TaxTMI 
TaxTMI 
2019 (3) TMI 1806
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....ributors Pvt. Ltd., respectively. 2. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of Share application money by observing that the alleged investor companies M/s Prithvi Vinimay Pvt. Ltd. and M/s Birla Arts Pvt. Ltd., M/s Macro Soft Technology Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sangam Distributors 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 C1T(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Prithvi Vinimay Pvt. Ltd. and M/'s Birla Arts Pvt. Ltd., M/s Macro Soft Technology Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sangam Distributors Pvt. Ltd., merely for the reason that evidences in the fonn 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 C1T(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Prithvi Vinimay Pvt. Ltd. and M/s Birla Arts Pvt. Ltd., M/s Macro Soft....
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....und that the A.O. was not having any material in his possession to substantiate the addition as the A.O. was not having even the statement of the alleged entry operator whereas the assessee has produced all the documentary evidences in support of the claim. The assessee is a group concern of Kota Dall Mill (KDM) group and subjected to the search and seizure action U/s 132 of the Act carried out on 02/07/2015. The A.O. initiated the proceedings U/s 153A of the Act in pursuant to the search for the A.Y. 2010-11 to 2013-14 and 2015-16 and made various additions U/s 68 of the Act on account of share application money, special deposits against the issue of preferential equity shares treating the same as accommodation entries availed by the assessee from the entry providers. The assessee challenged the orders passed by the A.O. before the ld. CIT(A) and contended that the A.O. has made the addition merely on the basis of the statements recorded by the Investigation Wing, Kolkata and without any incriminating material found or seized during the search and seizure action in the case of the assessee. The assessee also raised objection against the additions made by the A.O. on the ground tha....
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.... failed to establish the genuineness of the transaction. It is evident from the evidences collected by the Department during the investigation, enquiry, search and survey action and the A.O. received information from the Investigation Wing, Kolkata regarding involvement of Kota Dall Mill including the assessee in obtaining entries of bogus share application money. Such information was received prior to the initiation of the proceedings U/s 153A of the Act and also during the pendency of the proceedings of assessment. The Assessing Officer also conducted further enquiry during the assessment proceedings U/s 153A of the Act about the genuineness of the transaction of unsecured loans. The assessee was duly confronted with the results on all these facts and information shared by the Investigation Wing, Kolkata. In these circumstances, it cannot be a case of addition made without any incriminating material, but the A.O. was having sufficient material disclosing the undisclosed income in the shape of unexplained cash credit introduced by the assessee in the garb of share capital. Once the A.O. has brought on record the report of the Investigation Wing, Kolkata to prove that the said comp....
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.... of the funds. He has referred to the details and submitted that the said company was having sufficient fund as its is manifest from the financial statement and particularly the share capital and reserves of the said company as on 31/3/2012 was Rs. 97,21,54,685/- whereas the said company has paid the share application money to the assessee of Rs. 19.75 crores only. The department has accepted the transaction while passing the assessment orders U/s 143(3) of the Act in the share applicant. He has referred the assessment orders for the A.Y. 1998-99 to 2001-02, 2008-09 and 2014-15 which were undergone scrutiny assessment and the A.O. has accepted the transaction of investment made by the said company in the shares of the assessee. Even as per the ROC record, the status of the said company is shown as active and not as a shell company. Hence, the ld AR has submitted that once the assessee has produced all the relevant documents to establish the identity, creditworthiness of the share applicant and genuineness of the transaction, which were not disturbed by the department in the assessment in the case of the share applicant then the said transaction cannot be treated as the bogus in the....
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....Teac Consultants Pvt. Ltd 30,00,000 Others Disallowance u/s 14A of I.T. Act. 52,43,029 Others Addition on account of disallowance of retention charges 7,50,385 19,31,93,414 The first three transactions are in respect of unsecured loans taken by the assessee from three companies. There is no dispute that all these loan amounts were repaid by the assessee during the year under consideration and the repayment of loan was paid on 13/10/2009, therefore, as on the closing of previous year i.e. 31/3/2010 nothing was outstanding in respect of unsecured loans. Once the receipt as well as repayment of the loan in question are through banking channel then even if the A.O. has doubted the transaction of receipt of loan as an accommodation entry if the assessee has repaid the same during the year under consideration then it has neutralized the effect of accommodation entry. Even otherwise we note that the A.O. has made the addition based on the report of the DDIT (Inv.), Kolkata and was not having any other documentary evidence in his possession to support the decision of treating the transaction of unsecured loan as bogus trans....
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.... S. No. Particulars of Documents S. No. of PB where documents annexed AY 2010-11/VOL- II 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 477-478 2 Copy of Balance sheet of AY 2010-11 along with enclosures 479-484 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 485 4 Copy of share application form of equity share 486-487 5 Copy of ledger showing the transaction with share applicant 488-489 6 Share Allotment advice 490 7 Copy of affidavit of Mr Jitendra Sharma director of company. 491-494 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 495-501 9 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 2006-07, AY 2012-13 and 2014-15. 502-521 10 Copy of ROC master data. 522-523 11 Copy of PAN card. 524 12 Certificate of Incorporation. 525 13 Copy of Certificate of NBFC Registration. 526 14 Copy of Summon no. 1433 dated 13.10.2017 and reminder summon no.-1592 dated 31.10.2017 issued by DDIT (Inv....
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....2014-15. 656-676 10 Copy of ROC master data. 677-678 11 Copy of PAN card. 679 12 Certificate of Incorporation. 680 13 Copy of Certificate of NBFC Registration. 681 M/s Macrosoft Technology Private Limited (AY 2010-11). S. No. Particulars of Documents S. No. of PB where documents annexed AY 2010-11/VOL- III 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 682-683 2 Copy of Balance sheet of AY 2010-11 along with enclosures 684-688 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 689-692 4 Copy of account confirmation from books of unsecured loan creditor 693 5 Copy of ledger showing the transaction with unsecured loan creditor 694 6 Copy of affidavit of Mrs Deepa Kriplani director of company. 695-698 7 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 699-705 8 Copy of assessment order passed in the case of above named company for AY 2009-10, AY 2011-12, 2012-13 and 2014-15. 706-725 9 Copy of ROC master data. 726-727 10 C....
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.... Tax Act 1961. 825-827 We further note that all these companies were also assessed by the A.O. U/s 143(3) of the Act and the assessee produced the assessment orders passed for the A.Y. 2005-06 to 2014-15. Once the identity and creditworthiness of these companies are proved with the supporting evidence then in absence of any contrary material to disprove the evidence produced by the assessee, the addition made by the A.O. is not sustainable. It is also not in dispute that all the transactions are carried out through banking channel and the A.O. has not brought any material or fact on record to show that prior to the transaction of loan and share capital, any cash deposit is made in the bank account of the share applicant and loan creditor company. Even the assessee has produced the details of the availability of the funds with all these companies and those financial statements showing the funds with these companies were accepted by the A.O. while passing the assessment order U/s 143(3) of the Act. At the outset, we note that in the case of group concern M/s Kota Dall Mill Vs DCIT in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018, the Tribunal....
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....sultants 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 confirmed providing unsecured loan to the Appellant and source of providing the said loan. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators. 6.4 For these three creditors namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, which are available at page....
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....in the account of any of the creditors at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case of CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA), CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that no notice u/s 131 or 133(6) of the IT Act were issued to M/s Birla Arts Private Limited, however as far as the companies M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited are concerned, these have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 6.6 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri R....
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....ned in para 16 as reproduced in Para No. 4.2 above. 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.) LTD. [2014] 264 CTR 86 (RAJASTHAN-HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel RamniklalHirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Income-tax-4 v. G & G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon'ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/Del/2....
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....as his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] In the instance case before me, the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujarat High Court (supra). 6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the Appellant Firm as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in case of the Appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in....
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....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 2009-2010 250,00,000 2011-2012 2010-2011 20,00,000 2014-2015 2013-2014 67,57,37,000 M/s Teac Consultants Pvt. Ltd Assessment Year Financial Year Share capital raised 1996-1997 1995-1996 26,00,000 2001-2002 2000-2001 73,98,000 2003-2004 2002-2003 1,00,00,000 2005-2006 2004-2005 4,85,50,000 2007-2008 2005-2006 3,35,00,000 2010-2011 2009-2010 2,76,00,000 2011-2012 2010-2011 94,00,000 M/s Sangam Distributors Pvt. Ltd. Assessment Year Financial Year Share capital raised 2005-2006 2004-2005 2,47,50,000 2006-2007 2005-2006 10,50,00,000 2007-2008 2006-2007 7,93,50,000 2011-2012 2010-2011 2....
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.... 1 * Copy of ledger a/c of partner from books of accounts of assessee. 843-845 2 * Copy of Ack. of ITR of AY 2010-11 and computation of total income. 846-847 3 * Copy of Balance sheet of AY 2010-11 848-855 4 * Confirmation of a/c of the assessee from books of accounts of partner. 856-859 5 * Copies of relevant bank a/c of partner showing the entries of payment made to assessee against capital introduce. 860-872 6 * Copy of affidavit executed by Mr. Ravi Mundra director of Doshi Management Pvt. Ltd on behalf of amalgamated Company M/s Vasundhara Advisory Pvt Ltd, 873-875 7 * Copy of order of Calcutta High Court regarding amalgamation of company in Doshi Management Pvt. Ltd 876-900 8 * Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013. 901-904 9 * Copy of assessment order passed in the case of above named company for AY 2014-15. 905-908 10 * Copy of ROC master data. 909 11 * Copy of certificate dated 06.11.2011 issued by registrar of companies regarding modification of charges/mortgage. 910 12 * Copy of PAN card. 911 13 * Copy of Su....
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....033 34 * Copy of affidavit of Deepa Kriplani director of company. 1034-1037 35 * Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 1038-1044 36 * Copy of assessment order passed in the case of above named company for AY 2009-10, 2011-12, AY 2012-13 and 2014-15. 1045-1064 37 * Copy of ROC master data. 1065-1066 38 * Copy of certificate dated 06.11.2011 issued by registrar of companies regarding modification of charges/mortgage. 1067 39 * Copy of PAN card. 1068 40 * Copy of notice No. 1604 dated 21.09.2017 issued by DCIT, CC, Kota u/s 131 of Income Tax Act, 1961. 1069 41 * Copy of Reply of Notice submitted by the company 1070 42 * Copy of Summon No. 2115 dated 31.10.2017 issued by DCIT, CC, Kota u/s 131 of Income Tax Act, 1961. 1071 43 * Copy of Reply of Notice submitted by the company on 13.11.2017 and 23.11.2017. 1072-1074 M/s Banshidhar Advisory Pvt. Ltd 44 * Copy of ledger a/c of partner from books of accounts of assessee. 1075-1077 45 * Copy of Ack. of ITR of AY 2010-11 and computa....
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....062 M/s Banshidhar Advisory Pvt. Ltd 2014-15 1133-1134 All these four companies status has been shown in the Master data of ROC as "Active" and three of which, namely, M/s. Banshidhar Advisory Pvt. Ltd., M/s.Prithvi Vinimay Pvt. Ltd. and M/s. Vasundhara Advisory Pvt. Ltd. status was shown as "Amalgamated". Therefore, these companies have already under gone process of amalgamation through the approval of the Hon'ble High Court. Hence, there cannot be any dispute about the identity and the affairs of these companies as genuine. The assessee also produced the records about the availability of the funds with these four companies which were sufficient to introduce the partners' capital. The details of the source of funds of these four companies as submitted by the assessee are as under:- M/s Vasundhra Advisory Pvt. Ltd. Assessment Year Financial Year Share capital raised 2006-07 2005-06 5,76,00,000 2010-11 2009-10 6,61,50,000 2011-12 2010-11 5,43,50,000 2014-15 2013-14 10,82,35,000 M/s Prithvi Vinimay Pvt. Ltd Assessment Year Financial Year Share capital raised 2005-06 2004-05 1,51,00,000 200....
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.... relevant entry operators in respect of capital contributions by four companies, namely, M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited. The same is evident from the respective details for above lenders in the above reports dated 28.11.2017 and 06.12.2017 as under:- "With reference to your above quoted letter, this office has issued Summon notices u/s 131 of the Income Tax Act, 1961 dated 13.10.2017 to the following sixteen (16) companies based in Kolkata as mentioned in your above quoted letter requesting to furnish the requisite details related to share application money/share premium/special deposits/unsecured loan/capital introduced by partners or any transactions made with group concerns of the KDM Group for the period from F.Y. 2009-10 to 2015-16 within 05 (five) days of receipt of Summon Notices. As regards 5 (five) assesses, Summons notices u/s 131 of the Income tax Act, 1961 has not been issued since it is observed that the present address of five (5) companies is located either in Rajasthan or Patiala. ............. In response to said both....
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....on, the following facts has been emerged out from the database which reveals that some companies are listed in the database of paper/shell companies controlled & managed by entry operators and the same is being produced as under in the tabular form: SL. NO. NAME OF CONCERNS PAN ADDRESS GIVEN IN COMMISSION NOTICE ISSUED ENTRY OPERATOR DUMMY DIRECTOR 1 2BANSIDHAR ADVISORY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) AACCB7815M 11A ESPLANADE EAST 3RD FLOOR, KOLKATA - 700069 NOTICE ISSUED U/S 131 AT GIVEN ADDRESS This company is amalgamated with M/s Doshi Management Pvt Ltd which has been identified as paper/shell company controlled & managed by entry operator Anand Sharma SHASHI KUMARI RAMANI- The name of these dummy directors are listed in database, who worked/works under different entry operators for different period, the details of which has been given below in tabular form. 1 3VASUNDHARA ADVISORY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) AACCV1837B 11A ESPLANADE EAST 3RD FLOOR, KOLKATA - 700069 NOTICE ISSUED U/S 131 AT GIVEN ADDRESS This company is amalgamate with M/s Doshi Management ....
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..... Might have been identified as paper/shell company. Neither statement of Shri Anand Sharma not any list or annexure of said statements indentifying M/s Doshi Management Pvt. Ltd. Is available on record, though it is included in the report of DDIT (Inv.), Unit 1(3), Kolkatta. Therefore, the label of paper/shell company cannot be applied to M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as at the relevant time they were not part of M/s Doshi Management Pvt. Ltd. Moreover, in data base of directorships for these companies; M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as reproduce above also clearly show no direct control or influence of the alleged entry operator Anand Sharma. Similarly, the statement of Ankit Bagri is not implicating M/s Bansidhar Advisory Pvt. Ltd. in any manner as Shell Company. There are no statements from Nawal Kishore Jalan and Pankaj Agarwal on record implicating M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as shell companies. 7.3.1 In view of above ground reality I am treating M/....
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....ed by the AO were introduced in AY 2012-13. In the assessment proceedings of AY 2012-13 which was completed u/s 143(3) of the Act, such capital contributions were treated as genuine. Thus, once in the completed assessment proceedings the capital contribution of those companies has been considered as genuine than there is no reason to treat the capital received from such companies during the year as non genuine without having any material and only on presumption, assumption and surmises. d) Submission made in Ground No. 2 in respect of unsecured loans may also be treated as a submissions for the purpose of this ground of appeal. e) All the partners must be working partners is not mandatory under any of the laws in force. f) All the transactions were done through proper banking channels. g) The notices issued to the four companies u/s 131/133(6) of the Act were duly complied with along with the copy of the relevant documents. h) Affidavits of the directors of all companies were submitted wherein the Directors confirmed their investment as partner's capital in the Appellant Firm. i) No reliance can be placed on rejected books of ac....
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....In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to the said companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of the partner's capital from the aforesaid 04 companies totaling to Rs. 42,47,25,000/- 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 the corporate partners and genuineness of the transaction. Notably, the transactions with the said four companies are duly verifiable from confirmation of accounts filed at page 650 to 653, 708 to711, 763 to 766 & 830 to 832 of PB with supporting bank statements placed at page 654 to 660, 712 to716, 767 to 778 & 833 to 838 of PB and have been carried out through banking channels only and thus, appellant has duly proved the....
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....has not brought on record any contrary evidence except the allegation made in the report of the Investigation Wing Kolkata. Therefore, the documentary evidences brought by the assessee cannot be negated merely on the basis or allegation made in the report which is nothing but narration of the statements recorded of certain persons. The report of the DDIT Investigation cannot substitute the documentary evidence. Accordingly, in view of the facts and circumstances, we do not find any error or illegality in the order of the ld. CIT (A) qua this issue. The finding of the ld. CIT(A) for the year under consideration is based on the identical grounds as in the case of M/s Kota Dall Mill while deleting the addition made by the A.O. in respect of all these five companies. Thus having regard to the facts and circumstances of the case as well as the documentary evidence produced by the assessee in respect of the claim, the addition made by the A.O. based on merely allegations in the report of DDIT (Inv.), Kolkata without any supporting cogent material or documentary evidence is not sustainable. Therefore, in view of the earlier order as well as evidence produced by the assessee, we do not ....
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....tual claim of expenditure. The ld. CIT(A) has considered this issue in para 9.3 and 9.3.1 as under: "9.3 I have considered the rival submissions and perused the material on record. 9.3.1 In my considered view, the AO has legally erred in directly applying the provision of section 14A of the Act, without recording any satisfaction as to the correctness of the claim made by the Appellant. In the assessment order, there is no satisfaction 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 ear....
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....an allowable business expenditure U/s 37(1) of the Act. Accordingly, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. 12. In the cross objection for the A.Y. 2010-11, the assessee has raised following grounds: "1. On the facts and in the circumstances of the case and in law the order passed U/s 153A read with Section 143(3) of the Income Tax Act, 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT(A) erred in holding that the contention of the assessee cannot be accepted in view of SLP's admitted in various cases. The ld. CIT(A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in not declaring the assessment order as bad in law and void ab initio. It is contended that the A.O. passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunit....
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....he case of the assessee before us is solely on the basis of the information received from the Kolkata Investigation Wing which contains the statement of one Shri Anand Sharma in respect of some assessments and the statement of Shri Ankit Bagri in respect of some other assessments. Thus, undisputedly the Assessing Officer has made the addition while completing the assessment U/s 153A of the Act for all the assessment years on the basis of the information received from the Investigation Wing, Kolkata and not on the basis of any material or information gathered during the course of search and seizure action in the case of the assessee. We find that the assessment framed by the Assessing Officer as well as the orders passed by the ld. CIT(A) in the case of the assessee are identical and based on similar facts and circumstances as in the case of M/s Kola Dall Mill pursuant to the same search and seizure action carried out on 02/7/2015. This Tribunal in the case of Kota Dall Mill Vs DCIT vide order dated 31/12/2018 in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018 has considered and decided this issue in para 6 as under: "6. We have considered ....
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.... "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 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 sa....
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....quisition 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 whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held t....
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....l 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 related to the evidence found. This, however, does not mean that the assessment under Section 153A 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." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions a....
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....al 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 more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The word....
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....es not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the ass....
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....iso 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 cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) ....
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....tion 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the responden....
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....he Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of ac....
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....could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he s....
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....n picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jai Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under:- "23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the asses....
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....n 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income....
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....total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as notice....
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....ings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpreta....
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....est from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while framing the assessment under section 153A of the Act for the assessment years 2010-11 to 13-14. It is appropriate to re....
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....ic 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 evidences to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wherein the details of year-wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during search action has been accepted to be bogus by all family members in their respective s....
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....ereby 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 of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis supplied by me). (T....
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....ot 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 under section 153A for the assessment years 2010-11 to 1314 are not sustainable and accordingly the same are liable to be deleted. We order accordingly." The foundation of the assessment order is the information received from the Investigation Wing, Kolkata and statement of Shri Anand Sharma and Shri Ankit Bagri in respect of th....
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....sing Officer directed to allow the cross examination to the assessee, however, when the Assessing Officer has expressed his inability to produce the witnesses for cross examination, the ld. CIT(A) has finally rejected the objection raised by the Assessing Officer. An identical issue has been considered by us in the case of Kota Dall Mill (supra) vide order dated 31/12/2018 in para 11.1 as under: "11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a rema....
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....e has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them". 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of crossexamination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned....
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....a violation of principles of natural justice. However, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11-2008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." Thus the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the as....
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....t the revenue authorities had not recorded the statement of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer neither since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industrie....
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....r we are inclined to allow the appeal on this very issue." Thus the denial of opportunity to cross examine was considered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- "2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs. 1 Crores from M/s Mehul Gems Pvt Ltd during the impugned assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax fili....
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....aid Group has provided. This admission is sufficient to reject the contentions of the assessee." Further, regarding cross examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and i....
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....he result is that the assessee had not had a fair hearing. "The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed b....
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....e found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed." Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in l....