AI Drafter 
TaxTMI 
TaxTMI 
2019 (4) TMI 97
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....of the case and in law the order passed u/s 153 A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The Id. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only. 2. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. The findings of Id CIT(A) in this regard are perverse and erroneous. It is contended that the 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. 3. That the order of the Id CIT (A), confirming the addition made by the A....
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.... Grounds of revenue's appeal for the A.Y. 2010-11 "1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 1,45,00,000/- made by the AO u/s 68 of the IT Act on account of unexplained share application money allegedly obtained by the assessee from M/s Teac Consultants Pvt. Ltd. and M/s Sangam Distributors Pvt. Ltd., M/s Tech Consultants Pvt. Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Share application money by observing that the alleged investor companies M/s Teac Consultants Pvt. Ltd. and M/s Sangam Distributors Pvt. Ltd., M/s Tech Consultants Pvt. Ltd. are not shell companies without considering the financial statements of these companies. 3. 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 Teac Consultants Pvt. Ltd. and M/s Sangam Distributors Pvt. Ltd., M/s Tech Consultants Pvt. Ltd. merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not ava....
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....cantile Pvt. Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Share application money by observing that the alleged investor company M/s ISIS Mercantile Pvt. Ltd. is not shell company without considering the financial statements of the company. 3. 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 ISIS Mercantile 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 ISIS Mercantile Pvt. Ltd. despite the fact that the director or Principal Officer of the 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 fac....
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....dation entry providers, therefore, the assessment order ought to hold as bad in law and deserves to be annulled. The findings of the ld. CIT(A) in this regard are perverse and erroneous. 3. The appellant craves leave to add, alter, amend, any of the grounds of appeal at or before the time of hearing of appeal." 2. Common grounds have been taken in both the appeals therefore all the appeals as well as the cross objection are being heard together and for the sake of convenience, a composite order is being passed. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of leasing of property and plant and machinery. There was a search at various premises of M/s Kota Dall Mill group, Kota on 02/7/2015. The assessee company was carrying out the leasing business. It had leased out its property and plant & machinery to M/s Kota Dali Mill. The company was also engaged in the business of trading during the year under consideration. The return of income was e-filed on 31.08.2010 u/s 139(1) of the Act for the A.Y. 2010-11 declaring total income at Rs. 39,010/-. Further, notice u/s 153A of the IT Act, 1961 was issu....
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....ium M/s Teac Consultants Private Limited. 15,00,000 Unsecured Loan M/s Jalsagar Commerce Pvt. Ltd. 62,85,000 Others Disallowance u/s 14A 53,523 2,08,38,523 2011-12 Share Capital & Premium M/s ISIS Mercantiles Pvt. Ltd. 1,20,00,000 Others Disallowance u/s 14A 1,98,478 1,21,98,478 5. Assessee approached before the ld. CIT(A) against the order of the Assessing Officer for assessment year 2010-11. 6. The ld. CIT(A) vide letter dated 21-03-2018 called remand report from the AO and directed the ld AO to provide the copy of various documents relied by him and to provide the opportunity of crossexamination 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. 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 available for cross-examination subject to prior i....
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....up main lead case M/s Kota Dall Mill (in ITA 997/JPR/2018, for A.Y 2010-11 ). Hon'ble ITAT has followed this decision in assessee's another group case M/s Baran Roller Flour Mills Pvt. Ltd. (in CO 45/JPR/2018 A.Y 2010-11). The facts and circumstances of this case are same to M/s Kota Dall Mill/ M/s Baran Roller Flour Mills Pvt. Ltd. 10. It was also argued by the ld AR that the completed assessment cannot be reviewed without having incriminating material. It was also contended that the provisions of Section 153A of the Act cannot be applied in respect of assessment year in respect of which assessment has already been completed unless some incriminating material/information comes in the possession/knowledge of the assessing officer during the course of search proceedings. The assessment for AY 2010-11 and AY 2011-12 were not pending as on the date of search, as shown by following table. Assessment Year Date of filing of return u/s 139(1) Time limit prescribed for issue of notice u/s 142(1)/143(2) of I Tax Act 2010-11 31-08-2010 30-09-2011 2011-12 15-09-2011 30-09-2012 In support of the submissions made herein, the assessee placed reliance on t....
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....e Law PB 31-32 in case of M/s Kota Dall Mill) Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Delhi High Court. (iv) Hon'ble Delhi High Court has decided the legal position in the case of CIT Vs Kabul Chawla 380 ITR 573 (Del) (Copy at Case Law PB 114-125 in case of M/s Kota Dall Mill) after analyzing the case laws earlier decided by various courts and held that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. v) Hon'ble Rajasthan High Court in Jai Steel (India) Vs Astt Commissioner of Income Tax (2013) 259 CTR (Raj) 281. (Copy at Case Law PB 33-43 in case of M/s Kota Dall Mill) Hon'ble Jurisdictional High Court has analyzed the provisions of section 153A in detail and held that in case nothing incriminating is found on account of search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. (vi) Hon'ble Mumbai High Court in the case of Commissioner of Income Tax & Ors. vs....
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....-1, Jaipur ITA No 174/JP/2017 order dated 24/08/2017 (Copy at Case Law PB 95-104 in case of M/s Kota Dall Mill) (c) 2017 (9) TMI 638 - ITAT Jaipur M/S. Shyam Sarover Buildcon Pvt. Ltd. & M/S. Shivsagar Buildcon Pvt. Ltd. Versus The Deputy Commissioner Of Income-Tax, Central Circle-3, Jaipur ITA No 710/JP/2016 order dated 27/07/2017 (Copy at Case Law PB 105-113 in case of M/s Kota Dall Mill) (d) The Honb'le ITAT, Jaipur Bench, Jaipur in the case of M/s Jadau Jewellers & Manufacturers Pvt. Ltd in ITA No. 686/JP/2014 dated 14.12.2015 Copy at Case Law PB 44-54 in case of M/s Kota Dall Mill) Thus, the law as envisaged by the Jurisdictional High Court and various other High Court, followed by Hon'ble ITAT is that, if no incriminating material has been found, then no addition can be made in the assessment completed under section 153A which has not been abated. In support of the contention that the statement cannot be taken as incriminating material, reliance was placed on the following judicial precedents: (i) Hon'ble Delhi Court in Commissioner of Income Tax v. Harjeev Aggarwal (2016) 290 CTR 263 held that statements recorded under Section 132 (4) of the ....
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.... 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 of cross examination. Thus, the lower authorities violated the principle of natural justice, which tenders the assessment void ab-initio. 13. In support of the above proposition, reliance was placed on the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries V/S Commissioner of Central Excise, Kolkata-II 2016 (15) SCC 785 (SC) (Copy at Case Law PB 808-811 filed in case of M/s Kota Dall Mill), wherein Hon'ble Supreme Court has held that:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though t....
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....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. In our view the assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statement and disclose material, these were denied to him. In this view of the matter we are inclined to allow the appeal on this very issue". iv) Decision of Hon'ble ITAT Jaipur Bench in the case of Shri Prateek Kothari in appeal No. 159/JP/16 order dated 16/12/16 (Copy at Case Law PB 82....
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....ted 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 so, the AO stated that "in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group ....
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....s 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 case he is expected to meet and that he should further give him ample opportunity to meet it." It was held in that case that "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 produce ....
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.... 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 asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him." 2.11 In light of above proposition in law and especially taking into consideration the decision of the Hon'ble Supreme Court in case of C. Vasantlal & Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bh....
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....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 the case to it with directions that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private enquiries made by the Income Tax Officer if it is ....
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....l 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 Appellant 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-appreciation of record by Ld. AO and as also not adopting judicious approach has resulted in unreasonable and arbitrary assessment order. The Judgment of Kale Khan Mohammed Hanif (ibid) is distinct from the case of Appellant and has no applicability to the Appellant. The observations of Hon'ble Apex Court are reproduced below: "It was open to the assessee to raise the question that the finding that those amounts were income received from undisclosed sources was not based on an....
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..... In the case of the appellant, all the documentary evidences were produced before Ld. AO both by the appellant 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 appellant 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 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 the apparent as not real only on the basis of guess, assumptions, presumptions and surmises, which is not permissible under the law....
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....ade out by the Ld. AO. (v) A. Govindarajulu Mudaliar Vs. CIT [1958] 34 ITR 807 (SC): The facts and circumstances of case of Appellant has no relevancy, even remotely, with the judgment of Hon'ble Apex Court, as relied upon by the Ld. AO. In that case the Appellant did not prove his version that the gift was alleged to have been made by the Appellant 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 Appellant 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 Tribunal on grounds which might have taken in an appeal against the judgment of the High Court". Thus, the facts and law of the aforesaid case has no relevancy to that of the case of the Appellant. (vi) G.R. Siri Ram V. CIT (1975) 98 ITR 337 (P&H): The case is also not relevant to the case of Appellant inasmuch as in this case the Appellant had agreed before the ITO that there was no evidence available with the Ladies in ....
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....t 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 Appellant, the Appellant 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 Appellant remained un-rebutted, therefore, onus remained shifted to the Ld. AO, which was not discharged by Ld. AO. There is clear distinction between two types of matters (1) where the explanation and evidences are produced by an assesssee and (2) where no explanation and evidences are produced by the assessee. Since, the Appellant case falls under (1) above, the case relied upon by the Ld. AO is distinct and not applicable to the case of the Appellant. More so, the Ld. AO has not made out a case that the amount standing in their ....
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.... After the assessment completed for the above years, the department carried out search & seizure operations on 02.07.2015. The Income Tax department carried out intensive search and seizure operations over the assessee and during the course of search no material found from the possession of the assessee which shows that the unsecured loan and share capital & Premium received by the assessee during the year from various companies are not genuine/bogus. We found that the similar issues have been dealt by the Tribunal in the group concern of the assessee namely M/s Kota Dall Mill and M/s Baran Roller Flour Mills as quoted above. Respectfully following the decision of the Coordinate Bench in group case of the assessee we not find any merit in the addition so made by the Assessing Officer, in so far as assessments were not abated and no incriminating material was found during the course of search. With regard to ground No. 2 raised by the assessee against the addition made without providing opportunity of cross examination, the same is covered by the order of the Tribunal in the group concern of M/s Kota Dall Mill page No. 76 to 87 and the Baran Roller Flour Mills page 57 to 91. 1....
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.... treated as shell company. 6.2 Now, coming to the loan from M/s Birla Arts Private Limited no notice under Section 131 or 133(6) of the Act was issued to this company, either by the AO or by the concerned AO or by the DDIT (Inv.) Kolkata. This shows that no independent enquiry was done by the AO to establish that the said companies were shell companies, blind reliance has been placed by the AO on the investigation report of the DDIT, Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Order. 6.3 As far as the remaining lender companies namely, M/s Teac Consultants Private Limited and M/s Sangam Distributors Pvt. Ltd. are 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 con....
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....iable from confirmation of accounts placed at page no. 453 to 455, 532 to 534 & 588 to 589 of PB with supporting bank statements placed at page no. 444 to 452, 521 to 531 & 571 to 587 PB and have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 6.5 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 loans, there is balance available in the accounts of the borrowers, 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 i....
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....ns has been found and brought on record. 6.9 Similarly, I find that various observations of the AO on balance sheet / ITR of the lender companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations/observations of the AO are misconceived and premature only and in view the appellant's submission made in para 10 as reproduced in Para No. 4.2 of this order, the same 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 16 as reproduced in Para No. 4.2above. 6.10 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.) LT....
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.... are reported, accordingly the AO has not followed the principles laid down under section 68 of the Act. The Hon'ble Gujrat High Court in the case of Commissioner of Income-tax v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) has held that:- Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under 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 princ....
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.... the assessee has produced all the relevant supporting documentary evidence as we have reproduced in the foregoing paras as referred by the ld. A/R of the assessee and these creditor companies were subject to regular assessments and scrutiny assessments under section 143(3) were completed by the department as per the details reproduced. Therefore, once these creditor companies are regularly assessed to tax and duly examined by the department at the scrutiny assessments, then the transactions of loans cannot be held as bogus when the same were accepted in the hands of the creditors. We further note that these companies were having sufficient funds in the shape of share capital, reserves and surplus. The details of the share capitals of these companies are as under :- M/s Birla Arts Pvt. Ltd Assessment Year Financial Year Share capital raised 1998-1999 1997-1998 12,90,000 1999-2000 1998-1999 16,82,000 2003-2004 2002-2003 50,00,000 2004-2005 2003-2004 2,74,40,000 2005-2006 2004-2005 3,69,50,000 2007-2008 2006-2007 3,26,00,000 2010-2011 2009-2....
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.... 15,00,000/- There is no dispute that during the course of search and seizure no incriminating material was either found or seized disclosing any undisclosed income or indicating any bogus transaction of receipt of share capital and premium by the assessee from these two companies. Further, the AO has also not referred or relied upon any seized document while making the addition of the amount of Rs. 1,05,00,000/- on account of share capital and premium received from these two companies under section 68 of the IT Act. The sole basis of the addition made by the AO is the information received from the Investigation Wing Kolkata which is also in turn is nothing but the narration of the statements of various persons allegedly operators of bogus entry provider. The AO has referred to the statement of Shri Anand Sharma and other three persons as mentioned in the report of the Investigation Wing for treating the share capital and premium received from these two companies as undisclosed cash credit being the assessee's own unaccounted and undisclosed income routed in the shape of share capital and premium. It is also not disputed that the AO was not even having the alleged statement o....
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....ntry of payment made to assessee. 490 4 Confirmation of account showing the transaction with Assessee Company. 491 5 Copy of share application form of equity share 492-493 6 Copy of affidavit of Mrs Neelam Gautam director of M/s Birla Arts Pvt Ltd. On behalf of amalgamated company M/s Sangam Distributors Pvt Ltd. 494-497 7 Copy of order dated 19.07.2014 passed by Calcutta High Court regarding amalgamation of other companies in this company 498-524 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 525-528 9 Copy of assessment order passed in the case of above named company for AY 2006-07, AY 200708 and 2013-14. 529-540 10 Copy of ROC master data. 541-542 11 Copy of PAN card. 543 12 Certificate of Incorporation. 544 Thus it is manifest from the details of the documentary evidence produced by the assessee that the assessee established its claim of genuineness of the transaction as well as creditworthiness of these share applicants by showing the transactions in the books of accounts and financial statements of the share applicants, the availability of the fund....
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....istributors Pvt.Ltd 2013-14 6,79,400 538 M/s ISIS Mercantile Pvt. Ltd. 2006-07 6,936/- 500-501 M/s ISIS Mercantile Pvt. Ltd 2013-14 21,81,459/- 502-505 M/s ISIS Mercantile Pvt. Ltd 2014-15 Nil (Amalgamated with M/s Magnate Capital Market Pvt. Ltd.) 509-510 Thus it is clear that both the share applicant companies are regularly assessed and assessment orders under section 143(3) were passed wherein the transactions of investment made in the shares of the assessee were not disturbed by the AO. Hence all these documentary evidences as well as the admitted facts clearly established that the assessee has discharged its onus of proving the identity and creditworthiness of the share applicants as well as genuineness of the transactions. The AO has not brought on record any evidence to contradict the documentary evidence filed by the assessee. The ld. CIT (Appeals) has deleted the addition in para 5 to 5.13 as under :- "5. On being perusal of reports dated 28.11.2017 and 06.12.2017 received from Investigation Directorate, Kolkata it reveals no adverse facts, details and evidences are not found in the reports in respect of Share application ....
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....urden 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. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of Share application and Share premium from M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited amounting to Rs. 1,05,00,000/- is unjustified; firstly, on the ground that no inquiries were made to rebut the evidences filed by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. In particular, none of the material or statements have been provided in the Assessment Order wherein names of the said companies are mentioned. Notably, the transactions with the company are duly verifiable from confirmation of accounts placed at Page no. 296 and 351 of PB with supporting bank statements placed at Page no. 295 and 352 of PB and have been carried out through banking ch....
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....at 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 investment, funds are required to be arranged by the investor, therefore reflection of such entries in bank statement doesn't lead to draw any adverse inference against the Appellant. Needless to say that Appellant is not required to prove source of the source u/s 68 of the Act in view of the settled judicial precedents. 5.7 In my considered view, mere not believing an explanation cannot lead to a conclusion that the invested amount is the income of the assessee from some undisclosed sources while in the present case, no evidences of any generation of undisclosed income or their utilization in the form of share application and share premium has been found and brought on record. 5.8 Similarly, I find that various observations of the AO on balance sheet / ITR of the lender companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations / observations of the AO are misconceived and premature only and in view the appellant's submission made in para 10 as repro....
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....rs before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of investor companies and some directors/officer were also produced before the AO. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the present case it is untenable to make any addition for alleged non-appearance by the concerned person before the authorities though they complied with the notices/summon issued to them. 5.11 In the present case in hand, I find that AO asked Assessee to produce investor companies without verifying the facts of investing money from respective jurisdiction assessing officer and without verifying their returns of income and balance sheet wherein these transactions are reported, accordingly the AO has not followed the principles laid down under section 68 of the Act. The Hon'ble Gujrat High Court in the case of Commissioner of Income-tax v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) has held that:- Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax ....
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....rcumstances of the case the AO has made the addition based on the report of the Investigation Wing Kolkata whereas the assessee has produced all the relevant documentary evidence to establish the identity, creditworthiness and genuineness of the transactions. Hence in the absence of any discrepancy or otherwise any material or record to show that the assessee's own unaccounted/undisclosed income has routed through the share applicants, the addition made by the AO is not justified. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT (Appeals) in deleting the addition." 19. Similarly in respect of loan taken from M/s Teac Consultants Pvt. Ltd. of Rs. 15.00 lacs on account of share capital and premium, this issue is also covered by the decision of the Coordinate Bench in the case of Kota Dall Mill Vs. DCIT (supra) order dated 31/12/2018 for the A.Y. 2010-11 to 2012-13 at page 92 to 102 and in the case of DCIT Vs. M/s Baran Roller Flour Mills Pvt. Ltd. (supra) at page 11 to 23, which has already been reproduced and discussed in earlier paragraphs of this order. 20. In respect of share application from M/s ISIS Mercantile Pvt. Ltd. amount....
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....les Pvt. Ltd. 518-521 15 Copy of reply in response to such summon along with dispatch proof. 522-524 Further, the assessee also produced the master data of ROC showing the status of the said company as "Amalgamated". The amalgamation was duly approved by the Hon'ble High Court. The financial status and capacity to invest in the shares of the assessee was also proved by showing the share capital of the said company raised in the financial year 2005-06 of Rs. 15.42 crores, in the financial year 2010-11 of Rs. 2.5 crores and in the financial year 2012-13 of Rs. 12.9 crores. The assessment orders for all these years except assessment year 2011-12 were also passed under section 143(3) of the IT Act and, therefore, the availability of the funds as well as the investment made by the said company in the shares of the assessee were not disturbed by the department while completing the scrutiny assessment. Hence in view of our finding on this issue for the assessment year 2010-11 and an identical finding of the ld. CIT (Appeals) for the assessment year under consideration, we do not find any error or illegality in the impugned order of the ld. CIT (A) for the assessment y....
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....essment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which th....
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.... made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whet....
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.... of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be rel....
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.... "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at....
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.... power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to mak....
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....ound during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall ....
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....l as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in....
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....upta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various pu....
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....n respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in suc....
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....held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisd....
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....ante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is becau....
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....hat no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A....
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.... 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken t....
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....ute that these transactions of unsecured loans and partners' capital contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material ....
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....atisfactorily, 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. It may also be pointed out that the 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. b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evide4nces to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminati....
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....s Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately." The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon'ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :- "3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect....
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....ssee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was also dismissed by the Hon'ble Supreme Court, the additions made by the AO while passing the assessment orders....
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....within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs....
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....dy stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." Thus the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT....
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....rse of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately....
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....t been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors th....
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....which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the co....
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....e assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (....
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....n the case of Jai Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is ....
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....en this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account....
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.... the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what i....
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....the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating mate....
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.... the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the peri....
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....der Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of seco....
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....with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we ....
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....gation Wing Kolkata, the AO has neither referred to or was having in possession of any material to indicate that the unsecured loans shown in the books of accounts as well as partners' capital received by the assessee are nothing but assessee's own unaccounted and undisclosed income routed back in the garb of unsecured loans and partners' capital. There is no dispute that these transactions of unsecured loans and partners' capital contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Raj....
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....nd in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT (1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT (1977) 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. 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. It may also be pointed out that the 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. e. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operato....
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.... 153A of the Act. Rs. 2,82,83,460/- Additions | Unexplained cash credits u/s | 68 of the Act in the form of | unsecured loan and partner's | capital Rs. 67,20,14,999/- Assessed income Rs. 70,02,98,459/- R/o Rs. 70,02,98,459/- The total income of the assessee in the status of Firm for Assessment Year 2010-11 relevant to Previous Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately." The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition o....
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....), assessee's contention cannot be accepted. Moreover, in any case, the additions are to be adjudicated on merits as per relevant ground of appeal, the issue raised in this ground for present remains for academic discussion only. Accordingly, issue raised in ground no. 12 is dismissed." Therefore, neither in the assessment order nor in the order of the ld. CIT (A) there is any mention or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceeding....
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....2018 and others vide order dated 31st December, 2018 in para 11 and 11.1 as under :- "11. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the assessee has challenged the addition sustained by ld. CIT (A) in respect of unsecured loan from M/s. Jalsagar Commerce Pvt. Ltd. The other additions made by the AO on account of unsecured loans as well as partners' capital for the assessment year 2010-11 were deleted by the ld. CIT (A) on the ground that the AO was not having in his possession even the statement of the concerned persons in support of his finding that the alleged loan and partners' capital is nothing but bogus accommodation entries. Therefore, the revenue has challenged that part of the order in the cross appeal. The ld. A/R of the assessee has pointed out that for the assessment year 2010-11 there was no loan from the company controlled by Shri Anand Sharma, M/s. Royal Crystal Dealers Pvt. Ltd. but the assessee took the loan from M/s. Jalsagar Commerce Pvt. Ltd. which is not the company owned or controlled by Shri Anand Sharma. The ld. CIT (A) has sustained the addition in respect of loan from M/s. Jalsa....
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....ositors being the puppet in the hand of one or other accommodation entry providers, layering the transaction by cheque deposit on the same day or preceding day of share application / deposits, the assertions of the AO for nocreditworthiness or in-adequate creditworthiness of the so-called shareholders / depositors holds fields. During the appellate proceeding before me, though paper books for relevant AY and common Paper Books have been submitted, the same does not adduce any evidence to rebut the adverse factual finding made by the AO in the assessment order as mentioned by me in Para 4.1 above and categorically mentioned in the reports as discussed in para 4.4.7 above. Under these adverse background of appellant employing modusoperendi of resorting accommodation entry provider to build-up share capital / unsecured loans by foul means, what the AO is vehemently making the case for is the law on the issue-section 68 of Income-tax Act has to be applied by evolving perceptions for the law on the issue and not on the basis of routine perceptions on the law on the issue that is losing their relevance. 5.4 With all due respect to authorities cited by the appellant for canvassin....
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....e is no justification to interfere with the order of the ld. CIT(A). The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter. All the creditors have been rightly found to be men of meager means and no source of income have been filed to prove that they were having sufficient funds or savings in order to give loans to the assessee. On verification of the bank account of the depositors, it was specifically found that there were no sufficient funds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses or day-to-day requirements. Therefore, it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee. CIT(A) was justified in confirming the addition u/s. 68 of the IT Act. In the present case, the assessee has not adduced any sufficient evidence before the authorities below to prove the creditworthiness ....
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....e shareholders along with their books of accounts to substantiate its claim of genuineness of the cash credits. In fact on 10th December, 2009, authorized representative had appeared and he was apprised that the summons issued to the shareholders under Section 131 had been received back unserved in five cases and he was requested to provide the present postal address of the parties. In the meanwhile, the Assessing Officer managed to get hold of the bank statements of the shareholders, who had allegedly made deposits by way of cheques and pay orders. The assessment order specifically records that huge cash deposits in lacs were being regularly deposited in the said accounts and then pay orders/cheques were issued to the respondent assessee. 8. On 14th December, 2009, authorized representative appeared and stated that the assessee was unable to produce directors or principal officers of the six shareholder companies pleading that they were not shareholders now and seven years had passed since the transactions took place. The assessment order records and mentions about the transactions recorded in the bank accounts of the shareholder/entry operator companies to show and estab....
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....hannels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. 14. Certificate of incorporation, PAN number etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. It is in this context, the....
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....ed and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for inter....
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....ions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue, but when there is preponderance of evidence to show absence of culpability, the assessee should not be harassed by the Revenue. A delicate balance must be maintained between the two interests. In Divine Leasing (supra), the following proposition was elucidated:- "In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the credit worthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable Explanation by the assessed. (5) The Department....
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....he ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence ormaterial in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary." 18. Lovely Exports Pvt. Ltd.(supra) was also considered and distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that the entire evidence available on record has to be considered, after relying upon CIT Vs. Nipun Builders and Developers, [2013] 350 ITR 407 (Delhi), wherein it has been held that a reasonable approach has to be adopted and whether initial onus stands discharged would depend upon facts and circumstances of each case. In case of private limi....
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....roducing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according to us is the correct and true legal position, as identity, creditworthiness and genuineness have to be established. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated as sufficient to discharge the onus, even when payment is through bank account. 19. On the question of credit worthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. ....
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.... observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fresh adjudication keeping in view the aforesaid case law. The question of law is, therefore, answered in favour of the Revenue and against the respondent-assessee, but with an order of remit to the tribunal to decide the whole issue afresh. As reported at 2015-TIOL-314-SC-IT, in the above case, the Hon'ble Supreme Court observed to effect that 'merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity & genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account' 5.7 It may be mentioned that as reported at 2016-TIOL-207-SC-IT, the Hon'ble Supreme Court dismissed SLP by Rick Lunsford Trade & Investment Ltd in case of Rick Lunsford Trade & Investment Ltd Vs CIT 'upholding that it is open to the Revenue Department to ma....
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..... 36. Out of Rs. 4.35 crores received as share capital including premium, only Rs. 92 lacs has been received from the directors or their family members and the remaining amount has been received from parties totally unrelated to the Assessee. Notices to some of the investors could not be served and even the Inspector who was deputed to serve the summons stated that none of the addresses could be found. The authorised representative of the Assessee refused to produce the parties who had invested in the share capital on the ground that they were not in a position to produce them. The fact that the Assessee failed to produce the persons who had invested towards share capital shows that these were people who were completely unrelated to the Assessee and as such, all the entries were merely accommodation entries. Otherwise, in a private limited company, it would not have been difficult on the part of the Assessee to produce persons who were investing substantial amount of money in the company towards share capital. 37. The Assessing Officer in his order has as a sample referred to the entries in the account of some of the share holders noticing that there are cash depo....
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....or AY. 2005-06 and their ledger accounts from which the source of above share application money could have been verified. All the above summons were returned unserved with the comments from the postal authorities as "no such person in the above address". The AO accordingly brought this fact to the notice of the counsel of the assessee vide order sheet entry dated 18.12.2007 and he was given an opportunity to produce the functional directors of the above companies for verification. As mentioned in the assessment order, after certain adjournments, a letter was finally filed from the appellant mentioning that it is no in touch of the above share holders and their present whereabouts are not known to it. The appellant, however, relying upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. In which the powers of the Assessing Officer was not precluded from making enquiries in share application money, submitted that no addition can be made. 2.1.1 The AO however was not convinced with the submission of the appellant. He observed that that it was only in the course of enquiry that he tried to examine the above share applicants. Since....
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....arb of share application money, gifts, loans etc. through these accounts, in lieu of cash, to any person who is having unaccounted money. 2.1.2.1 The AO observed that some of the companies show above by the appellant as its share holders were found to have stated before investigation wing that they were mere name lender for advancing money. To quote some of them, Shri Rajesh Bansal, Director of M/s. Rubicon Associates Pvt. Ltd., Shri Mahesh Garg, Director of M/s. S.J. Hosiery Pvt. Ltd. Etc. have categorically stated before the Investigation wing, in their statement taken on oath, that they used to take the amount in cash and give entries to different concerns as gift, loan or share application money. According to AO, to enquire into this aspect also, the appellant was asked to produce the functional directors of such share holders. 2.1.3. In view of these facts and circumstances, the Assessing Officer concluded that the credit in the name of these shareholders are not genuine and represents unexplained cash credits. Accordingly he made addition of Rs. 1.50 lakhs to the returned income. Then Hon'ble Income Tax Appellate Tribunal Delhi Bench: 'B' held in Para....
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....ried on any business. Asstt. year 2005-06 In such circumstances the share premium is not found to be justified by any of the act on the part of assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before it. There is something more than that meets the eye. As rightly contended by Ld. DR in such situation the observation of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 and in the case of Sumati Dayal Vs. CIT 214 ITR 801 are apt for application. We therefore do not find any reason to hold that the share capital receipts by assessee were from persons whose identity is established and the amount is genuinely received towards share capital. 5.10 In a recent decision in case of Principal Commissioner Of Income vs Bikram Singh in ITA 55/2017, the Hon'ble High Court of Delhi held on 25 August, 2017 as under:- 25. The law applicable to transactions of this nature is w....
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....leasing (supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 is well settled. .............................................................................................................................. 43. The transactions in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness. 5.11 In my considered view, the technical objections raised by the Appellant in respect of loan from M/s Jalsagar Commerce Pvt. Ltd. are of no avail to the appellant due to following undisputed facts:- i. It is undisputed fact that ....
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....e Supreme Court and the Hon'ble jurisdiction Court. Therefore, in view of above facts discussed in Para 4.1 & 4.4.7, 5.1 to 5.3 and legal position apprised in Para 5.5 to 5.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to Rs. 12,36,49,999/- from M/s Jalsagar Commerce Pvt. Ltd. sustainable and the same is confirmed." Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata. We find that the report of the DDIT (Inv.) Kolkata is also based on the statements of various persons recorded during their investigation and the statement 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 Feb....
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...., financial statements including Balance Sheet, copy of ROC master data showing the status of loan creditor company as "active", confirmation of loan given to the assessee. Further, the AO issued summons and also got the summons served through DDIT Kolkata under section 131 of the IT Act which were duly responded by the loan creditor. Except the statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata, the AO has not brought on record any other material to controvert or disprove the documentary evidence produced by the assessee. It is pertinent to note that the loan 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 th....
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....td., interests credited/paid and repayment of loan amount as well as closing balance are as under :- Name of Company AY Opening Balance Loan taken during the year Interest credited in loan a/c during the year Interest credited in interest Paid /payable a/c Loan repayment/ TDS/transfer in partner capital during the year Closing balance Jalsagar Commerce Private Ltd 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Jalsagar Commerce Private Ltd 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Jalsagar 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 47,85,95,1 88 2,76,31,50,00 0 0 0 2,97,53,40,000 26,64,05,188 Jalsagar Commerce Private Ltd 14-15 26,64,05,1 88 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Jalsagar Commerce Private Ltd 15-16 0 1,34,89,00,00 0 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,....
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....r a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither 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 statemen....
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.... is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this court in CCE v. Andaman Timber Industries Ltd., order dated 17.3.2005 waws passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on 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....
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....ided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination in para 11 to 17 as under :- "11. We have therefore proceeded to hear and decide the matter unassisted by the revenue. In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather & Platt (India) Ltd.(supra) and submitted that merely because a person is not found at an address after several years it cannot be held that he is non 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 seve....
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....ustries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case. 16. In the instant case although the appellant assessee has called upon us to draw an inference that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and 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 ....
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....rms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the 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 resp....
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....mination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In 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 tha....
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....en addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case 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 suppl....
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....able in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee." Both the parties have fairly admitted that the fact as well as the issue is identical in both the cases. Therefore, in view of our finding on this issue in the case of Kota Dall Mill (supra), we decide this issue in favour of the assessee." 26. Similarly grounds No. 3 to 5 of the appeal with regard to unsecured loan taken from Jalsagar Commerce....
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....ction recorded by the AO as required by section 14A (1) of the Act before proceeding further to make any disallowance u/s 14A of the Act. Further, it is seen that AO has mechanically applied the Rule 8D as amended w.e.f. 02.06.2016, which was not even applicable to relevant assessment year. In my considered view, the law cannot be applied mechanically and that too retrospectively. It is seen that AO has not established any nexus of investment with borrowed funds, rather availability of sufficient interest free funds justifies the case of the Appellant that disallowance u/s 14A of the Act is unwarranted. Further, it is seen that AO has neither pointed out nor given any specific findings in the assessment order that any exempt income was earned during the relevant assessment year. Therefore, in the relevant cases also wherein section 14A of the Act is applicable, only the relevant portion of expenditure is required to be disallowed and not the complete expenses, which in the instance case, the AO has done without making any case for disallowance u/s 14A of the Act. Therefore, in view of the non-fulfillment of such statutory requirement as laid down in various judicial preced....
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....ed any nexus of investment with the borrowed funds, rather availability of sufficient interest free funds justifies the case of the assessee that the disallowance U/s 14A is unwarranted. Detailed findings were recorded by the ld. CIT(A) are as per material on record which do not require any interference on our part. Accordingly, grounds taken by the revenue in both the years with regard to the disallowance U/s 14A of the Act are dismissed. 32. The cross objection filed by the assessee has become infructuous, therefore, dismissed. 33. In the result, appeal of the assessee is allowed and appeals of the revenue are dismissed. Order pronounced in the open court on 27th March, 2019. ============= Document 1 provided to Aradhana Estate Pvt Ltd. In the entire process the beneficiary party gave me cash in lieu of which I gave them cheque for some commission income. Some paper companies have been sold to beneficiary parties. A total of Rs. 54.48 Crores respectively have been given as accommodation entry. Pages 72 and 73 consist of lodger copy of Rajgharana Vyapaar Pvt Ltd through which bogus accommodation share application money has been ....