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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
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2019 (4) TMI 50
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.... Id. AO passed the assessment order against the 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 provider....
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....on of unsecured loans allegedly obtained from M/s Competent Securities Pvt. Ltd. merely for the reason that evidences in the form 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....
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....rder though detailed paper book for relevant AY and common paper books have been submitted, and d) holding that incriminating material had been found during the course of search of accommodation 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....
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....he AO and directed the ld AO to provide the copy of various documents relied by him and to provide the opportunity of cross-examination of witness. The ld 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. 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. H....
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....d by AO as non genuine on the basis of statement 1. Anand Sharma (i) M/s Jalsagar Commerce Pvt. Ltd (ii) M/s Royal Crystal Dealers Pvt. Ltd (iii) M/s Doshi Management Pvt. Ltd 2. Ankit Bagri M/s VSG Leasing and Finance Co. Pvt. Ltd (No loan or deposit taken by assessee from this company) 3. Shiv Shanker Banka M/s VSG Leasing 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 an....
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....appeal would also frustrated if violation of the principle of natural justice is taken place during initial proceedings of assessment itself. 15. With regard to merit of the addition, the ld AR of the assessee has submitted that the assessee had submitted ample documents during assessment proceedings to prove the identity, genuineness and creditworthiness of the Unsecured loan 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....
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....d Kale Khan Mohammed Hanif Vs CIT (1963) 50 ITR 1 (SC), it was submitted by the ld AR that in the present case of the Assessee, Assessee has already discharged its prima facie onus to prove the cash credit by furnishing relevant documents substantiated identity, creditworthiness and genuineness of the transaction. The ld. AO could not point out any defects in the documents or material so furnished by the 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....
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....n that there are reasons to believe that the apparent is not the real and a little probing was sufficient in 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, 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, however, as a result of search no evidence was found to prove that the assessee w....
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....ound by the Tribunal, a position not disputed before us on behalf of the Revenue". "We may 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. As per the ld AR the 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. 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 a....
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....ar Commerce Pvt. Ltd: - AY 2015-16 S. No. Particulars of Documents S. No. of PB where documents annexed AY 2015-16/VOL-II 1 Copy of Ack. of ITR of AY 2015-16 along with computation sheet 420-422 2 Copy of Balance sheet of AY 2015-16 along with enclosures 423-436 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 437-443 4 Copy of Confirmation of accounts from the books of unsecured loan creditors 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 annex....
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.... placed by the ld AR on the decision of the Hon'ble Rajasthan High Court in the case of Aravali Trading Co V/s ITO (2008) 8 DTR (Raj) 199 wherein it was held that once the existence of the creditors is proved and such persons own the credits, the assessee's onus stands discharged and the assessee is not required to prove the source from which the creditors could have acquired the money deposited with him. Hon'ble jurisdictional High Court has held that merely because the depositors' explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to the assessee itself. ii) Creditworthiness In order to prove the creditworthiness 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 sta....
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....ir creditworthiness is duly proved. Further once the assessee able to establish that he has in fact received money from third party, it can't be burdened with a further onus of establishing the source from which such third party had been able to obtain the money. Reliance is placed on the following decisions: - (i) Sideways Investment Pvt. Ltd. Vs DCIT 24 Tax World 146 (JP ITAT) (ii) CIT Vs. Daulat Ram Rawatmal 87 ITR 349 (SC) (iii) Saraogi Credit Corp. Vs. CIT 103 ITR 344 (PAT) iii) Genuineness a) The assessee submitted the confirmation of lender (PB pg 444/Vol-II/A.Y 2015-16 and PB Pg 444-446/Vol-II/A.Y 2016-17). b) The assessee has submitted the affidavit of the director of the cash credit company (PB pg 446-449/Vol -II/ A.Y 2015-16 and PB Pg 451-454/Vol-II/AY 2016-17). c) Further the company is repaying the loans. The major repayment of loan was made in 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 ....
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....as demonstrated by the Registrar of Companies records and there is no allegation or observations by the Ld. AO that cash was deposited in the bank account of the investor or companies or have been routed through the assessee. A perusal of Bank statements of Investor's Companies reveal that the "source" of "source" was also explained and was through banking transaction. The deposits in the Creditors' bank accounts were by bank transfers. Thus, in the case under appeal, the creditworthiness of the Creditors was fully established and there can be no preponderance of probabilities that these loans were in fact accommodation entries. Thus in the case of assessee the source of source is also available with the department. No concealed source of income as a result of search and survey:- During the course of search carried out over the assessee group no document or evidence was found to show that the assessee company was having 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 ma....
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....beyond the provisions of the Section-68 by expanding the onus on the Assessee, beyond the expectations of Parliament. The assessee has no statutory power to enforce the personal presence of the parties. If power to call the witness and examine him are not exercised judicially than the deposit cannot be considered as undisclosed income. Reliance is placed on the following decisions. 1) Nathu Ram Premchand Vs CIT (1963) 49 ITR 561 (All); 2) E.M.C. Works P Ltd Vs ITO ( 1963) 49 ITR 650 (All) 25. As per the ld AR, the assessee has discharged its onus laid down u/s 68:- Under section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and if the assessee offers no explanation or the explanation offered is not in the opinion of the AO, satisfactory, then such cash credit is liable to be charged to income tax as income of the assessee of that relevant previous year. This is not the case 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 ....
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....e CBDT cannot issue directions or instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. The SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said that an assessment order is the result of a judicial proceedings. According to the Apex Court, an assessment proceeding is a judicial proceeding. Obviously, no one can have influence or say in the course of judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried away under some report. Hon'ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-" that one who hears must decide the case.". b) Perusal of assessment order shows that A.O. has 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....
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....mmerce Pvt. Ltd has been carried out by the department u/s 143(3) of I.Tax Act for various assessment years and no where this company was assessed as entry operator. (ii) Information received from the ITO (Inv.), U-3, Kolkata of Investigation Directorate of Kolkata, vide letter number ITO (Inv.)/U-3, Kol./FIU/2015-16/6470/dated 30.03.2016. (PB-I pg 387-388/ A.Y 2015-16) Under the aforesaid letter, ITO has informed the Ld. AO that during the FY 2011-12 huge loan being Rs. 29.47 crore was advanced by M/s Magnet Capital Market Ltd. to M/s Kota Dall Mill. It is humbly submitted that the aforesaid letter mainly pertains STR (suspicious transaction report) relating to M/s Magnet Capital Market Ltd. The assessee company has no transaction with M/s Magnate Capital Market Ltd, hence this report is totally irrelevant for the case of assessee. (iii) Information received from the Deputy Director of Income Tax (Inv.), U-1(2), Kolkata of Investigation director of Kolkata vide letter number DDIT(Inv.)/U-1(2), KOL/16- 17/4499 date 24.03.2017. (PB-I pg 389-390/ A.Y 2015-16) The aforesaid letter pertains to Cash deposit in the Account of M/s Ajay....
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....at PB-I pg 401 name of five companies mentioned. The assessee had unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. The assessee has no concern with other Four companies. In this report it has been mentioned that Deepa Kriplani is director of M/s Jalsagar Commerce Pvt. Ltd and Mr. Anand Sharma/Janardhan Chokhani is entry operator of this company. The Ld AO has provided of copy of statement of Shri Anand Sharma dated 06-01-2014 (PB Pg 76- 81/Vol- I/A.Y 2015-16) and dated 06-02-2014 (PB Pg 82-85/Vol-I/AY 2015-16). In both the statements he has no where stated that M/s Jalsagar Commerce Pvt. Ltd was providing accommodation entries. Further, the entire data base is based on the statement recorded behind the back of the assessee at different occasions. The opportunity of cross examination was not given to the assessee, therefore, the statement of alleged entry operator cannot be utilized for adverse inference against the assessee. It is humbly submitted that no conclusion, whatsoever it may be, has been drawn by the authorities and it is merely a sharing of information by the internal authority and without having any cogent evidences for any of the relevancy with the....
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....so to be appreciated that besides submitting substantive documents with the reply by respective lender as well as by the Assessee, Assessee, in order to make his case, submitted Affidavits of directors M/s Jalsagar Commerce Pvt. Ltd. (Copy at PB-II Page no. 446- 449/A.Y 2015-16), wherein they confirmed the following major facts: - (i) Information regarding business activity of the company. (ii) Board of Directors is not working under any external influence and not appointed by any external person. (iii) Address of jurisdiction AO. (iv) Information regarding issuance of share capital by the Lender Company and detailed of assessment carried out by the respective AOs. (v) Confirmation in affidavit regarding providing unsecured loan and detail thereof. (vi) Detail regarding source of funds of the Company. Though, the Ld. AO has mentioned a very generalized statement in the show cause notice as well as in the assessment orders and failed to substantiate its contention inasmuch as the unsecured loan from NBFCs. Yet the Assessee dealt with the each and every allegation of the Ld. AO elaborately to show that even generalized statemen....
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....ct do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). (Copy at Case Law PB 509-523 in case of M/s Kota Dall Mill) Thus the as a result of search the department did not find any positive material against the assessee to show that the unsecured loan and share capital and share premium capital received from various companies are not genuine. In view of above submission this is to submit that order passed u/s 153A r.w.s. 143(3) of Income Tax Act, 1961 is bad in law, void-ab initio and deserve to be annulled and the findings made by ld CIT(A) deserves to be set aside. 10. In support of the proposition that the assessment order passed without giving opportunity of cross examination amounts to violation of principles of natural justice, therefore, the assessment order ought to have been held as bad in law and deserves to be annulled. Reliance was placed on the decision in the case of M/s Baran Roller Flour Mills Pvt. Ltd. for the A.Y. 2010-11 and 2011-12. It was argued by the ld AR that the assessee has taken the similar ground in the group's main lead....
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....Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically 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 assessee 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 assessee wanted to cross-examine those dealers and what extraction the assessee wanted from them". ii) Commissioner of Income Tax v. Ashwani Gupta, 2010 322 ITR 396 (Del); The Delhi High Court held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to....
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.... that without providing opportunity of cross-examination of the materials gathered and statement recorded behind the assessee cannot be used. In this case Hon'ble ITAT has held that:- "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 impugned 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 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 ....
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....f 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 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 th....
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....res 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 filed in case of M/s Kota Dall Mill) 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 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 ....
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....nity 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." 13. It was also argued by the ld AR that 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 is explained as under: (ii) 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 ....
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....aced by the Ld. AO on the aforesaid judgments of Hon'ble Apex Court to substantiate that prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee and where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. In this context, it is submitted that in the present case of the Assessee, Assessee has already discharged its prima facie onus to prove the cash credit by furnishing relevant documents substantiated identity, creditworthiness and genuineness of the transaction. The ld. AO could not pointed out any defects in the documents or material so furnished by the assessee. However, Ld. AO failed to apply ratio laid down by Hon'ble Apex Court that burden of proof is fluid for the purposes of Section-68. 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. However, in the instant case of Assessee, the burden of ....
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....it entries were income received from undisclosed sources was disputed only on the ground that the income from the business had been computed on the basis of an estimate. In the circumstances of the case we could not have done anything else". It is to the noted that the documentary proof substantiating the identity, credit worthiness and genuineness of the transaction, furnished by the Assessee, remained undisputed by the Ld. AO. Thus, placing reliance to the said judgment with that of the case of Assessee is a misconceived interpretation of the Ld. AO. (iv) Commissioner of Income-tax v. Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal v. Commissioner of Income-tax [1995] 80 TAXMANN 89/214 ITR 801 (SC): Ld. AO, while placing reliance upon the aforesaid judgments has held that the theory of preponderance of human probability as pronounced by the Hon'ble Apex Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 and Sumiti Dayal v. CIT (1995) 80 Taxmann 89/214 ITR 801 (SC) is of utmost importance. In the cases where it has been established that the source company is a near 'Paper Company' solely engaged in the activity of providing accommodation entries, th....
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....able in the case of assessee as reality of the transactions carried out by the assessee in the course of normal business activities have been duly proved beyond doubt with the documentary evidences and confirmed by the respective lenders/parties also and even acceptable before the judicial authorities. It shows misconceived interpretation by the Ld. AO without having any nexus with the facts of the case of the assessee. (v) Commissioner of Income Tax v. Independent Media (P) Ltd 210 Taxmann 14 (Delhi) (2012) Though the Ld. AO has placed reliance upon the aforesaid judgment to substantiate his action for making addition under Section-68 of the Act but the act of Ld. AO is derogatory to the aforesaid judgment of Hon'ble High Court of Delhi. Ld. AO did not provide opportunity to the cross-examination of so-called witnesses, relied upon by Ld. AO, which must have been allowed as held by the Hon'ble High Court of Delhi in the above judgment. The relevant paras are reproduced below: "the Tribunal, however, may be justified in directing the assessing officer to afford an opportunity to the assessee of cross-examination the persons who had allegedly given statements before t....
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....ts regarding discharge of onus by the Assessee, the aforesaid judgment, relied upon by the Ld. AO has no relevancy. (viii) CIT V. Kishori Lal & Santoshi Lal (1995) 216 ITR 9 (Raj.): Though, the Ld. AO has placed reliance upon the aforesaid judgment but act of the Ld. AO is contrary to the ratio laid down by the Hon'ble High Court of Rajasthan in the aforesaid judgment. The relevant para from the aforesaid judgment is reproduced below: "In the assessment proceedings, the Income Tax Officer is supposed to follow the principle of natural justice and when a notice is given to the assessee to explain such an entry, the explanation which has been given has to be taken into consideration". In the instant case of Assessee, Ld. AO has acted in utter disregard to the principle of natural justice and neither considered documentary evidences nor considered the explanation of the Assessee. Furthermore, Ld. AO without appreciating what has been held in the aforesaid judgment of Hon'ble Court has acted in derogatorily to the aforesaid pronouncement itself. It has clearly been held by the Hon'ble Court that "If the explanation is not supported by any do....
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....s action under Section-68 of the Act. However, Ld. AO failed to discharge its onus, as laid down by the Hon'ble Court in this judgment. The relevant para from the aforesaid judgment is reproduced below: "We would like to observe that the law on this point is now well settled. It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the department". 14. In view of above, it was contended that the cases cited by AO are entirely distinguished from those the assessees case or AO failed to apply the ratio laid down by the Hon'ble Courts in those cited cases, as such no reliance should be placed on the cases, having no relevancy with the Assessee case. However, most of the cases, cited by the AO are supporting the contention of the Assessee. 15. On the other hand, the ld. CIT-....
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....tatement of Shri Anand Sharma was also sent along with the report of the AO. The ld. CIT (A) has confirmed the addition because of the reason that the statement of Shri Anand Sharma was very much in the possession of the AO who has admitted in his statement that M/s. Jalsagar Commerce Pvt. Ltd. was engaged in the activity of providing accommodation entry. However, we find that M/s. Jalsagar Commerce Pvt. Ltd is not managed or controlled by Shri Anand Sharma, rather the company M/s. Royal Crystal Dealers Pvt. Ltd. was stated to have been owned by Shri Anand Sharma and in his statement dated 6th February, 2014 Shri Anand Sharma has stated to have been providing entries from M/s. Royal Crystal Dealers Pvt. Ltd. to M/s. Jalsagar Commerce Pvt. Ltd. Therefore, there is no allegation or any admission in the statement of Shri Anand Sharma that he has provided bogus loan entry to the assessee or any group concerns of the assessee. Since the name of M/s. Jalsagar Commerce was crepted in his statement, the AO has presumed that the loan provided by M/s. Jalsagar Commerce Pvt Ltd is nothing but the bogus accommodation entry provided by Shri Anand Sharma through M/s. Royal Crystal Dealers Pvt. L....
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....creditor was assessed to tax and the AO completed the assessment under section 143 (3) for various assessment years which are relevant for the assessment year under consideration. The AO in case of loan creditor has not disturbed the transactions of loan given by this company to the assessee. From the financial statements of the loan creditor it is apparent that the loan creditor was having sufficient funds to advance the loan amount to the assessee and once the said financial statements were not disturbed, then the creditworthiness of the loan creditor cannot be doubted when it was accepted in the assessment order passed under section 143(3) of the IT Act. We further note that the AO insisted the assessee to produce the directors of the loan provider company. The assessee produced the affidavit, and the notices issued by the AO under section 131 and 133(6) of the Act were duly complied with by the creditor. The statement of the Director of M/s. Royal Crystal Dealers Pvt. Ltd. was also recorded by the AO wherein the Director has confirmed the transaction of loan. There are various reports of the DDIT Kolkata which are placed at pages 406 to 422 of the paper book. We find that all t....
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.... 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Jalsagar Commerce Private Ltd 12-13 53,05,000 78,95,00,000 1,07,08,434 96,37,591 31,72,80,655 47,85,95,188 Jalsagar Commerce Private Ltd 13-14 47,85,95,188 2,76,31,50,000 0 0 2,97,53,40,000 26,64,05,188 Jalsagar Commerce Private Ltd 14-15 26,64,05,188 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Jalsagar Commerce Private Ltd 15-16 0 1,34,89,00,000 49,00,600 44,10,540 1,34,93,90,060 0 Jalsagar Commerce Private Ltd 16-17 0 87,11,00,000 1,67,23,178 1,50,50,860 87,27,72,318 0 All these details were before the AO as all these assessment years were passed by the AO pursuant to the search and seizure action under section 132 of the IT Act. Thus it is clear that for the assessment year 2015-16 there was Nil balance on account of loan taken from M/s. Jalsagar Commerce Pvt. Ltd. and the entire loan was already repaid by the assessee. We f....
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....ing 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 practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the back of the assessee, therefore, the said statement of Shri Anand Sharma cannot be the sole basis of assessment without giving an opportunity of cross examination to the assessee. The Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statem....
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....ndustries 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 the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show-cause notice. 9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. No costs." Once the assessee has disputed the correctness of the statement and wanted to cross examine the witness which was not given by the AO as well as ld. CIT (A), then the orders passed based on such statement are not sustainable in law. The Hon'ble Delhi High Court in case of CIT vs. Ashwani Gupta, 322 ITR 396 (Delhi) while dealing with the issue of not providing the opportunity to cross examine the witnesses has held in para 5 to 7 as under :- "5. Secondly, in fact, a rectification application being MA 264/Delhi/2008 under section 254(2) of the Income-t....
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....amination 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 existent and that the assessee had discharged his primary onus by identifying the source of the amount paid. The Court observed that once the primary onus is discharged, the onus shifted to the revenue to verify genuineness of the transaction. In the present case no such effort was made by the revenue. We find that in S. Hastimal (supra) the Madras High Court observed that after a lapse of several years the assessee should not be placed upon the rack and called upon to explain not only merely, the origin and source of his capital contribution but the origin of origin and the source of source as well. In yet another case of Bahri Brothers (P) Ltd. (supra) the Division Bench of Patna High Court observed that where the assessee upon whom the initial burden lies, produc....
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....e 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 adopt that view after having given our thought to various issues raised and the decisions cited by Mr. Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conclude that the loan was a bogus transaction. 17. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque ....
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....ch 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 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 prov....
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....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 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) 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 sub-section (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 again....
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....sessee 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 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 co....
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.... 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." 17. We had carefully gone through the above order of the Tribunal in the case of Kota Dall Mill Vs. DCIT (supra) with respect to the very same search and seizure action taken with respect to the amount taken from M/s Jalsagar Commerce Pvt. Ltd. After having similar observation as in the instant case before us, the A.O. has made the addition which has been confirmed by the ld. CIT(A). We found that the Tribunal have dealt with the issue threadbare and after controverting each and every objection of the Assessing Officer and the ld. CIT(A) have confirmed the addition and also dealing with all the judicial pronouncements referred by the ld. CIT(A) deleted the addition so made with respect to the loan taken from M/s Jalsagar Comm....
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.... substantiating that these companies are controlled by the so-called Entry Operators. 5.2 For the unsecured company namely, M/s Competent Securities 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 company, which are available at page no. 400- 436 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 these companies. Th....
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....m 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 of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal is not a director in the Appellant company. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant company or its total income, this basis of addition adopted by the AO is farfetched & cannot be concurred. 5.5 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in the account statement of creditor, there is corresponding credit entry of equal amount, however, this observation of the AO is itself not sufficient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making loan, funds are required to be arranged by the lender, therefor....
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....ftline 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 creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal & Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing & Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this question of law. 5.9 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income tax authorities only and therefore, in view of the judgment CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, the Appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of lender companies and some directors/officer were also produced before the AO. T....
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....bsence 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. 5.12 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 in respect of loan from M/s Competent Securities Private Limited totalling to Rs. 1,40,00,000/- is not sustainable and hence the same stands deleted. Thus, ground No. 2 of appeal is partly allowed." 21. The revenue is in further appeal before us against deletion of addition made on account of loan taken from M/s Competent Securities Pvt. Ltd.. 22. 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. We found that the Coordinate Be....
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....company Act for AY 2009-10, AY 2010-11, & AY 2014-15 537-553 Assessed Income for AY 2014-15 is Rs. 9,06,648/- 2. Bank statement of lender company 521-523 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 2016-17 510-512 Income declared for A.Y 2016-17 Rs. 1,92,28,760/- 4 Affidavit of Director 526-529 Further, the company has raised share capital in various years which was assessed by Income Tax department in scrutiny assessment u/s 143(3) of ITax Act, shown as under:- M/s Competent Securities Pvt. Ltd. Assessment Year Financial Year Share capital raised Assessment Order u/s 143(3) at PB pg 1994-95 1993-94 3,00,000 - 2000-01 1999-00 24,50,000 - 2009-10 2008-09 98,36,50,000 538-539/Vol-II/AY 2016-17 There is sufficient source of funds with the company to give the unsecured loan to the assessee. The chart showing the amount given on unsecured loan to the assessee viz a viz own funds with the companies are as under: - Name of the Investor company Amount....
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....pany to the DDIT (Inv.) Unit-1(3), Kolkata: (i) Copy of Certificate of Incorporation, PAN Card (ii) Assessment Order passed under Section 143(3). (iii) Copy of acknowledgement of Income Tax Returns and Audited Accounts for the period from Assessment year 2010-11 to Assessment year 2016-17 (iv) Details pertaining to the transactions carried out with M/s KDM Group concerns along with copies of Ledger account, Share allotment advice and Loan confirmation, share sale letter along with share transfer form pertaining to the aforesaid transactions. (v) Sheet showing details regarding sources of fund along with highlighted bank statement reflecting the transactions with KDM Group. Source of source was explained by submitting the bank statement of creditors:- We also observe that investor is corporate entity and is maintaining proper books of accounts, which are subjected to Statutory Audit by Independent Auditors and audited balance sheet, and profit and loss account along with the income tax returns were filed before the Assessing Officer. Therefore, the proof of their existence is available as demonstrated by the Registrar of Compa....