AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 50
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.... doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore the assessment order ought to held as bad in law and deserves to be annulled. 2. That the order of the Id CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case. The addition confirmed by ld.CIT (A) deserves to be deleted. 3. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in confirming the additions made u/s 68 of the Income Tax Act, 1961 by : - a) solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee. b) giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.)-Kolkatta. c) holding that the as....
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....of statement on oath of the relevant entry operators were not available on record. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Competent Securities Pvt. Ltd. despite the fact that the director or Principal Officer of this company was never produced before the AO for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Competent Securities Pvt. Ltd. merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions. 6. Whether on the facts and circumstances of the case and in la....
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....dation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkatta. 4. On the facts and in the circumstances of the case and in law the ld.CIT(A) erred in confirmation the addition of Rs. 4,55,00,000/- made by Id. AO u/s 68 of Income Tax Act, 1961 on account of unsecured loans taken from following parties and erroneously held that the identity, creditworthiness and genuineness of the under mentioned company is doubtful: - Name of the company from whom loan received Addition during the year Amount Name of alleged entry operator whose statement were relied Jalsagar Commerce Pvt. Ltd 4,55,00,000 Shri Anand Sharma 5. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds. 6. 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." 2. As the common grounds are involved in both the years under consideration, as taken by the assessee and the revenue, therefore all the appeals are being hear....
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....me of persons required for cross examination and flexible time frame. The assessee vide letter dated 20/04/2018 filed on 24/04/2018 intimated the name of persons required for cross-examination. The assessee further submitted that the assessee is always and instantly available for cross-examination subject to prior information of one week. 5. The AO vide letter dated 07/05/2018 asked the assessee to file power of attorney of persons who will make cross examination of witness and give assurance to bear all the expenses of cross examination including cost of travelling etc. The assessee vide letter dated 18/05/2018 intimated the AO that the assessee is ready to bear the cost of cross-examination and it would like to cross-examine the witnesses at Kota. 6. The AO submitted the remand report to ld CIT(A) vide letter dated 21/05/2018, copy of which was forwarded to assessee by ld CIT(A) vide letter dated 28/05/2018. However, at this stage also, opportunity of cross-examination of witness was not given to the assessee. However, the A.O. asked the ld. CIT(A) to issue guidelines and procedure to be followed by him for conducting of cross examination. 7. By the impugned order, the ld. CIT....
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....ing and Finance Co. Pvt. Ltd (No loan or deposit taken by assessee from this company) 4 Hanish Toshniwal M/s Mangalgauri Vinimay Pvt Ltd M/s Quality Mercantile Pvt Ltd (No loan or deposit taken by assessee from these companies) 11. The ld CIT(A) vide letter dated 21-03-2018 called remand report from the AO and directed the AO to provide the copy of various documents relied by him and to provide the opportunity of cross-examination of witness. The AO vide letter dated 12-04-2018 provided copy of various inquiry reports and asked the assessee to intimate the name of persons required for cross examination and flexible time frame. The assessee vide letter dated 20/04/2018 filed on 24/04/2018 intimated the name of persons required for cross-examination. The assessee further submitted that the assessee is always and instantly available for cross-examination subject to prior information of one week. 12. The AO submitted the remand report to ld CIT(A) vide letter dated 21/05/2018, copy of which was forwarded to assessee by ld CIT(A) vide letter dated 28/05/2018 for A.Y 2016-17. However, at this stage also, opportunity of cross-examination of witness was not given to the assessee an....
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....n and in such documents no defects were pointed by ld. AO and the same were rejected only on suspicious, surmises, conjectures and replying solely on the statements of some parties. 16. As per ld. AR, the assessment order has been passed on the basis of unacceptable, unreasonable, incorrect and misconceived interpretation of the various judicial pronouncements of Hon'ble Apex Court and Hon'ble High Courts as relied upon by the Ld. AO, which was explained by the ld A.R. as under: (i) Dhakeswari Cotton Mills Ltd V. Commissioner of Income Tax, West Bengal (1954) 26 ITR 775 (SC): Ld. AO has proceeded with to pass the assessment order in violation of the principles and ratio laid down by the Hon'ble Apex Court in the aforesaid judgment. While placing reliance upon the judgment of Hon'ble Apex Court in case Dhakeswari (supra), Ld. AO declined access to the documents, relied upon by him and did not afford opportunity for cross-examination of witnesses, statements of which were recorded behind the back of Assessee on the pretext that Income Tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidenc....
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....he assessee. The respective lenders have also filed relevant documents with Ld. AO and respective authorities, in reply to notice under Section- 131 and 133(6) of the Act. It is also pertinent to mention that no authorities raised any doubt regarding the truthfulness of the document, furnished by the Assessee or respective lenders. Furthermore, the Ld. AO did not appreciate the ratio decided by the Hon'ble Apex Court in Roshan Di Hatti case (ibid), which is reproduced below: "the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding. We accordingly allow the appeal, set aside the order of the High Court and answer the question referred by the Tribunal in negative. The Commissioner will pay the costs of the appeal to the assessee". The case of Assessee is squarely covered under the aforesaid finding of Hon'ble Apex Court. The Judgment of Kale Khan Mohammed Hanif (ibid) is distinct from the case of Assessee and has no applicability to the Assessee. The observations of Hon'ble Apex Court are reproduced belo....
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....ue that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real". In the case of the assessee, all the documentary evidences were produced before Ld. AO both by the assessee and by the respective lenders as well and the documents produced are the public documents which are available on public domain itself. These documents include documents filed with ROC, bank statements, assessment carried out by the Income Tax Department and so on. The ld. AO did not point out any defects in such documents. It is further most importantly relevant to mention here that the Income Tax department carried out intensive search over the assessee group, however, as a result of search no evidence was found to prove that the assessee was having some undisclosed income which was routed in books of accounts in the shape of unsecured loans. Thus, the Ld. AO must have considered apparent as real as Ld. AO failed to establish and also to show any reason to believe that the apparent is not the real. Unless and until there was any reason to disbelieve the truthfulness of documentary evidences, there was no case and basis with the Ld. AO to treat t....
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....d judgment rather supports the contention of the Assessee and proves its case and not the case made out by the Ld. AO. 20. The ld AR also distinguished the facts laid down in the case of A. Govindarajulu Mudaliar Vs CIT (1958) 34 ITR 807 (SC), G.R. Siri Ram Vs CIT (1975) 98 ITR 337 (P&H), CIT Vs. Kishore Lal & Santoshi Lal (1995) 216 ITR 9 (Raj). The detailed submissions filed in this regard is placed on record. 21. With regard to various documentary evidences placed on record, the ld AR has relied on the decision of the Coordinate Bench in the case of M/s Kota Dall Mill A.Y 2010-11, AY 2011-12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17 Assessee's appeal (ITA No. 997 to 1002 and 1119/JPR/2018) and departmental appeal (ITA No. 1057 to 1062 and 1210/JPR/2018), wherein the unsecured loan taken by assessee from various companies was deleted by Hon'ble ITAT by passing order dated 31/12/2018. In view of the findings of Hon'ble ITAT in the main group case M/s Kota Dall Mill, it was submitted that impugned addition made by Ld. AO and confirmed by ld CIT(A) is not legally tenable. 22. As per ld. AR, so as to discharging of the burden u/s 68 of the Act, the....
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....tors 444 5 Copy of Ledger from the books of accounts of assessee 445 6 Copy of affidavit of Mrs Sangeeta Somani director of company. 446-449 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. 450-456 8 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 200708, AY 2011-12. 2012-13 and 2014-15. 457-499 9 Copy of ROC master data. 500-501 10 Copy of PAN card. 502 11 Certificate of Incorporation. 503 12 Copy of Certificate of NBFC Registration. 504 A.Y 2016-17 S. No. Particulars of Documents S. No. of PB where documents annexed AY 2016-17/VOL- II 1 Copy of Ack. of ITR of AY 2016-17 along with computation sheet 384-386 2 Copy of Balance sheet of AY 2016-17 along with enclosures 387-396 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 397-443 4 Copy of Confirmation of accounts from the books of unsecured loan creditors 444-446 5 Copy of Ledger from the books of accounts of assessee 447-450 6 Copy of affidavit of Mrs Sangeeta Somani director of company. 451-454 7 Copy of balance sheet of company....
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....reditworthiness of the cash creditor, the assessee has submitted the following documents before the lower authorities. S.No Description PB 2015-16 Vol II page no. Remarks 1 Assessment Order u/s 143(3) of the lender company Act for AY 2005-06, AY 2007-08, AY 2011-12, AY 2012-13 AND AY 2014-15. 457-499 Assessed Income for AY 2012-13 is Rs. 9,64,69,110 2. Bank statement of lender company 437-443 (for AY 2015-16) and 397-443 (for AY 2016-17) Bank statement shows the huge transactions in bank. There is no cash deposit in any of the company prior to the loan given to the assessee 3 Income Tax return for AY 2015-16 420-422 Lender Company declared total income of Rs. 1,48,15,240/- 4 Income Tax return for AY 2016-17 384-386/A.Y 2016-17 Lender Company declared total income of Rs. 1,72,95,720/- 5 Affidavit of Director 446-449 Further, the company has raised share capital in various years which was accepted by Income Tax department in scrutiny assessment u/s 143(3) of I.Tax Act, shown as under:- Assessment Year Share capital raised Assessment Order u/s 143(3) at PB A.Y 2015-16 1995-96 33,00,000 1996-97 16,50,000 2005-06 7,94,00,000 462....
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....n AY 2016-17. Further, the company paid interest to the lender company which the ld AO treated as genuine payment as he made no disallowance against the interest payment. When the interest payment is genuine the loan cannot be treated as in genuine. REPAYMENT OF LOAN AND INTEREST PAYMENT Name of Company AY Opening Balance Loan taken during the year Interest credited in a/c during the year Loan repayment during the year Closing balance M/s Jalsagar Commerce Pvt. Ltd 15-16 Nil 1,50,50,000 1,66,253 Nil 1,50,50,000 16-17 1,50,50,000 11,93,00,000 41,30,597 12,98,50,000 45,00,000 d) Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against unsecured loan was own undisclosed money of the company. No any entry in books of account or document was found showing payment of cash to these investor company in lieu of receipt of cheques from these company against unsecured loan. Therefore the genuineness of the transactions cannot be doubted. Further, the transactions are reflecting in the bank accounts of respective Investor Company as well as bank account of Assessee....
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....ng some undisclosed income. From the record we found that the assessee company was not having any undisclosed income. During the course of search proceedings over assessee Group carried as well as post search investigation and assessment proceedings no material was found by the department against the assessee to prove that the assessee company had channelized its unaccounted monies in form of unsecured loans . There is no any deposit of cash or suspicious funds in account of investor companies. The entire unsecured loan was invested by the investor company out of funds owned by it which is supported by the bank statements of the respective company, affidavits of their directors etc. The bank statements of the investor company clearly demonstrate that there is no cash deposit in bank a/c of lender Company. The investor company were incorporated much prior to investment made in assessee company and having their sufficient net worth. Thus in the case of search assessments no additions can be made without having corroborative material and evidences as a result of search. Allegation of shell companies without material In the light of submission, as aforesaid, it was submitted that the....
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....se where assessee has not provided relevant details. In this case the assessee discharged its onus by filing the documents for which the AO has not pointed any discrepancy. There is no material with the ld. AO to prove the funds received by the assessee as non-genuine and the belief of the ld. AO is solely based on some reports of the investigation wings or some statements of the parties which are not any way concerned with the assessee. However, before embarking on the allegation of the Ld. AO, the ld. AR submitted his submissions on merits in case of the lender company in respect of whom addition was made, which reads as follows: a) M/s Jalsagar Commerce Pvt. Ltd. As we understand and on the basis of details/information available with assessee no summon/notice under Section 131 or 133 (6) of the Act was issued to M/s Jalsagar Commerce Pvt. Ltd., either by the Ld. AO or by the concerned AO or by the DDIT (Inv.) Kolkata, which shows that Ld. AO had no doubt regarding the veracity of the documents furnished by the Assessee as nothing had been done by the Ld. AO. Thus, addition of unsecured loan, provided by M/s Jalsagar Commerce Pvt. Ltd. is unreasonable, untenable, without any ba....
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....as referred to report of investigation wing. The A.O. has to pass the assessment order on the basis of his own opinion and application of mind. There should have been independent application of facts after perusing the evidences and information. Report itself cannot be a ground to make addition Reliance is placed on the decision of Hon'ble Delhi High Court in CIT V Fair Finvest Ltd. 357 ITR 146. c) Information of Investigation Directorate:- On bare perusal of the documents relied upon and provided by the Ld. AO, it is needless to say that Ld. AO only reproduced the information of Investigation Directorate without conducting any independent enquiry and drawing any conclusion on the same and even the information obtained under the aforesaid letters have not been appreciated in the right perspective and in toto, which shows distorted approach of Ld. AO towards the aforesaid documents as well. Thus, without having any documents in support of the contents of documents, relied upon by Ld. AO, as aforesaid, are not acceptable and not tenable at all. d) Reports of the Investigation Directorate: - (i) Sharing of information letter of ACIT/CC-2(1)/Sharing of Information/Kol/2016-17 d....
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....0/ A.Y 2015-16) The aforesaid letter pertains to Cash deposit in the Account of M/s Ajay Traders and transfer of funds from M/s Ajay Traders to M/s Sangam Distributors Pvt. Ltd. The assessee company has no transaction with M/s Sangam Distributors Pvt. Ltd, hence this report is totally irrelevant for the case of assessee. (iv) Investigation report of the DDIT (Inv.), Unit-1(3) Kolkata vide letter number DDIT (Inv)/ Unit-1(3)/ KOl/ Jaipur/ Commission/ 2017-18/1867 dated 28.11.2017. (PB pg 391-399/Vol-I/A.Y 2015-16). Submission: Silent features of the report are as under:- * Admitted in the report that no notice remained unserved. It is humbly submitted that DDIT (Inv) in the aforesaid letter has admitted that no notice returned unserved by the postal authorities i.e. all the notices, issued by the DDIT (Inv) were duly served upon the respective creditors/investors companies, which proves their identity. * Admitted that all details filed -Tab I It is also admitted fact that all the creditors/investors companies duly responded to the notices of DDIT (Inv) by submitting all the requisite documents to prove identity, creditworthiness and genuineness of the transactions.....
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....i) Statement of 4 alleged entry operators As regard the statement of 4 alleged entry operators, we submit as under:- a) Mr. Anand Sharma - The statement of Mr. Anand Sharma was recorded on 06.01.2014 and 06.02.2014. PB-I Pg 76-81 & 82-95 /A.Y 2015-16 respectively He has no where stated that M/s Jalsagar Commerce Pvt. Ltd has provided accommodation entry to the assessee company. The statement of Mr. Anand Sharma is totally irrelevant for the case of assessee. Further the opportunity for cross examination was not given to the assessee, therefore, the statement of Shri Anand Sharma cannot be used against the assessee. b) Mr. Hanish Toshniwal - The statements were recorded on 11.05.2015, wherein a list of 207 Companies has been given. Name of M/s Jalsagar Commerce Pvt.Ltd is not appearing in the list. The statement of Shri Hanish Toshniwal is totally irrelevant for the case of assessee. However, data-base by the Directorate of Investigation Wing, Kolkata is itself contradictory. Furthermore, the statements were not recorded in the case of assessee. Further the opportunity for cross examination was not given to the assessee, therefore, the statement of Shri Hanish Toshniwal canno....
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....e of law, so as to not acceptable against the Assessee Company considering the principle of equity and law. Receipt of payment against unsecured loan through banking channel As already submitted during assessment proceedings, unsecured loan invested by NBFC to the Assessee Company through RTGS/Account Payee Cheque. The payments credited in the Bank account of the Assessee Company. Therefore, the Assessee has explained the nature and source of the credit entry and discharged the onus to prove the genuineness of the transactions. The aforesaid contention of the Assessee finds support from the following judicial pronouncements: i) CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA) "Where assessee received and returned amount in question by way of account payee cheques and transaction was reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated as assessee's income when department failed to prove to contrary." ii) CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180 "Where it was apparent from material on record that le....
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....s followed its findings on this issue in assessee's another group case M/s Baran Roller Flour Mills Pvt. Ltd (in CO 45/JPR/2018 & CO 46/JPR/2018). The facts and circumstances of this case are same to M/s Kota Dall Mill. The assessee relies upon findings of Hon'ble Tribunal in the case of M/s Kota Dall Mill which is at Pg 76-87 of the order of Hon'ble ITAT. 11. From the record we also found that the assessee made repeated requests for cross examination of witnesses. The Ld AO did not provide the opportunity of cross examination of witnesses. The Assessee raised this issue before ld CIT(A). Ld CIT(A) called remand report from AO and directed to provide the assessee opportunity of cross examination. Ld AO during the remand proceeding asked the assessee the name of persons to whom the assessee wants to cross examine and to give assurance to bear the expenses of witnesses. The assessee provided the name of persons to whom it wants to cross examine and gave assurance to bear all the cost relating to cross examination of witness. However the ld AO did not provide the opportunity of the cross examination and ld CIT (A) also held that there was no need to give the opportunity ....
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....t case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee 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. iii) H.R. Mehta V. Assistant Commissioner of Income Tax 387 ITR 561(Bombay); "In our view in the light of the fact that the monies were advanced apparently account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CIT (A) and the Tribunal vulnerable. ....
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....ction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn't provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing s....
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.... 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 this regard, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812-818 filed in case of M/s Kota Dall Mill) has held that "The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under subsection (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the....
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....ated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by....
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....ce and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law. However, ld. AO failed to appreciate that Hon'ble Apex Court in the case of Dakeshari (supra) has held that in making the assessment the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material and also that material relied upon by the Income Tax Officer should be disclosed to the Assessee, which in the case of Assessee, Ld. AO failed to do. The relevant para of the above judgment is reproduced below: "In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produced in support of his case. The result is that the assessee had not had a fair hearing". "in the result we allow this appeal, set aside the order of the Tribunal and remand t....
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....It is also pertinent to mention that no authorities raised any doubt regarding the truthfulness of the document, furnished by the Assessee or respective Lenders. Thus, the reliance placed by the Ld. AO is not only misconceived but also misinterpretation of the law laid down by Hon'ble Apex Court. Furthermore, the Ld. AO did not appreciate the ratio decided by the Hon'ble Apex Court in Roshan Di Hatti case (ibid), which is reproduced below: "the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding. We accordingly allow the appeal, set aside the order of the High Court and answer the question referred by the Tribunal in negative. The Commissioner will pay the costs of the appeal to the assessee". The case of Assessee is squarely covered under the aforesaid finding of Hon'ble Apex Court as the finding of the Ld. AO is unreasonable and any person acting judiciously and properly instructed as to the relevant law would not have come to such a finding. The non-appreciating of facts properly and non-appreciati....
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....the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. However, it is humbly submitted that while interpreting the aforesaid judgment, the Ld. AO failed to consider the finding of Hon'ble Apex Court that "it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real". In the case of the assessee, all the documentary evidences were produced before Ld. AO both by the assessee and by the respective lenders as well and the documents produced are the public documents which are available on public domain itself. These documents include documents filed with ROC, bank statements, assessment carried out by the Income Tax Department and so on. The ld. AO did not point out any defects in such documents. It is further most importantly relevant to mention here that the Income Tax department carried out intensive search over the assessee group and as a result of search no evidence was found to prove that the assessee was having some undisclosed income which was routed in books of accounts in the shape o....
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.... only state that the assessing officer shall act in accordance with law". Since, the act of the Ld. AO is not in accordance with the law, the Ld. AO failed to appreciate the ratio laid down by Hon'ble Court while carrying out assessment proceedings in the instant case of Assessee. It is humbly submitted that ratio of the aforesaid judgment rather supports the contention of the Assessee and proves its case and not the case made out by the Ld. AO. (vi) A. Govindarajulu Mudaliar Vs. CIT [1958] 34 ITR 807 (SC): The facts and circumstances of case of Assessee has no relevancy, even remotely, with the judgment of Hon'ble Apex Court, as relied upon by the Ld. AO. In that case the Assessee did not prove his version that the gift was alleged to have been made by the Assessee to his aunt and by her to him. More so, the conclusion to which the Appellate Tribunal came amply warranted by the facts of the case. Furthermore, in that case it was held that "But seeing that in this case the Assessee had moved the High Court and a decision has been pronounced adverse to him and this has become final obviously it would not be open to him to question the correctness of the decision of the Tribu....
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....s under Section-131 and/or Section-133 of the Act. Thus, considering the ratio laid down by the Hon'ble Court the invoking of Section-68 by the Ld. AO is unlawful. (ix) P.V. Raghava Reddy V. CIT (1956) 29 ITR 942 and M.M. A.K. Mohindeen Thambay & Co. V. CIT (1959) 36 ITR 481: The aforesaid cases, relied upon by the Ld. AO have no relevancy to the case of Assessee. In this case the Hon'ble Court held that the question of burden of proof cannot be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the ITO under certain circumstances. In the instant case of the Assessee, the Assessee discharged its onus and burden of proof, in respect of unsecured loan obtained by it by submitting documentary evidences of the respective Lenders before the Ld. AO for substantiating identity, creditworthiness and genuineness of the transactions. The documentary evidences produced by the Assessee remained un-rebutted, therefore, onus remained shifted to the Ld. AO, which was not discharged by Ld. AO. There is clear distinct....
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....d that the ld. CIT(A) was not justified in deleting the addition made in respect of loan taken from M/s Competent Securities Pvt. Ltd. 16. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that during the assessment year 2015-16 and 2016-17 the assessee has taken unsecured loan of Rs. 1,50,500/- and Rs. 4,55,00,000 respectively from M/s Jalsagar Commerce Pvt. Ltd.. In A.Y. 2016-17, the assessee has taken unsecured loan of Rs. 1.40 crores from M/s Competent Securities Pvt. Ltd.. The loan so taken was paid within the same financial year alongwith interest. However, the A.O. has allowed the interest expenditure but the added the amount of loan taken from M/s Competent Securities Pvt. Ltd. which has been deleted by the ld. CIT(A) after giving detailed finding. So far as the amount of loan taken from M/s Jalsagar Commerce Pvt. Ltd. is concerned, we found that the Coor....
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....ons from M/s.Royal Crystal Dealers Pvt. Ltd. to M/s. Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the chain of transactions and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank accounts statement of loan creditor, return of income, assessment orders framed under section 143(3), confirmation of the loan creditor, then a proper examination could have very well established the link, if 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....
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....ecting documentary evidence disclosing undisclosed income instead of obtaining the statement and then support of their claim merely on the basis of the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assessee has produced the documentary evidence and particularly the financial statements of the loan creditors, their bank account statement, then in the absence of any discrepancy or fault in these financial statements 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 ....
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....counts and also subjected to assessment under section 143(3) for some of the assessment years. Therefore, even as per the evidence produced by the assessee, the alleged suspicion of the AO was got dispelled and in the absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these 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 rema....
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....ifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them". 7. As mentioned 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 of levy of excise duty. Whether the goods were, in fact, sold to the said dealers. witnesses at the price which is mentioned in the price ....
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....ever, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11-2008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity 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 statem....
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....nk and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee 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....
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....sidered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- "2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs. 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an ind....
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....tion, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux....
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....) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evide....
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....assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed." Thus when the assessee has specifically asked 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 s....
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....st expenditure claimed by the assessee in respect of the loan taken from M/s Competent Securities Pvt. Ltd. which was repaid by 02/3/2016 with interest. The books of account of the assessee was clearly showing loan taken on interest payment and repayment of loan with interest. After having the following observation, the ld. CIT(A) has deleted the addition by holding as under: "5. Coming to the second class containing loans from M/s Competent Securities Private Limited and where adverse facts, details and evidences are not found in the reports dated 28.11.2017 and 06.12.2017 from Investigation Directorate, Kolkata as mentioned in para 3.4.8 mentioned above, my findings are as follows:- 5.1 As far as the lender companies namely, M/s Competent Securities Private Limited is concerned, it is evident from the documents placed on record that Notice was 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 pro....
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....and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 5.3 Furthermore, from the perusal of documentary evidences submitted by the Appellant, it is seen that transactions have been done through banking channels and on the date of making of loan, there is balance available in the accounts of the lender, which proves the creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of any of the creditors at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case 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 M/s Competent Securities Private Limited have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. ....
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....me does not lead any where to draw any adverse inference against the Appellant. Further, the various case laws relied upon by the AO are distinguishable from the facts of the present case as categorically countered by the Appellant in his written submissions as mentioned in Para No. 3.2 above. 5.8 It is settled judicial precedents that under the income tax law primary burden u/s 68 of the Act is on the Appellant and once this burden 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 Income-tax (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....
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....section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. 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 Gujarat High Court (supra). 5.11 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loan by the Appellant as no evidence....
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....ssessment year 2010-11, the finding of the ld. CIT (A) is upheld." 23. We had also gone through the findings recorded by the ld. CIT(A) in deleting the addition and found that no clinching evidence was brought on record by the Assessing Officer for holding that the loan given by the M/s Competent Securities Pvt. Ltd. was bogus. The assessee proved the identity the company. The company was assessed by Income Tax Department u/s 143(3) of ITax Act. The details of assessment completed u/s 143(3) is as under a) Assessment u/s 143(3) Name of Company Assessment year Income Assessed Assessment Order u/s 143(3) at PB 2016-17 pg-Vol-II M/s Competent Securities Pvt Ltd 2009-10 94,600 538-539 M/s Competent Securities Pvt Ltd 2010-11 2,08,099 544 M/s Competent Securities Pvt Ltd 2014-15 9,06,648 b) Copy of Master Data of ROC Name of Company Category of company as per Master data of ROC PB A.Y 2016-17 M/s Competent Securities Pvt Ltd Active 554/Vol-II ii) Creditworthiness In order to prove the creditworthiness of the cash creditor, the assessee has submitted the following documents before the lower authorities. M/s Competent Securities Pvt. Ltd S.N....
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....AN AND INTEREST PAYMENT Name of Company AY Opening Balance Loan taken during the year Interest credited in a/c during the year Loan repayment during the year Closing balance M/s Competent Securities Pvt. Ltd 16-17 Nil 1,40,00,000 4,96,721 1,40,00,000 Nil e) Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against unsecured loan was own undisclosed money of the company. No any entry in books of account or document was found showing payment of cash to these investor company in lieu of receipt of cheques from these company against unsecured loan. Therefore the genuineness of the transactions cannot be doubted. Further, the transactions are reflecting in the bank accounts of respective Investor Company as well as bank account of Assessee. Thus, the genuineness of the transactions cannot be doubted merely on the basis of guess, assumptions and presumptions, without having any other corroborative evidences. The following documents were furnished by the respective Investor Company to the DDIT (Inv.) Unit-1(3), Kolkata: (i) Copy of Certificate of Incorpora....