finding of the ld. CIT (A) are based on the facts as well as the documentary evidence produced by the assessee whereas the AO has not brought on record any contrary evidence except the allegation made in the report of the Investigation Wing Kolkata. Therefore, the documentary evidences brought by the assessee cannot be negated merely on the basis or allegation made in the report which is nothing but narration of the statements recorded of certain persons. The report of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est of the parties for which the additions were deleted by the ld. CIT (A) are same for which the AO was not having any material or document to substantiate the finding of bogus accommodation entries as in the case of other parties, namely, M/s. Birla Arts Pvt. Ltd., M/s. Tech Consultants Pvt. Ltd., M/s. Sangam Distributors Pvt. Ltd. As regards the corporate partners who have introduced the capital, they remain the same for all the years and, therefore, the issue is common for all these years except the fact that for the assessment year 2014-15 only one partner, namely, M/s. Bansidhar Advisory Pvt. Ltd. introduced some capital of Rs. 13.00 lacs and for the assessment year 2013-14 only three partners introduced the capital. Therefore, in view of our finding on all these issues while deciding the cross appeals for the assessment year 2010-11, the grounds raised by the assessee and revenue for the assessment years 2011-12 and 14-15 stand disposed off on the same terms and finding of the assessment year 2011-12 is mutatis-mutandis applicable for these assessment years. 23. For the assessment year 2015-16 only, the ld. CIT (A) has sustained the addition in respect of only one party i.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the report of the Investigation Wing Kolkata as well as the statement recorded by the DDIT Kolkata. We note that the surrounding circumstances and the facts are identical as for the A.Y. 2010-11 as recorded by the AO as well as the ld. CIT (A). The ld. CIT (A) has turned down the request of cross examination in para 3.12 to 3.13 at pages 188 to 190 as under :- "3.12 In my considered view, the technical objections raised by the Appellant in respect of loan from Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. as above, are of no avail to the appellant due to following undisputed facts: i. It is undisputed fact that the Income Tax Department has made tremendous investigations in such shell companies of Kolkata, Mumbai and Delhi providing accommodation entry and statements made by several accommodation entry providers have become virtually in public domain. It is no argument that the AO did not provide such statement before the assessement or in any of the notices. These facts were well known to the appellant group and ignorance is mere pretence. ii. Moreover, such statements are so vocal and undeniable that as mentioned in some of the case laws above, cro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,000/- from M/s Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. respectively, is sustainable and the same is confirmed." Thus the ld. CIT (A) has decided the issue on identical terms as for the assessment year 2010-11. We have already given our finding on this issue and referred various decisions of Hon'ble Supreme Court, Hon'ble High Courts as well as this Tribunal. Therefore, our finding on the issue for the assessment year 2010-11 is squarely applicable as the facts and issues are identical for these years. Accordingly, we hold that the addition based on the statement of third party recorded at the back of the assessee without affording opportunity of cross examination is not sustainable in law. 27. Apart from the issue of violation of principles of natural justice, we find that on merits the assessee produced all relevant documentary evidences in support of the claim which is identical to all the other parties in respect of which the ld. CIT (A) has deleted the addition. Even for sake of completeness, we refer to the documentary evidence produced by the assessee in respect of these two companies as under :- S. No. Particulars PB Page No. 1. M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 1063-1064 M/s Caplin Dealcomm Pvt. Ltd 2014-15 2,85,945 1066-1068 Once the party is regularly assessed to tax and orders under section 143(3) were passed by the AO, then the transactions cannot be treated as bogus once. It is manifest from the financial statements of these companies that the share capital and reserve of M/s. Caplin Dealcomm Pvt. Ltd. and M/s. VSG Leasing & Finance Co. Pvt. Ltd. as on 31st March, 2016 were Rs. 136,63,90,504/- and Rs. 97,11,26,758/- whereas the amounts given to the assessee by these two companies was Rs. 16.10 crores and Rs. 10.88 crores respectively. Thus the creditworthiness of these companies as evident from their financial statements was undisputedly sufficient to give the amounts in question to the assessee. Accordingly, having regard to the documentary evidence filed by the assessee and our findings on this issue for the assessment year 2010-11, the additions made by the AO are not sustainable and the same are deleted. This issue covers both the assessment years 2015-16 and 16-17. The assessee has also raised Ground No. 5 regarding typographical error in the finding of the AO/CIT (A) on account of late delivery charges of Rs. 12 lacs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der dated 18/03/2013 for A.Y. 2008-09 and Learned CIT Appeal, Kota Vide order dated 27.03.2014 for A.Y. 2009-10 has allowed these expenditure to the Appellant. Also, on subsequent appeal by the department in the Appellate Tribunal, the same was dismissed as non maintainable. 7.3.3 Therefore, by concurring with the view of the predecessor CIT (A), I allow this ground of appeal raised by the Appellant and thus, the addition of Rs. 4,11,08,334/- is deleted." Therefore, the issue on principle is already decided by this Tribunal and hence we do not find any reason to interfere with the impugned order of the ld. CIT (A) so far as the allowability of the claim is concerned. However, as regards the typographical error of the amount, we find that the ld. CIT (A) in para 7.1 has mentioned the disallowance made by the AO on this account of Rs.,4,23,19,238/-. The same is reproduced as under :- " 7.1. As discussed in the Assessment order at page no. 2-3, AO disallowed the expenditure of Rs. 4,23,19,238/- holding that these charges are in violation of the law and thus penalty in nature. Accordingly, he disallowed late delivery charges of Rs. 5,90,515/- deducted by the WCD Department, Rajasth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that non maintenance of day to day quantitative details is not affecting correctness and completeness of record. The volume and quantum of transactions made it impossible to maintain separate quantitative accounts of large and numerous entries of raw material and finished goods on day to day basis. He has further submitted that for the assessment year 2011-12, the GP declared by the assessee is better than the earlier year and, therefore, even if the AO has rejected the books of accounts, it would not automatically result in addition. He has referred to the comparative details of GP of the earlier assessment years and submitted that for the assessment year 2010-11 the AO while passing the assessment order under section 153A, has accepted the book results wherein the assessee declared GP at 3.79% whereas gross profit for the year under consideration declared at 4.29% and that too when there is a 242% increase in the turnover for the year under consideration in comparison to the earlier year. Further, the AO has made a lump sum addition without any basis or any proper and reasonable criteria. In support of his contention, the ld. A/R has relied upon the decision of Hon'ble Suprem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ails of raw material as pointed out by him. In fact the trading results are better than previour AY. 9.3.3 In my condidered view, it is not justified for rejecting the books of account on the sole ground of not maintaining quantitative details when there is complete record for volume of transaction and purchase thereof. 9.3.4 Following the ratios of decisions cited by the appellant in para 11 i) to iii) of his submission reproduced above, Thus, action of AO in rejection of books of accounts is not sustainable. 9.3.5 Moreover, the AO has made specific additions on account of unsecured loan and contributions by partners and a part of the same is already confirmed. 9.3.6 In view of above discussion, the impugned addition of Rs. 20,00,000/- is deleted." Therefore, when the AO has not found any discrepancy in the opening stock, purchases and closing stock of the assessee, then merely because the assessee has not maintained the day to day details of the movement of the stock due to the large quantity and numerous entries of raw material and finished goods cannot be a basis for rejection of books of accounts. The Hon'ble Jurisdictional High Court in the case of Malani Ramjivan Jagann....