TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1806
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....r 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 Technology' Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sa....
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..... 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 that the assessee was not given an opportunity of cross examination of the witnesses whose statement was r....
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....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 company is a shell company and engaged in providing bogus accommodation entries then the assessee was duty boun....
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....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 hand of the assessee. He has supported the order of the ld. CIT(A). The ld AR has also relied upon the serie....
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.... 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 transaction being accommodation entries. The said report of the DDIT(Inv.), Kolkata was also not based on any documentary evidence but the narration of the statements of the alleged entry operators,....
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....f 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 (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961 to M/s Teac Consultants Private Limited. 527-530 15 Copy of reply in response to summon issued to the company. 531-533 16 Copy of letter for confirmation of source of funds used for applying the shares along with ....
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....Y 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 Copy of Certificate dated 06.11.2011 issued by registrar of company regarding modification of charges 728 11 Copy of PAN card. 729 12 Certificate of Incorporation. 730 13 Copy of summon no. 2116 dated 31.10.2017 issued by DCIT (CC), Kota u/s 131(1) of the Income Tax Act 1961. 731 14 Copy of reply in response to summon no. 2116 dated 31.10.2017 issued by DCIT (CC), Kota u/s 131(1) of the Income Tax Act 1961. 732-733 15 Copy of notice no. 1612 dated 21.09.2017 issued by DCIT (CC), Kota u/s 133(6) of the In....
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....pital, 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 while deciding the identical issues vide order dated 31/12/2018 has considered the transactions of unsecured loan taken from these companies namely Birla Art Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. in para 15 as under: "15. We have considered the rival submissions as well as the relevant material on record. The AO has made the addition on account of unsecured loans taken from all the parties whereas the ld. CIT (A) has deleted the addition in respect of the loans taken from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. and confirmed the addition made on account ....
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....iating 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 no.443 to 644 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any inves....
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.... 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 Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal is not a partner in the Appellant Firm. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant firm or its total income, this basis of addition adopted by the AO is farfetched & cannot be concurred. 6.7 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in th....
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...., 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/2012 vide its order dated 10.02.2016. Further, Hon'ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal & Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing & Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this question of law. 6.11 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income t....
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....enable 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 the absence of any incriminating material found during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of unsecured loan u/s 68 of the Act is legally untenable and unjustified. 6.14 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon'ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited totaling to Rs. 12,36,40,000/- is not sustainable and hence the same stands deleted." Thus the ld. CIT (A) was of the view that so far as t....
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....012 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 2,50,00,000 2013-2014 2012-2013 13,00,00,000 These details clearly show that at the time of granting of loans to the assessee these companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As we have discussed earlier that the AO has not pointed out any discrepancy in the financial statements or in the bank account statements of the loan creditors to show that there was deposit or introduction of the cash prior to giving the loan to the assessee, accordingly, in view of the facts and circumstances of the case as well as our finding on the issue of addition in case of M/s. Jalsagar Commerce Pvt. Ltd., ....
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....rding modification of charges/mortgage. 910 12 * Copy of PAN card. 911 13 * Copy of Summon No. 1439 dated 13.10.2017 and reminder notice No. 1579 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. 912-915 14 * Copy of reply submitted by the company in response to summon/notice issued to it along with dispatched proof 916-918 M/s. Prithivi Vinimay Pvt. Ltd. 15 * Copy of ledger a/c of partner from books of accounts of assessee. 919-921 16 * Copy of Ack. of ITR of AY 2010-11 and computation of total income. 922-923 17 * Copy of Balance sheet of AY 2010-11 924-942 18 * Confirmation of a/c of the assessee from books of accounts of partner. 943-946 19 * Copies of relevant bank a/c of partner showing the entries of payment made to assessee against capital introduce 947-958 20 * Copy of affidavit executed by Mr. Ravi Mundra director of Doshi Management Pvt. Ltd on behalf of amalgamated Company M/s Prithvi Vinimay Pvt Ltd, 959-962 21 * Copy of order of Calcutta High Court regarding amalgamation of company in Doshi Management Pvt. Ltd 963-987 22 * Copy of balance sheet of company of 31.03.2010, 31.03.....
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.... the assessee from books of accounts of partner. 1090-1093 48 * Copies of relevant bank a/c of partner showing the entries of payment made to assessee against capital introduce. 1094-1100 49 * Copy of affidavit executed by Mr. Ravi Mundra director of Doshi Management Pvt. Ltd on behalf of amalgamated Company M/s Banshidhar Advisory Pvt Ltd, 1101-1103 50 * Copy of order of Calcutta High Court regarding amalgamation of company in Doshi Management Pvt. Ltd 1104-1128 51 * Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013. 1129-1132 52 * Copy of assessment order passed in the case of above named company for AY 2014-15. 1133-1137 53 * Copy of ROC master data. 1138-1139 54 * Copy of certificate dated 06.11.2011 issued by registrar of companies regarding modification of charges/mortgage. 1140 55 * Copy of PAN card. 1141 56 * Copy of Summon No. 1438 dated 13.10.2017 and reminder notice No. 1580 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. 1142-1145 57 * Copy of reply submitted by the company in response to summon/notice issued to it along with dispatched proof 1146-1148....
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....s Bansidhar Advisory Pvt. Ltd Assessment Year Financial Year Share capital raised 2006-07 2005-06 5,76,00,000 2010-11 2009-10 10,64,00,000 2011-12 2010-11 1,61,00,000 2014-15 2013-14 15,00,00,000 The assessee has also submitted the records regarding the corporate guarantee of Rs. 73.60 crores given by the SBBJ in favour of M/s. Bansidhar Advisory Pvt. Ltd. and, therefore, it was brought on record the fact that the bank has issued the corporate guarantee only after verification of the financial condition of the said company. We find that the bank guarantee to the company of Rs. 73.60 crores issued by the bank is always secured by the liquid-able assets of the company which shows that the company was having underlined assets to secure the said bank guarantee and consequently the creditworthiness of the said company was duly examined by the bank. The ld. CIT (A) has considered all these facts while deciding this issue in para 7.3 to 7.3.9 as under :- 7.3 It may be mentioned that same procedure of remand report have been done as discussed in para 4.3 above and the same is not repeated here. Similarly, as discussed in para 4.4.3 this matter too was referred by the AO ....
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....HAR LTD WITH ADVISORY PVT (AMALGAMATED DOSHI MANAGEMENT PVT LTD) Transactions details with KDM Group concern, copy of ledger, copy of certificate of incorporation & PAN Card, copy of assessment order u/s 143(3) for A.Y. 14-15, audited accounts for F.Y. 09-10 to 12-13, source of fund, bank statement showing the transactions with KDM group concerns, nature of business & copy of Hon'ble High Court order in respect of Amalgamation. 07.11.2017 13. VASUNDHARA ADVISORY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) Nature of business, copy of Hon'ble High Court order in respect of Amalgamation, transactions related to investment in equity shares and capital 07.11.2017 contribution with KDM group concern, bank statement depicting the transactions with KDM group concerns, audited accounts for F.Y. 09-10 to 12-13, source of fund, copy of certificate of incorporation & PAN Card, copy of ledger & copy of assessment order u/s 143(3) for the A.Y. 14-15. 14. PRITHVI VINIMAY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) Transactions details, copy of ledger along with supporting documents incl. Share applications, share allotment, account confirmation fr....
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..../s Doshi Management Pvt Ltd which has been identified as paper/shell company controlled & managed by entry operator Anand Sharma DEEPAK TIBREWAL - 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. It may be mentioned here that amalgamation took place in July 2014 where as statement of Shri Anand Sharma are prior to March 2014. "Further, the verification and investigation of past and present directors of following companies has been carried out with the help of Database of Entry Operators prepared by Directorate of Investigation Wing, Kolkata which reveal that the directors of these companies have been listed under the name of various entry operators who are engaged in the business of providing accommodation entries by appointing various dummy directors by known entry operators whose names has been mentioned in the under mentioned table. S. No. Name of company Name of Director(s) Period Name of Entry Operator 1. VASUNDHARA ADVISORY PVT LTD PUNAM RAMANI 28.02.2011-TILL DATE NAWAL KISHORE JALAN 2. PRITHVI VINIMAY PVT LT....
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....pellant along with paper book for the year under consideration and all relevant material placed on record and could not find a single piece of evidence to say that any one of above could be shell company. 7.3.2 It is seen that during this year, the AO has made additions in the hands of Assessee on account of partner's capital from 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 AO alleged that despite providing huge capital contribution, none of the newly introduced Partner is interested in the business activities of the Assessee Firm as there is no working Partner on their behalf and none of them have nominated any Director or other Officer of the Company to act as Working Partner in the Assessee Firm. 7.3.3 However, the A/R of the Appellant while representing the case has argued the matter in detail and has filed detailed submissions as reproduced above in response to the findings and allegations of the AO. A summarized form of the submissions and arguments put forth by the A/R is given hereunder: a) The Appellant has duly discharge....
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....uly 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 investment in the Appellant Firm in the form of partner's capital. 7.3.5 The only allegation of the AO is that the Directors of these companies have not been nominated as working partners. In my view, such allegation is without any substance as there is no legal obligation on a partnership firm to appoint all the partners as working partners. There are various partners in firms which only do investment in the firm and do not participate in the regular business activities of the firm. Such partners are called sleeping partners and the said partners do exist in the normal business parlance. 7.3.6 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 as well as the relevant assessment orders, which are available at page no. 645 to 867 of PB. From these documentary evidences placed on re....
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....its burden casted upon it u/s 68 of the Act. It is further seen that 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 have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 7.3.8 Further, it is evident from the Assessment Order that other findings and allegations of the AO with respect to the partner's capital are similar to the findings made by the AO with respect to the unsecured loans of the Appellant. As the said similar findings and allegations have already been dealt with in Ground No. 2 above, these are not again dealt with for the sake of brevity. However, my view regarding the findings and allegations as already discussed in Ground No. 2 above, shall mutatis mutandis apply to the findings and allegations of the AO with respect to partner's capital made in this ground of appeal. 7.3.9 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon'ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including j....
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....he addition on the ground that the A.O. has even not recorded any satisfaction that the alleged expenditure has any direct nexus with the investment when the assessee was having sufficient interest free funds. 9. We have heard the ld. CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The assessee is in the business of finance and therefore, the interest expenditure is essentially connected with the business of the assessee if except the borrowed fund is directly used by the assessee for the purpose of investment in shares. We further note that there is no fresh investment made by the assessee during the year but all these investments were old investments, therefore, in absence of any finding that the assessee has used the borrowed fund at the time of making the investment, the disallowance on the ground of interest expenditure is not warranted. As regards the indirect expenditure, the ld. CIT(A) has noted that the A.O. has applied amended provisions of Rule 8D(2)(ii) of the Rules, however, that the amendment is w.e.f. 02/6/2016 and not applicable for the year under consideration even otherwise when these investments are old investments an....
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....ght any fact or material to controvert the finding of the ld. CIT(A) or to point out that the finding of the ld. CIT(A) is perverse. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. Hence, we uphold the same. 10. Ground No. 8 of the revenue's appeal is regarding the addition on account of retention charges. The assessee has claimed retention charges of Rs. 7,50,385/-.The A.O. without discussing any reason for making the addition or disallowance has added the said amount to the total income of the assessee. The assessee challenged the addition made by the A.O. before the ld. CIT(A) and submitted that this amount was paid as fee to the RIICO for not supporting the commercial activity at the industrial site allotted by the RIICO to the assessee. Thus, it was contended that this is a business expenditure incurred by the assessee. The ld. CIT(A) has allowed the claim of assessee and deleted the addition made by the A.O. 11. We have heard the ld. CIT-DR as well as the ld. AR of the assessee, we find that this amount was paid by the assessee being the fee for not commencing the commercial activity at the industrial site allotted....
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....l the group concerns of Kota Dall Mill which are subjected to the search and seizure action on 02/7/2015. We have considered these two issues in the case of M/s Multimetals Limited Vs. DCIT in ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 and C.O. 38 & 39/JP/2018 vide order dated 29/01/2019 in para 9 and 14 as under: "9. We have considered the rival submissions as well as relevant material on record. Undisputedly the assessment for the A.Y. 2010-11 to 201213 were not pending on the date of search on 02/7/2015 as the original assessment U/s 143(3) of the Act were also completed prior to the date of search. Thus, the assessment for these three assessment years were not got abated by virtue of search U/s 132 of the Act on 02/7/2015 and therefore the Assessing Officer would assess the total income of the assessee as per the provisions of Section 153A of the Act in respect of these three assessment years having regard to the fact that whether any incriminating material was found or came to the knowledge of the Assessing Officer during the search and seizure proceedings. Since these assessment years were not pending as on the date of search, therefore, the proceedings U/s 153A of ....
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....as in the cases of the remaining two assessment years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee's total income, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The provisions of section 132 read with section 153A of the Act stipulate two types of situations - one where the assessment of any assessment year falling 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 assessm....
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....he 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 assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents 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. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already 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" whi....
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....0001 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re-open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course 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, bot....
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....ustify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with." 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not 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 ....
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....itions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) 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 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 res....
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....i Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the 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 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 15....
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.... which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in 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 or....
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.... Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa(supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even 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 ....
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....Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a yearwise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by 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....
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....eposits were rightly deleted by the ld. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under :- "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, 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 unde....
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....sment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon 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 S....
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....h orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under 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 ....
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....he course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under:- "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along 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 s....
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....re, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkata and statement of one Shri Anand Sharma, who is stated to be an entry operator and managed various concerns/companies including M/s.Royal Crystal Dealers, one of the loan creditors of the assessee. Except the said statement and report of the Investigation 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 t....
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....e of the assessee and no further burden lies on the revenue to show that the income is from any particular source as enumerated the Hon'ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC). Prima facie onus is always on the assessee to prove the cash credit entry found 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. b. Th....
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.... credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective assessment years." " 22. After examination of the information and details placed on record and discussion with the assessee, the total income of the assessee is computed as under :- Returned income as per ITR u/s 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. C....
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.... as Continental Warehousing (Nhava Sheva) Ltd., (supra), 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 no....
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....e decisions/binding precedents as relied upon by the ld AR and also considered by this Tribunal in the case of Kota Dall Mill (supra), we have no reason to take a different view on this issue. Accordingly, by following the earlier decision of this Tribunal in the case of group concern M/s Kota Dall Mill we hold that the addition made by the Assessing Officer while passing the assessment orders for the A.Y. 2010-11 to 2012-13 U/s 153A of the Act are not sustainable and liable to be deleted. Hence, this ground of the assessee's appeal is allowed. x x x x x x x x x x 14. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee demanded the cross examination of the witnesses, therefore, statements have been relied upon by the Assessing Officer while framing the assessments under consideration. The ld. CIT(A) though while calling the remand report of the Assessing 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 i....
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....justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held in para 6 to 9 as under :- 6. "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally....
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....Delhi/2008 under section 254(2) of the Income-tax Act, 1961 had been filed by the revenue before the said Tribunal. In that also, in paragraph (g) of the Miscellaneous Application, the revenue had submitted as under:- "(g )Because, although findings of the Tribunal are factually correct but the decision of the Tribunal is not acceptable because violation of the canons of natural justice in itself is not fatal enough so as to jeopardize the entire proceedings. In the interest of justice, the Tribunal could have set aside the assessment order with the limited purpose of offering assessee an opportunity to cross-examine Shri Manoj Aggarwal before completing the proceedings." [Emphasis supplied] 6. A reading of the said paragraph (g) makes it clear that the revenue had accepted the findings of the Tribunal on facts as also the position that there had been 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 circumstan....
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....lies, produces bank certificate to establish that the transaction was carried out through account payee cheques thus disclosing the identity of the creditors as also the source of income, the burden shifts on to the department and the department cannot add the cash credits to his income from undisclosed source. 12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the instant case by virtue of the fact that the transaction was completed by cheque payments, the appellant has contended that it had satisfied all the three tests. 13. In Kishanchand Chellaram (supra) wherein the Supreme Court observed that 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....
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....nue 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." 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....
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.... 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 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 e....
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.... 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 in support of its case. The 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 give....
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....uthorities 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 Bhanwarlal Jain and others, and various incriminating documentary evidence 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....