TaxTMI 
TaxTMI 
2019 (7) TMI 69
X X X X Extracts X X X X
X X X X Extracts X X X X
....A. No. 325/Jodh/2018, has raised the following grounds of appeal : "1. Whether on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 76,65,206 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established." 3. Brief facts of the case are that the assessee is a firm, engaged in the business of marble mining and selling. The assessee filed its return of income for the assessment year 2010-11 on September 29, 2011 declaring total income at Rs. 31,89,380. A search and seizure action under section 132 was carried out on August 26, 2015 at the residential premises of its partner in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come in the form of long-term capital gain (LTCG) in his individual capacity and there is no clinching evidence for routing the unaccounted income through unsecured loan during the search, therefore, it is not legally tenable to make addition in the absence of incriminating material found during the search for making such addition in the assessment under section 153A. The addition was made on the basis of third party information, thus the learned Commissioner of Income-tax (Appeals) also deleted the addition on the merits. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue has filed the present appeal before us. 5. We have heard the submissions of the learned Departmental representative for the Revenue and the learned authorised representative of the assessee and perused the material available on record. Though the Revenue has raised as many as three grounds of appeal however, in our considered view the only substantial ground of appeal relates to deleting the addition under section 68. The learned Departmental representative for the Revenue supported the order of the Assessing Officer. The learned Departmental representative further submits th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice under section 143(2) was already lapsed when notice under section 153A was issued. The assessee also raised the objection that no incriminating material qua the addition was found in the search. This fact is duly recorded by the Assessing Officer in para. 5.7 at page Nos. 4 to 8 of the assessment order. The learned authorised representative further submits that the assessee raised the ground of appeal before the learned Commissioner of Income-tax (Appeals) that the assessment order dated December 29, 2017 is without jurisdiction and bad in law. 7. In support of his submission, the learned authorised representative relied upon the decision of the Delhi Tribunal in Anurag Dalmia v. Dy. CIT in I. T. A. Nos. 5395 and 5396/Delhi/2017 dated February 15, 2018, Visakhapatnam Tribunal in G. Koteshwara Rao v. Dy. CIT [2015] 64 taxmann.com 159, Jaipur Tribunal in Navrattan Kothari v. Asst. CIT in I. T. A. No. 425/JP/2017 dated December 13, 2017, Jodhpur Tribunal in Adarsh Co-operative Bank v. Asst. CIT in I. T. A. Nos. 452 and 453/Jodh/2015 dated June 19, 2017, the hon'ble Bombay High Court in CIT v. Gurinder Singh Bawa in I. T. A. No. 1839 of 2013 dated October 5, 2015- [2016] 386 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iberated on the various case law referred and relied by the lower authorities. It is an admitted fact that a search was carried out at the business premises of the assessee as well as directors of the group on August 26, 2015. The Assessing Officer during the assessment nowhere recorded that in the search action any incriminating material related with the share application money was recovered or seized. The Assessing Officer has referred that statement of Shri J. P. Agarwal was recorded who had admitted to have obtained accommodation entry in the form of long-term capital gain in his individual capacity only. There is no reference in the entire assessment order that Shri J. P. Agarwal ever admitted about the receipt of unsecured loan. The impugned assessment year under consideration is 2010-11 and the period for completion of assessment has already expired when the search was conducted. The Assessing Officer made the addition of alleged share application money in the assessment year 2010-11, which is beyond his jurisdiction in the absence of incriminating material found during the search. 11. We are conscious of the fact that the present appeal is filed by the Revenue and no cross....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Deputy Director of Income-tax, Investigation, Kolkata and not considered the evidences furnished by the assessee. The report of the Deputy Director of Income-tax, Investigation was not provided to the assessee. The Assessing Officer has not brought any defect or discrepancy in the evidence brought on record by the assessee. The learned Commissioner of Income-tax (Appeals) deleted the addition on his observation that neither report of investigation was provided nor any opportunity was given to the assessee to rebut the report of investigation, therefore, no cognizance on such report could be taken in view of the decision of the hon'ble Supreme Court in Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC). No contrary facts or evidence is brought to our notice to take a contrary view, therefore, we affirm the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition. 15. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 326/Jodh/2018 assessment year 2014-15 by the Revenue 16. The Revenue has raised the following grounds of appeal : 1. Whether on the facts and in the circumstances of the case and in law the Commissioner of I....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established before the Assessing Officer. 4. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 29,46,934 made by the Assessing Officer by disallowing the claim of interest expenses on unsecured loans treated as bogus by the Assessing Officer." I. T. A. No. 312/Jodh/2018 for the assessment year 2015-16 cross-appeal by the assessee 20. The assessee has raised following grounds of appeal : 1. Under the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in not holding the assessment order dated December 29, 2017 as bad in law, perverse, arbitrary, without jurisdiction and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lared while filing the original return of income under section 139. The assessment was completed under section 153A read with section 143(3) on December 29, 2017. The Assessing Officer while passing the assessment order made the addition on account of unsecured loan received by the assessee from the following six parties aggregating to Rs. 2,30,00,000 (actual figure is Rs. 2.55 crores) ; Sl. No. Name of parties Amount of loan (Rs.) 1. Emrald Commercial Pvt. Ltd. 25,00,000 2. Vignharta Infra Developers Pvt. Ltd. 15,00,000 3. Venketeshwara Industries Promotion Pvt. Ltd. 10,00,000 4. S. K. Growth Funds Ltd. 1,10,00,000 5. Tavish Industries 75,00,000 6. Aplaya Creation Ltd. 20,00,000 Total 2,55,00,000 22. During assessment proceeding, the Assessing Officer asked the assessee to furnish the details of unsecured loan. The assessee furnished its reply, vide its reply dated February 16, 2017. To substantiate its contention the assessee also furnished the documentary evidence of identity of loan creditor, creditworthiness and genuineness of loan transaction. The Assessing Officer issued notice under section 131/133(6) to creditors. The Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mons to the principal officer of the creditors company and to furnish spot verification through inspector. The Assessing Officer received the enquiry report from the Deputy Director of Income-tax, Kolkata wherein it was disclosed that some of the entry operator are controlling and managing all affairs of the business activities of the lender companies which are engaged in providing accommodation entries. The Assessing Officer on the basis of report of the Deputy Director of Income-tax, Kolkata made addition of Rs. 2.55 crores and also the disallowed the interest expenses of Rs. 29,46,934. The learned Commissioner of Income-tax (Appeals) sustained the additions of Rs. 25 lakhs on account of unsecured loan from Emrald Commercial Limited and deleted the additions unsecured loan from the six creditors of Rs. 2.30 crores. 26. Considering the fact that in the assessee group case in I. T. A. No. 308/ Jodh/2018 (Geetanjali Investech Holding India Pvt. Ltd.) we have restored the addition on account of unsecured loan received from same entity (Emrald Commercial Ltd.) to the file of the Assessing Officer for deciding the issue/addition afresh, therefore, this addition is also restored to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essing Officer not only once, but thrice and also sought the comment of the assessee. After considering the remand reports and the submissions of the learned Commissioner of Income-tax (Appeals) passed the following order : "6. Now I deal with the unsecured loans/share application from M/s. Vishnaharta Infra Developers Pvt. Ltd. (Rs. 15,00,000), M/s. Venketeshara Industries Promotion Pvt. Ltd. (10,00,000) and M/s. SJC. Growth Funds Pvt. Ltd. (Rs. 1,10,00,000), M/s. Tavish Industries (Rs. 75,00,000) and M/s. Aplaya Creation Ltd. (Rs. 20,00,000). 6.1 As mentioned in para 4.3.3 neither their names are not appear ing in the above list of accommodation entry providers nor is there any adverse statements of any of the accommodation providers searched so far. Even, during the search of the appellant also no adverse material have been found during the search, post-search or assessment proceeding barring the first report of the Deputy Director of Income-tax (Investigation), Unit-4(2), Kolkata which is proved to be premature. Therefore, strict rigours of section 68 cannot be applied to the unsecured loans/share application from M/s. Vighnaharta Infra Developers Pvt. Ltd. (Rs. 15,00,000),....
X X X X Extracts X X X X
X X X X Extracts X X X X
....), the hon'ble Patna High Court has held 'if the loans are given by an account paying cheque, it amounts to identi fication of the parties and discharge of burden by the borrower.' In view of the above, it is clear that the appellant discharged its burden under section 68 of the Act. Even otherwise, there is no adverse find ing of any investigation conducted by the learned Assessing Officer itself. Notably, transaction is duly verifiable from the confirmation of accounts filed in paper book Nos. 167, 219, 260, 318, 357 and with supporting bank statements placed at page Nos. of paper book Nos. 168-173, 220-226, 261-267, 319-326, 358-364 and has been carried out through banking channel only and thus, the appellant has duly proved the identity, creditworthiness and genuineness of the trans action. 6.4 Further, it is seen that the appellant during assessment submitted substantiating evidences as referred in para No. 2.7 of its submission above which include balance-sheet, ITR, copy of the relevant bank statement, AOA/MOA, confirmation of accounts, etc. (paper book No. 130-371). From the perusal of these documentary evidences, it is seen that transactions have been done th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2017, the Deputy Director of Income-tax (Investigation) has forwarded its report on compliances made by the lender companies, however, this report has not been considered by the Assessing Officer. The said report (paper book Nos. 1-258) of common paper book beyond doubt establishes the identity, creditworthiness and genuineness of the transaction with Venketeshara Industries Promotion Pvt. Ltd. and others as referred in para. No. 4.3.2 and thus support the direct evidences brought on record by the appellant which remained uncon troverted by the Assessing Officer. Further the report of the Deputy Director of Income-tax (Investigation) as well as the statement of entry operators was not provided to the appellant. It is further seen that the Assessing Officer has not brought any specific defect/ discrepancies in the direct evidence brought on record by the appel lant. The Assessing Officer has observed that on the date of debit in the account statement of creditor, there is corresponding credit entry of equal amount, however, this observation of the Assessing Officer is itself not sufficient to prove beyond doubt that the appellant routed its unaccounted income by these companies rath....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntly by the hon'ble Delhi Tribunal in the case of ITO v. Softline Creations (P) Ltd. in I. T. A. No. 744/Delhi/2012 vide its order dated February 10, 2016- [2016] 51 ITR (Trib) 460 (Delhi). Further, the hon'ble apex court as well as the High Court has held that once the identity of creditor is established, the Department is free to reopen the assessment of creditor and no addition can be made in the hands of the borrower as rightly held in the case of CIT v. Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC); [2008] 216 CTR 195 (SC), CIT v. Rock Fort Metal and Minerals Ltd. [2011] 198 Taxman 497 (Delhi), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; 25 Taxman 80F (SC) and others on this question of law. 6.10 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the Income-tax authorities only and therefore, in view of the judgment CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271 (Delhi), the appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instance case, the appellant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Venketeshara Industries Promotion Pvt. Ltd., M/s. Tavish Industries and M/s. Aplaya Creation Ltd., are fully paid back whereas the unsecured loan from M/s. S. K. Growth Funds Pvt. Ltd., is paid back to the extent of more than Rs. 1,00,00,000 as confirmed by the Assessing Officer in his supple mentary remand report dated April 4, 2018 and there is not a single statement or report to implicate these concerns to hold them as shell company as held by the Assessing Officer on the basis of initial, half cooked, inquiry report of the Deputy Director of Income-tax (Inves tigation), Unit-4(2), Kolkata. Moreover, with the abundant evidences discussed above and all concerns, subjected to verification by issuing commission under section 131(1)(d), found existing, the blame of shell company on depositors is not justified. 6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the appellant-company as no evidences as to receipt/ payment of cash for receipt of unsecured loans were found during search in the case of the appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment year 2016-17 by the Revenue 33. The Revenue has raised the following grounds of appeal : "1. Whether on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 3,60,00,000 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established before the Assessing Officer." 34. Brief facts of the case for the appeal under consideration are that the assessee filed its return on income for the assessment year 2016-17 on October 17, 2016 declaring of Rs. 20,44,130. The return of income was selected for scrutiny. The assessment was completed under section 143(3) on December 29, 2017. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rders of the authorities below. Though the Revenue has raised as many as three grounds of appeal, however, in our view, the sole ground of appeal is deletion of the addition under section 68. The learned Departmental representative for the Revenue supported the order of the Assessing Officer. The learned Departmental representative further submits that the assessee failed to discharge his onus to prove the identity, creditworthy and genuineness of transaction. On the other hand, the learned authorised representative of the assessee submits that he adopts his submission, put forth in appeal for earlier years, as the addition in the impugned year under consideration is also not based on incriminating material found during the search. The assessee during the assessment discharged his onus. There was no material before the Assessing Officer to make addition against the assessee. The additions were made only on the basis of assumptions and presumptions. The Assessing Officer has not discussed the documentary evidence furnished by the assessee. The Assessing Officer has no where referred that addition is based on any incriminating material found during the search. On the merits, the lea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tna), the hon'ble Patna High Court has held 'if the loans are given by an account paying cheque, it amounts to identi fication of the parties and discharge of burden by the borrower'. In view of the above, it is clear that appellant discharged its burden under section 68 of the Act. Even otherwise, there is no adverse find ing of any investigation conducted by the Department in relation to this company. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the appellant, I find that this addition of Rs. 3,60,00,000 is unjustified ; firstly, on the ground that no notice was issued/no inquiries made to rebut the evidences filed by the appellant and secondly, on the ground that appellant duly discharged its burden casted upon under section 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. Notably, transaction is duly verifiable from confirmation of accounts filed in paper book 102-104 and has been carried out through banking channel only and thus, appellant has duly proved the identity, creditworthiness and genuinene....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed as shell companies based on initial investigation carried out behind the back of the appellant. In the instance case, the Assessing Officer has considered only part of the investigation and not full outcome of the investigation carried out. It is seen that in the report dated December 21, 2017, the Deputy Director of Income-tax (Investigation) has forwarded its report on compliances made by the lender companies, however, this report has not been considered by the Assessing Officer. The said report (paper book No. 1-258) of common paper book beyond doubt establishes the identity, creditworthiness and genuineness of the transaction with Venketeshara Industries Promo tion Pvt. Ltd. and others and as referred in para. No. 4.3.2 and thus support the direct evidences brought on record by the appellant which remained uncontrovered by the Assessing Officer. Further the report of the Deputy Director of Income-tax (Investigation) as well as statement of entry operator was not provided to the appellant. It is farther seen that Assessing Officer has not brought any specific defect/discrepancies in the direct evidence brought on record by the appellant. The Assessing Officer has observed tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k Hospitals (P.) Ltd. [2015] 373 ITR 115 (Mad), CIT v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Raj), CIT v. Creative World Telefilms Ltd. [2011] 333 ITR 100 (Bom), CIT v. Patel Maheshbhai Dahyabhai [2014] 222 Taxman 153 (Guj), Pr. CIT v. G and G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recent by the hon'ble Delhi Tri bunal in case of ITO v. Softline Creations (P) Ltd. in I. T. A. No. 744/ Delhi/2012 vide its order dated February 10, 2016- [2016] 51 ITR (Trib) 460 (Delhi). Further, the hon'ble apex court as well as High Court has held that once the identity of creditor is established, the Department is free to reopen the assessment of creditor and no addi tion can be made in the hand of borrower a rightly held in the case of CIT v. Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR 195 (SC), CIT v. Rock Fort Metal and Minerals Ltd. [2011] 198 Taxman 497 (Delhi), CIT v. Divine Leasing and Financing Ltd. [2008] 299 ITR 268 (Delhi) and CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; 25 Taxman 80F (SC) and others on this question of law. 4.3.10 Further, power to call for information/production o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e procedure of law under section 68 of the Act. There fore, requiring the assessee to produce the directors of the lender company was not legally tenable in view of the judgment of the Gujarat High Court (supra) 4.3.12 It must be mentioned that the unsecured loans from Glaze Construction Pvt. Ltd. Nihon Commodities Pvt. Ltd. and VSG Leas ing and Finance Pvt. Ltd. are paid back as confirmed by the Assessing Officer in his supplementary remand report dated April 4, 2018 and there is not a single statement or report to implicate Grove Suppliers Pvt. Ltd. to hold them as shell company as held by the Assessing Officer on the basis of initial, half cooked, inquiry report of the Deputy Director of Income-tax (Investigation), Unit-4(2) Kolkata. Moreover, with the abundant evidences discussed above and all concerns, subjected to verification by issuing commission under section 131(1)(d), found existing, the blame of shell company on depositors is not justified. 4.3.13 It is noted that no clinching evidence has been brought on record that any unaccounted income was routed through unsecured loans by the appellant-company as no evidences as to receipt/pay ment of cash for receipt of unsecu....