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2020 (9) TMI 1094
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....revity, we dispose all the appeals by this consolidated order. 2. Before we advert to the grounds taken in the cross appeals, it would first be relevant to cull out the basic facts of the case and effect of law in brief in respect of certain AY's. Search u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "the "Act") was conducted against the Mani Group, on 22-06-2016 thereby triggering section 153A of the Act. Prior to the date of search, the income-tax assessment under section (hereinafter referred to as "u/s.") u/s 143(3) of the Act (scrutiny assessment) for AY 2013-14 stood already completed on 29-03-2016 i.e. (two months before the search). Accordingly, the assessment for AY 2013-14 did not abate consequent to the search on 22.06.2016. The original return of income for AY 2014-15 was filed on 30-03-2016 and the time limit for issuance of notice u/s 143(2) of the Act had not expired as on the date of search. Accordingly AY 2014-15 was an abated assessment year. With regards AY's 2015-16, 2016-17 & 2017-18, it was pointed out that the returns of income for all these years were filed only after the date of search. Therefore, except AY 2013-14, all the other AYs 2014-....
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....gainst sale of flat in its 'Shiromani' project. Referring to the documents with identification mark RB/12 [found at the premises of Ambica Dhatu Group on 22-09-2015], the AO concluded that the assessee had received 46.67% of the actual sale consideration of the flat sold to M/s Satyam Bubna (HUF) in cash and the balance 53.33% was received in cheque which alone was accounted in the books of the assessee. Relying on the same document, he further held that the assessee also received Rs. 6,00,000/- in cash against sale of car park to M/s Satyam Bubna (HUF) in 'Shiromani' Project. The relevant finding recorded by the AO in this regard is as follows: (2)"It was conveyed to the assessee by issue of notice u/s. l42(1) of the Act dated 31.08.2018 that the documents seized during the course search and seizure operation (ID Marked RB-12) conducted at the premises of AmbicaDhatu Group on 22.09.2015, it was found that Rs. 4.82 croresapprox was paid to 'Mani Group' in 'Otherwise' (Cash) against sale of flat in Second Floor of the said project and car parks by Sat yam Bubna (HUF). From the said seized documents, it was found that the cash consideration paid by Satyam Bubna (HUF....
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....worthy that the above calculations were though found from the premises of Ambica Dhatu Group, They have been prepared by Mani Square Limited only. The same is evident from the following two observations: * The amount of Rs. 4,81,38,000/- have been as 'received till date;. Since M/ s. Satyam Bubna (HUF) is the buyer, had he been preparing the above statement, then the nomenclature would have probably been 'paid till date'. * Further, m the interest calculation part, the nomenclature of the words 'shortfall' 'deficit' would have been probably different like 'not paid' or 'pending. ' 4. The AO thereafter required the assessee to furnish complete details of the units sold in its 'Shiromani' Project. Based on the information submitted by the assessee, the AO made enquiries u/s 133(6) of the Act from all the flat purchasers and the summarized details of all the flats sold during the year and the information was set out in the Table at Page 8 of the assessment order. Referring to documents identified with mark, MSL/23 Pages 1 to 3, MSL/8 Page 13, SJ/MHD/MZ Page 2 and MSL/21 Page 32 to 36, the AO concluded that the assessee was regularly ....
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....ld in AY 2013-14 (each flat has 4 Nos. of car parks) 48 Nos. Cash Component on each Car Park Rs. 6,00,000/- ON MONEY received for sale of car parks Rs. 2,88,00,000/- (48 Nos. * Rs. 6,00,000 per car park) Thus, Rs. 47,20,09,864/- [ Rs. 44,32,09,864 (+) Rs. 2,88,00,000] is considered as undisclosed income and is added to the total income of the assessee. 5. On appeal, the ld. CIT(A) held that the Revenue was able to find only one instance of payment of on-money (cash) i.e. in relation to sale of M/s Satyam Bubna(HUF) and accordingly confirmed the addition made by the AO u/s 68 of the Act to the extent of Rs. 4,81,38,000/-. The Ld. CIT(A) however held that extrapolation of unaccounted sales done by the AO on the basis of this singular instance was untenable. In support of this finding, the Ld. CIT(A) relied on the decisions of the Hon'ble Delhi High Court in the cases of Anita Rani reported in 392 ITR 501 and Kurele Papers Mill reported in 380 ITR 571 and Hon'ble Bombay High Court in the case of C.J. Saha & Sons reported in 246 ITR 671. The Ld. CIT(A) accordingly deleted the balance addition of Rs. 42,38,71,864/-. The relevant findings of the Ld. CIT(A) in this regard a....
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....d be done for unaccounted sales found in the case of the assessee or not. In the case of C.J. Saha and sons 246 ITR 671 undisclosed sales for three months was found extrapolation to the entire block period was found to be non tenable by Mumbai High Court. In the case of M/s. Ford Project Pvt. Ltd. Vs. DCIT, ITA No.11213/Cal/2011 addition of Rs. 64.83 crore made by extrapolation of noting in seized material RN / 5 was not found tenable. The Hon 'ble Court held that the assessee was bound by the presumption u/ s.292C of the Act in respect of seized papers and addition on account of On Money can be limited to the seized material, no further addition was sustained. In the case of Savitri Developers Pvt. Ltd. ITA No.401/Amd./2014 and 3188/Amd/2014 two purchasers had given a statementfor payment of ON Money on sale of Flats. Department sought extrapolating it to all the flats sold by the assessee. While the addition for ON Money paid for two flats was upheld, the extrapolation was struck down. Delhi ITAT In Minda Industries Vs. DCIT has also upheld that extrapolation would not be allowed. This view is also supported by the case of Smt. Anita Rani 392 ITR 501 Delhi and Kurele Papers M....
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....Rs. 34,08,50,000/- on which interest of Rs. 3,04,62,997/- was paid. Five (5) lenders had weak financials whose principal sum was Rs. 5,65,00,000/- on which interest of Rs. 15,50,466/- was paid. The AO thereafter set out "entry operator" wise summary of the loan creditors and extensively reproduced statements of several so-called entry operators to conclude that the loan creditors were controlled and managed by these so-called entry operators and that the unsecured loans obtained from these loan creditors were in the nature of accommodation entries provided by them to route assessee's own unaccounted monies. The AO accordingly added outstanding unsecured loans of Rs. 39,73,50,000/- by way of unexplained cash credit u/s 68 of the Act and disallowed the interest of Rs. 3,20,13,463/- paid on such unsecured loans u/s 69C of the Act. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). In the appellate order, the Ld. CIT(A) in principle upheld the additions made u/s 68 & 69C by the AO, but directed the AO to exclude the opening balance of loans of Rs. 17,03,57,761/- brought forward from earlier years after verification and also reduce the quantum of l....
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....veral so-called entry operators to conclude that these nine loan creditors were controlled and managed by the so-called entry operators and that the unsecured loans obtained from these loan creditors were in the nature of accommodation entries provided by them to route assessee's own unaccounted monies. The AO accordingly added principal loan amount of Rs. 2,15,00,000/- by way of unexplained cash credit u/s 68 of the Act and disallowed the interest of Rs. 25,76,219/- paid on such unsecured loans u/s 69C of the Act. Aggrieved by this separate order of the AO, the assessee raised various grounds challenging the addition/disallowance made therein, which formed part and parcel of the main appeal filed by the appellant i.e. M/s Mani Square Limited before the Ld. CIT(A). The Ld. CIT(A) in his consolidated appellate order dated 13.08.2019 confirmed the additions/disallowances made by the AO in the separate assessment order passed in the case of M/s. IQCIPL. Since M/s. IQCIPL stood amalgamated with the assessee and it being no longer in existence from 06.03.2017 and onwards, the appellant/assessee, being the successor entity/assessee, has agitated the disallowances/additions confirmed by t....
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.... to the Assessee. 6. That the Ld. A.O. has erred and the Ld.CIT(A) has wrongly sustained the impugned addition u/s 68 solely on suspicion, surmises and conjures without considering the fact that the entire transaction for unsecured loans is supported by proper documentary material/evidence(s) on record proving identity, genuineness and creditworthiness of the respective transactions, and which have not been disputed and/or rebutted and/or doubted by both the lower authorities. 7. That the Ld. A.O. has erred and the Ld.CIT(A) has wrongly sustained the impugned addition u/s 68 solely on "borrowed satisfaction" based on the alleged information received from DDIT, Kolkata, and pre-existing departmental data and third party statements of unrelated third parties recorded by the Investigation Wing without conducting any such independent enquiry and investigation of their own to arrive at their own independent conclusions vis-à-vis the Assessee's case in hand to sustain the impugned additions u/s 68 of the I. T. Act, 1961. 8. That the Ld. A.O. has erred and the Ld.CIT(A) has wrongly sustained the impugned addition u/s 68 without considering the settled position of Law which....
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.... the facts and circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs. 42,38,71,864/- on account of undisclosed income as being the cash consideration received by the assessee against the sale of 12 flats and 48 car parks in the Shiromani Project. 2. On the facts and circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs. 15,07,993/- as undisclosed expenses on account of payments made by the assessee to the Proloy Mandal and Satyendra Singh on the basis that no such explanation had been received with respect to the said payment." 10. The Ld. AR, Shri S. K. Tulsiyan, Advocate, appearing on behalf of the assessee raised additional grounds in the appeals for AYs 2013-14, 2014-15 and 2015-16. Since additional grounds raised in appeal are identical for all these three (3) years, we reproduce the additional grounds of appeal for AY 2013-14 as under: 1) The Ld. AO erred in passing an order u/s 153A/143(3) of the IT Act, 1961 for AY 2013-14 in the case of the Appellant who is now a non existing e....
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....te of search, could be held to be sustainable on facts and in law? (B) Whether the Ld. CIT(A) was justified in confirming the addition made on account of alleged on-monies of Rs. 4,81,38,000/- received upon the sale of flat and car park(s) to M/s Satyam Bubna (HUF) in the Shiromani Project ? If yes, whether based on this singular instance, the AO was justified in extrapolating and making addition by way of unaccounted sales in respect of all units and car parks sold in the Shiromani Project ? (C) Whether the Ld. CIT(A) was justified in confirming the AO's order making addition on account of unsecured loans and interest paid thereon u/s 68 & 69C of the Act? (D) Whether the Ld. CIT(A) was justified in deleting the addition of Rs. 15,07,993/- made by the AO by way of unaccounted transactions conducted by the appellant ? (E) Whether the AO could be held to have validly assumed jurisdiction by issuing notices u/s 153A and 143(2) in the name of non-existent entity (M/s IQCIPL) and consequent thereto frame separate assessment order dated 31.12.2018 and whether such action of the AO was tenable in the eyes of law or not ? 13. We first proceed to answer the question (A) which is ag....
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....uired to issue notices u/s 153A of the Act to assess the income of the assessee for six assessment years preceding the date of search. These six assessment years comprise of assessments which are not abated ( non-pending assessment before AO on the date of search ); and assessments which are pending before the AO on the date of search, which would be treated as abated. In the case of abated assessments, the AO is free to frame the assessment in regular manner and determine the correct taxable income for the relevant year inter alia including the undisclosed income un-earthed during search, having regard to the provisions of the Act. However, in relation to unabated assessments (AYs), which were not pending on the date of search, there is a restriction on the powers of the AO. In case of unabated assessments, the AO can re-assess the income only to the extent and with reference to any incriminating material which the Revenue has unearthed in the course of search. Merely because an assessee is subjected to search, he cannot be placed on a different pedestal or put in a more disadvantageous position than an assessee who is not subjected to search unless in the course of search some in....
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....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 Ld AO. Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of 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." 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." 14. We find that the Hon'ble Delhi High Court while adjudicating the appeal in the case of CIT vs Kabul Chawla (2016) 380 ITR 573 had taken judicial note of host of the earlier decisions in the cases of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT v....
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....requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances." In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed." 16. Considering the judicial precedents (supra) on the subject, particularly the decision of the Hon'ble jurisdictional Calcutta High Court in the case of PCIT vs Salasar Stock Broking Ltd. (supra) which is binding upon this Tribunal as well as the Hon'ble Apex Court decision, we hold that in the case of unabated assessments of an assessee, no addition is permissible in the order u/s 153A of the Act unless it is based on any tangible, cogent and relevant incriminating material found during the course of search qua the assessee and qua the AY. 17. In view of the above legal position, let us now pr....
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....nstrates or proves that what is apparent is not real or what is real is not apparent . In other words, let us assume that an assessee has recorded transactions in his books or other documents maintained in the ordinary course of business, then it is discovered in the search certain material or evidence in such an event then, in order to hold the discovered material or evidence to be incriminating in nature, only when the discovered/seized material/evidence/document should affect the veracity of the entries made in the books of the assessee and thus lead to the conclusion that the entries made regularly/maintained by the assessee do not represent true and correct state of affairs. Rather the evidence unearthed or found in the course of search would go on to show that the real transaction of the assessee was something different than what was recorded in the regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax auth....
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....cument referred to in the assessment order relates to addition made on account of onmoney (cash) of Rs. 4,81,38,000/- allegedly received outside the books on the sale of flat and car park(s) to M/s Satyam Bubna (HUF) in Shiromani Project. From the order of the lower authorities, it is abundantly clear that the basis of this impugned addition was the documents seized in the course of search conducted on 22-09-2015 [ i.e. nine (9) months before search in assessee's premises which was on 22.06.2016 ] against Ambica Dhatu Group (third party), bearing identification marks RB/12, Pages 2,3,6 & 7. The Ld. AR took us through the contents of the said documents and pointed out that these documents were mere rough notings on loose papers and therefore did not have any evidentiary value. Taking us through Pages 2 & 3 of the document ID Marked RB/12, the Ld. AR showed that nowhere did the name of the appellant/assessee or its project etc. was anywhere mentioned in the said papers. He further pointed out that this paper neither in any manner constitute agreement between the appellant/assessee and M/s Satyam Bubna (HUF) nor did the notings suggest that any sort of such agreement or arrangement ha....
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.... therefore it could not be utilized for making any addition/disallowance qua the assessee in the unabated assessment completed u/s 153A of the Act. The Ld. AR pointed out the contradiction/double-standard in the action of the AO in the treatment of this document. According to him, on one hand the AO of the assessee treated the documents as incriminating though not seized from its premises, on the other hand, the AO of M/s Ambica Dhatu Group (third party) from whom the document was seized, did not thought it fit to draw adverse inference against it (for giving cash to assessee) which means according to Ld AR, the AO of M/s Ambica Dhatu Group did not treat the seized document as incriminating material against it and so as a natural consequence it (the same material) cannot be used against the assessee. The Ld AR further contented that if the AO of M/s Ambica Dhatu Group (third party which was searched earlier) was of the opinion that these documents belonged to the assessee, then the correct course of action would have been to record such satisfaction and forward these documents to the assessee's AO to initiate proceedings u/s 153C of the Act, which was not done or resorted to agains....
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....been brought on record by the AO to support the presumption drawn from notings on these loose papers even after the search conducted on assessee's premises. Moreover, we find the Ld. AR's reference to the excerpts from the statement of Shri Satyam Bubna recorded in the course of his search u/s 132(4) on 17.11.2015 to be of much relevance. The relevant part of the statement is as follows: "Q15. I am Showing loose bunches bearing ID mark RB-12 found during the course of search operation on 22/9/15 at your residence. It relates to "Shiromani" premises no. 60/1 Ballygunge Circular Rd. Kolkata, agreement dt 7/6/10 between Satyam Bubna (HUF) and Mani Square Ltd. it is noticed that out of Rs. 10,40,25,000/- Rs. 4,81,38,000 was paid by otherwise mode. It is also noticed in the account statement of Satyam Bubna cash of Rs. 49265000/- was paid to Mani Square Pvt. Ltd. against that property in cash. Please comment. Ans. No cash payments were made in the above transaction. All payments were made by cheques and the account statement of Satyam Bubna was just an estimate and a rough calculation not forming part of actual transaction. The property has been registered as per the valuation made....
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.... the AO of M/s Satyam Bubna HUF accepted his submission and neither drew any adverse inference nor made any addition on account of alleged cash payments in its hands as unexplained expenditure; then as a corollary the very same document cannot be said to constitute incriminating material or evidence qua the assessee. We further note that the assessee has also placed the copy of the sale deed dated 30.06.2014 along with its ledger at Pages 340 to 380 of the convenience compilation from which it is evident that all the transactions involving receipt of payments in lieu of sale of flat & car park to M/s Satyam Bubna HUF was conducted through proper banking channel without there being any involvement of cash. For the reasons discussed in the foregoing, we therefore hold that documents ID marked RB/12 cannot be construed to be 'incriminating' in nature qua the assessee for drawing adverse inference and so it cannot be considered as a basis for making any addition against the assessee. 24. We also find merit in the Ld. AR's alternate contention that the documents ID marked RB/12 was a third party document found in the course of search conducted on a different person i.e. Ambica Dhatu Gr....
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....ther in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153A of the Act was misconceived since the so-called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not under Section 153A. This goes to the root of the matter. 8. Consequently, the impugned order of the ITAT calls for no interference of this Court. The question framed by this Court answered in negative, that is, in favour of the Assessee and against the Revenue." (emphasis supplied by us ) 25. We note that similar view was expressed by this Tribunal in the case of Krishna Kumar Singhania & Others Vs DCIT, CC-3(3), Kolkata in IT(SS) Nos. 106 to 112/Kol/2017 dated 06.12.2017. In the decided cases also an independent search was conducted on 23.12.2014 in the b....
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....o documents that were seized from the premises of the assessee except loose sheets vide seized document reference KKS /1 comprising of 8 pages , for which satisfactory explanation has been given by the assessee and no addition was made by the ld AO on this seized document. The seized document used by the ld AO for making the addition in section 153A assessment is CG/1 to 11 and CG/HD/1 which were seized only from the office premises of Cygnus group of companies in which assessee is a director. In this regard, it would be pertinent to note that as per section 292C of the Act, there is a presumption that the documents , assets, books of accounts etc found at the time of search in the premises of a person is always presumed to be belonging to him /them unless proved otherwise. This goes to prove that the presumption derived is a rebuttable presumption. Then in such a scenario, the person on whom presumption is drawn , has got every right to state that the said documents does not belong to him /them . The ld AO if he is satisfied with such explanation , has got recourse to proceed on such other person (i.e the person to whom the said documents actually belong to) in terms of section 15....
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....e assessment proceedings under s.153A of the Act which mainly refers to the financial statement of the assessee. Noticeably, one of the major additions have been made under s.68 of the Act which is not permissible unless the entries are found to be credited in the books maintained by the assessee. Once the entries are found to be entered in the books of assessee, the addition under s.68 of the Act could not be made in unabated assessments in the absence of any contradictions emerging from incriminating documents unearthed in the course of search. No such reference has been made in the assessment order. The additions under s.68 of the Act has been made on the basis of credits appearing in financial statement annexed to TEP only which petition was received at a much later stage in the course of assessment post search. It was pointed out that a reference was, however, made to certain documents in the 'remand proceedings' before the CIT(A) at belated stage. The AO is not entitled to make radical changes in basis of assessment in the remand proceedings at belated stage. Without prejudice, a reference was made to the incriminating documents 'CMB-24' in the remand report i....
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.... assessee received part of the sale consideration in cash. MSL/23 page-2, 3 also indicate possibility of receipt of part consideration in cash (Asst. Order Page 9, 10 & 11). The Ld. A/R in his reply has stated that Mr. Bubna is a part time employee of Mani Group and the transaction mentioned in these papers relate to Mani Karn project and not with respect to Shiromani Project. I agree with the contention of the assessee that since these papers relate to Mani Karn Project therefore, no addition on the basis of these papers can be made in the case of Shiromani Project. 5.5. Seized document MSL/8, Page-13 relates to cash transaction made by client Manoj Rathi. However the AO has made addition for this in another assessment year and the paper would be relevant for that year's assessment. 5.5.1. Extract of seized document (SJ/HD/MZ1 Page 2)- It is extract of Mobile Messages found from Srikant Jhunjhunwala. The papers show cash received/paid on different date to different persons. According to the assessee these papers were disclosed in IDS therefore, no addition can be made on the basis of these papers. 5.6.Seized document MSL/21, Page-32, 33, 34, 35 & 36- These pages als....
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.... of the statements of few persons, recorded between year 2013 to 2015 by some other officers of the Department, the AO himself never examined any of the so called entry operators independently during the assessment proceedings and elicited any answers so as to bring on record relevant facts which would prove that assessee was beneficiary of the accommodation entries allegedly provided by any of them and thus justify his adverse view. And moreover, if the AO wanted to still rely on the statements of third party to draw any adverse inference against the assessee/IQCIPL/Appellant, then he was duty bound to furnish a copy of the third party statement to assessee/IQCIPL/Appellant and then summon the third parties and examine them himself and thereafter allowed the assessee/IQCIPL/Appellant an opportunity to cross examine and thereafter if he is satisfied about the veracity of their statements then he can rely on such statement, which unfortunately the AO has not done, so the third party statement cannot be relied upon by the AO to draw adverse inference against the assessee/IQCIPL/Appellant. It has to be kept in mind that wide though his power, the AO must act in consonance with the rul....
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....favour of the assessee, this Tribunal held that the statements of alleged entry operators recorded in the actions conducted u/s 132/133A in their respective searches cannot be said to constitute 'incriminating material found in the course of search upon the assessee' and accordingly deleted the additions made in the order u/s 153A since no incriminating material was unearthed in the course of search in relation to an unabated assessment. The relevant findings of this Tribunal are as follows: "7. Before us, ld Counsel for the assessee begins by pointing out that during both the search operations conducted in the case of Banktesh Group, no document or incriminating material was found or seized pertaining to the assessee company. The assessee's assessment under section 143(3) of the Act also stood completed for the relevant assessment year and in absence of any incriminating material, found/ unearthed during the course of search u/s 132 of the Act, the ld AO had no jurisdiction to make such additions. The incriminating material is the sine qua non for making addition u/s l53A of the Act, which is absent in the assessee`s case under consideration. Therefore, according to the well....
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....lue of Rs. 10 with Premium of Rs. 30 total Rs. 40 each per share. It is against the human probability that anyone will invest and Pay Rs. 10/- along with share premium of Rs. 30/- per share without having any future prospect of the earning by the company. It would be pertinent that assessee company BSL had discontinued its earlier business as mentioned by the director of assessee company Mr. Keshav Kumar Bubna (KKB), The current directors haven't been able to justify, why the shares were priced at high premium of Rs. 30/- per share, without corresponding valuation of the company, which was already experiencing down turn in business prospect. In the normal circumstances it is not possible until unless all the two (2) companies are being controlled remotely by one person. All the circumstances manifests that these are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries. (8) The accommodation entry provider (AEP) Mr. Bhagwan Das Agarwal in multiple statement recorded u/s 131, 133(1), 132(4) and 132(3) read with 132(4). On IT SS) A No. 142/Kol/2018 A.Y 2010-11 M/....
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...., on 30.03.2015. We note that again, during the course of second search operation conducted on 02.03.2016, no documents pertaining to the assessee was found and/or seized, that is, there were no any incriminating material found or unearthed during the search. Therefore, in absence of any incriminating material being found in connection to the assessee, the addition of Rs. 50,00,000/- in garb of unexplained cash credit u/s 68 of the Act, made by the ld AO in the impugned assessment order is wholly untenable in law and on facts of the case. Thus, we note that in absence of any incriminating material or document found during the course of search, the Assessing Officer cannot make additions/disallowances in the assessments u/s 153A/143(3) of the Act for the unabated assessment years." 33. We also place reliance on the decision of this Tribunal in the case of Loyalka Farms Pvt Ltd Vs DCIT in ITA(SS) No. 67/Kol/2018 dated 14.11.2018. In the decided case also additions were made by the AO u/s 68 of the Act referring to statements of alleged entry operators in the unabated assessments which were completed u/s 153A of the Act. On appeal this Tribunal held that the third party statements b....
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....hat has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- (S. R. Mahapatra] Under Secretary (Inv. II) We find that there is absolutely no corroborative evidence found in the course of search by the search team or material evidence brought on record by the ld AO or by the ld CITA in order to give credence to the statement recorded during search. Hence we hold that no addition could be made merely by placing reliance on the statement recorded during search." 34. Following the judicial view endorsed by the coordinate Benches of this Tribunal, we therefore hold that the third party statements referred by the AO to justify additions of Rs. 41,88,50,000/- [....
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....of the appellant/assessee and M/s IQCIPL, which has since merged with the assessee, did not constitute incriminating material and therefore no additions were legally permissible in the assessments framed u/s 153A for the AY 2013-14 for which the assessments did not abate when the search was conducted on 22-06-2016. Ground Nos. 1 & 2 of the assessee's appeal for AY 2013-14, therefore stand allowed in favour of the assessee and against the Revenue. 37. Coming to the Question (B) which is repeated for easy reference (B) Whether the Ld. CIT(A) was justified in confirming the addition made on account of alleged onmonies (cash) of Rs. 4,81,38,000/- received upon the sale of flat and car park(s) to M/s Satyam Bubna (HUF) in the Shiromani Project ? If yes, whether based on this singular instance, the AO was justified in extrapolating and making addition by way of unaccounted sales in respect of all units and car parks sold in the Shiromani Project ? We have already held in Paras 19 to 23 above, the document ID Marked RB/12, relied upon by the lower authorities to justify the addition of Rs. 4,81,38,000/- on account of onmonies received in cash upon sale of flat & car park by the assessee....
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....cument pertained; then as a necessary corollary no addition was logically warranted in the hands of the appellant/assessee because neither this document was found from the premises of the appellant/assessee nor any corroborative material or evidence could be unearthed from the premises of the assessee/appellant. These statement of Shri Satyam Bubna recorded u/s. 132(4) of the Act (supra at para 20) and the action of AO of the Satyam Bbna HUF not to draw any adverse inference against Satyam Bubna HUF on the very same material discovered in search from their premises and the fact that in the subsequent search in assessee/appellant's premises did not yield any corroborative material, and in the absence of any other incriminating material to support the view of AO, no addition was warranted. Moreover, we note that assessee had filed corroborative material and evidence which substantiated that the entire sale consideration was received upon sale of flat & car park to M/s Satyam Bubna HUF was through proper banking channel. We accordingly do not find merit in the Ld. CIT(A)'s action of confirming the addition of Rs. 4,81,38,000/- by way of alleged on-monies/cash received upon sale of fla....
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....utgoing cash transactions, the Assessing Officer has arrived at the turnover. Moreover, the peak investment was Rs. 40,14,806 for three months. However, there is no material seized to justify any figure to be included for a period earlier to the said period of three months. In the circumstances, the Tribunal has recorded a finding of fact and has held that the addition of Rs. 3.40 crores was totally unjustified. The entire finding of the Tribunal is based on the facts. No substantial question of law arises. Hence, the appeal is dismissed." (B) M/s Fort Projects (P) Ltd. v. DCIT, Kolkata, [2013] 29 taxman.com 84 (Kolkata - Trib.): 4. "... ... ... Revenue is in appeal before Tribunal against deletion of addition on the basis of project completion method of accounting for reasons that on-money receipts from various projects have to be added in the year of receipt, since books of account were rejected by AO. As against the order of CIT(A), assessee contended that disputed seized document RM/5 was forcibly manufactured by the search party at the time of search and entire alleged on-money receipt of Rs. 9.02 crores mentioned in RM/5 in respect of few flats in these three projects was....
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.... tried to rebut the presumption under s. 292C by pointing out defects/mistakes in RM/5, but unable to do the same by any cogent evidence. Accordingly, we have to accept the seized document RM/5 as correct and true. 6. When we have assumed that assessee was bound by the presumption under s. 292C in respect of the contents of seized documents marked as RM/5, the addition of Rs. 64.83 crores is also unsustainable because no corroborating document or evidence whatsoever was found in the course of search or survey action in support of addition of Rs. 64.83 crores. The said figure of Rs. 64.83 crores was arrived at by the AO by extrapolating the notings in RM/5 to all the other flats in three projects. We are of the view that AO was not justified in extrapolating few stray notings in RM/5 to the balance flats in three projects given that no incriminating evidence pertaining thereto was found in course of search more so when the authenticity of the subject seized documents, RM/5 was itself challenged by assessee. Since it was presumed by us that assessee was bound by presumption under s. 292C in respect of seized paper RM/5, additions on account of alleged on-money could at best be lim....
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....d be estimated to the best of his judgment by the assessing authority on the basis of the material in his possession. And Hon'ble High Court held that there was no finding by the AO that the estimate of income was made after consideration of the material that came to light during the course of search and seizure, accordingly, Tribunal was justified in setting aside the best judgment assessment made by AO. 8. Similarly, Hon'ble Bombay High Court in the case of CIT v.C.J. Shah & Co. [2000] 246 ITR 671/[2001] 117 Taxman 577 held that where material is detected after search and seizure operations are carried out, the AO is required to determine the undisclosed income and in such cases additions are based on estimates but in matter of estimation some amount of latitude is required to be shown to AO particularly when relevant documents are not forthcoming. However, Hon'ble High Court observed that it does not mean that the AO can arrive at any figure without any basis by adopting any arbitrary method of calculation. 9. We find that even Hon'ble Apex Court in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 laid down principle regarding estimation that while mak....
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....y deleted the addition on account of on-money receipt of Rs. 3,28,13,355/- made by the AO. However, it sustained Rs. 14,10,000/- being aggregate of the confessional amount from two purchasers whose statements were actually recorded. In short, the CIT(A) sustained addition of Rs. 14,10,000/- out of total addition of Rs. 3,28,13,355/- made by the AO........................... 8. We have carefully considered the rival submissions. Both assessee as well as the Revenue are aggrieved by the order of the CIT(A). The addition on account of alleged on money receipt towards sale of residential flat by the assessee is subject matter of controversy. While it is the case of the assessee that in view of the voluntary declaration made by the assessee in its own record to the tune of Rs. 2 Crore which sufficiently covers any remotely possible on money receipt on sale of flats, separate addition over and above which is volunteered not plausible. The Revenue, on the other hand, seeks to contend that quantification of on-money receipt actually works out to Rs. 5,28,13,355/- and therefore addition of Rs. 3,28,13,355/- over and above Rs. 2 Crore declared is fully justified. In the course of search c....
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.... in aggregate, were obtained behind the back of the assessee. The copy of the statement was not provided to the assessee at all. The cross examination of the purchasers were also not provided by the Revenue authorities despite several requests made by the assessee. Such overwhelming facts remain unrebutted on behalf of the Revenue. This being so, the action of the AO in placing reliance upon statement of third party to crucify the assessee is clearly in negation of overriding principles of natural justice which is supposed to be guiding factor in an adjudication process. Needless to say, the appropriate opportunity to an affected party is not a gift but an absolute and salutary right which cannot be simply bypassed. The infringement of basic principles of natural justice has thus vitiated the order of the AO to the core. The legitimate expectation of the assessee to seek cross examination of a person making adverse comments against the assessee to enable it to traverse the assertions cannot be shunned in sub-version of judicial propriety while weighing an issue. The right to fair hearing is a guaranteed right. Every person affected by the statement of third party has indispensible ....
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....unctures or surmises nor should it act on no evidence at all or on vague considerations partly on evidence and partly on suspicion, conjunctures or surmises. The Revenue could not demonstrate any material except unsupported statements of two persons. Such unverified statements without any proof towards its assertions are not a good evidence and do not raise any estoppel against the assessee. Therefore, the addition made by the AO is in the realm of speculation without any basis whatsoever. Hence, we decline to interfere with the order of the CIT(A) in so far as appeal of the Revenue is concerned." (D) ACIT Vs Minda Industries Ltd, in ITA No.4455 & 4456/Del/2015 dated 27.04.2018 (Delhi - Trib) "14. Coming to the issue of deletion of addition by the Ld. CIT (Appeals) in respect of the scrap sales which has been challenged by the Department, it is seen that the Ld. CIT (Appeals) has accepted the assessee's contention that the impugned addition had been made by the assessing officer on an estimate and that the same was not based on any evidence that was found during the course of search proceedings. While allowing the relief, the Ld. CIT (Appeals) has also accepted the assessee's r....
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....reditors were controlled and managed by these so-called entry operators and that the unsecured loans obtained from these loan creditors were in the nature of accommodation entries provided by them to route appellant's own unaccounted monies. The AO accordingly made additions u/s 68 & 69C of the Act on account of unsecured loans and interest paid thereon, in the separate assessments framed u/s 153A/143(3) in the name of the appellant/assessee and M/s. IQ City Infrastructure Pvt Ltd [M/s IQCIPL] which since stood merged with the appellant/assessee. On appeal, the Ld. CIT(A) confirmed the action of the AO. 41. At the time of hearing of appeal, the ld. AR submitted that before the lower authorities, the appellant had submitted the following documents to prove the identity, genuineness and creditworthiness of the unsecured loans taken. a. The PAN No. Addresses and MCA details of ALL the creditors in question ( for identity) b. The financial statements of all the unsecured loan creditors ( for creditworthiness) c. The Ledger copies in the Assessee's books of accounts evidencing the receipt and the repayment of the loans and interest ( for genuineness) d. Bank statement eviden....
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....D(4) dated 10.06.2014 in appellant's own case for AYs 2005-06 & 2012-13 wherein similar allegation was raised by the Revenue regarding the genuineness of the unsecured loans taken by the appellant from various bodies corporate. The ITSC, having considered the material facts and the Revenue's similar arguments, however did not find any merit in the plea of the Revenue and consequently none of the unsecured loans received by the appellant from other bodies corporate were held to be in the nature of accommodation entries. The Ld. AR pointed out that on this issue, the order of ITSC had since attained finality and was therefore binding on the Revenue. He further pointed out that some of the creditors who had advanced loans in AYs 2005-06 & 2012-13 were common in the relevant AY 2013-14 and/or subsequent years. The Ld. AR contended that when these common loan creditors had been accepted to be genuine in the earlier years by the ITSC, Kolkata, then it was no longer open for the Revenue to keep on doubting their identity or creditworthiness or genuineness in the subsequent years. Per contra, the Ld. CIT, DR fully supported the order of the lower authorities. 43. Having heard both the par....
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.... 41 Desire Merchandise Pvt. Ltd. - 32,877 42 Eastern Alloy & Engg I P Ltd - 13,54,931 43 Mahadeo Tracon Pvt. Ltd. - 3,09,041 44 Pace Tradelink Pvt. Ltd. - 91,918 45 Vindya Agencies Pvt. Ltd. - 5,61,095 46 Alosha Marketing Pvt. Ltd. - 7,22,302 47 Damodar Niketan Pvt. Ltd. - 8,17,644 48 Rameshwar Finvest Pvt. Ltd. - 4,44,658 49 Bhikshu Vinimay Pvt. Ltd. - 2,74,931 50 Ganaswaro Marketing Pvt. Ltd. - 2,65,890 51 Ajayhari Textrde Pvt. Ltd. - 4,00,000 52 Nikhar Dealers Pvt. Ltd. - 1,22,740 TOTAL 37,03,50,000 3,20,13,463 * wrongly taken as Rs. 3,00,00,000/- by the AO 44. From the material on record, it is noted that the appellant had furnished name, complete address, PAN details, account confirmation, audited financial statements and MCA details of all the lenders. All the loans were transacted through bank accounts of the creditors. Further, it is important to note that each of the loan creditors was regularly assessed to income-tax. Further, from a perusal of the financial statements of each loan creditor for the financial year 2012-13 revealed that the transaction with the appellant/assessee was duly reflected therein. Moreove....
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....ts of the creditor is un-reasonable and cannot be the sole ground to draw adverse inference against the loan creditor or assessee. It is to be appreciated that this is a case of two unrelated parties i.e. lender and borrower, brought together by a finance broker, and the loans were given and thereafter repaid along with interest through banking channel after deducting tax on it. Accordingly when there was no continuing relationship with the loan creditors, then post the conclusion of such loan transactions and applying the tests of human probabilities, the non-attendance/ non-service of summons by the loan creditors could not be viewed adversely by the AO in the light of the evidences furnished by the assessee on this issue we discussed supra. In the present case on hand, considering the facts and circumstances discussed, such non-compliance alone cannot be the decisive fact to justify the impugned addition in the hands of the appellant, particularly when the appellant had furnished all the relevant documents which it was required to maintain in ordinary course to substantiate its loan transactions with independent third party loan providers. 47. According to Ld. AR's plea section....
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....ould arise." 49. In the case of Nemi Chand Kothari 136 Taxman 213, the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68 of the Act, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subjec....
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.... from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of thesource(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub- creditor had the creditworthiness to advance the ca....
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....between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, NemichandNahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have prove....
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....en by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements." 51. Further, the Hon'ble High Court of Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax (353 ITR 171), on the issue of unexplained cash credits, held that when the basic evidences are on record, the mere failure of the creditor to appear cannot be the basis to make addition. The Hon'ble Court held as follows: "8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explana....
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....e learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: "The Income-tax Appellate Tribunal performs a judicial function under the Indian Incometax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. " 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Co....
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....bers. Under the circumstances, when it was found that the assessee already discharged the initial onus cast upon him with respect to all the creditors and accordingly when the CIT(A) has deleted the addition of Rs. 33,55,011/- made under Section 68 of the Income Tax Act and consequently deleted the disallowance of Rs. 3,10,478/-, which was made with respect to interest and when the same has been confirmed by the ITAT, it cannot be said that ITAT has committed any error and/or illegality, which calls for the interference of this Court. In paragraph 11, ITAT has observed and held as under: "We have heard the rival submissions and perused the material on record. It is an undisputed fact that during the year the assessee had received loan from 17 parties aggregating to 33,35,011/-. The details of which are listed at page 2 of Assessing Officer order. CIT(A) while deleting the addition has given a finding that the assessee had filed before Assessing Officer the confirmations with name, address, PAN Number, copy of ledger account, copy of balance sheet and profit and loss account, copy of Income Tax returns and computation of total income in respect of all the parties except two de....
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....ged its onus of proving the identity of creditors by giving their complete addresses, permanent account numbers and copies of assessment orders. It was further observed that the assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques from the bank account of loan-creditor. The Hon'ble High Court held that only on the ground that some of the creditors could not be served with notice u/s 131 or they failed to appear before Assessing Officer, the loans could not be treated as non-genuine and therefore upheld the order of the Tribunal deleting the addition u/s 68 of the Act. The relevant findings of the Hon'ble High Court are as follows: "7. We have considered the rival submissions and have also gone through the order passed by the Assessing Officer, the relevant portion of which we have also extracted in para. 2 above. The Commissioner of Income-tax (Appeals) more or less confirmed the addition on the reasoning given by the Assessing Officer in the assessment order. A perusal of the chart given by us in para. 3 above indicates that out of 21 creditors the Assessing Officer has recorded the statements of only six creditors, viz., ....
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....s also paid by the assessee to the creditors by account payee cheques. Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee -from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfi....
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....n the appellant's case, the Court observed that when the assessee had furnished loan confirmations from lenders, copies of creditors' bank statements, Income Tax returns etc., these materials duly proved the genuineness of the transaction of loan as well as the identity & creditworthiness of the lenders. 55. We further rely on the decision of the Hon'ble Delhi High Court in the case of CIT Vs Shiv Dhooti Pearls & Investment Ltd (64 taxmann.com 329). In the decided case the assessee had received unsecured loans in the year in question. In the course of assessment, the AO requisitioned the details of the loans received by the assessee. From the details furnished by the assessee, it was observed that few loan creditors had returned loss and their source of advancing loans were other bodies corporate who had also returned miniscule taxable income in their income-tax returns. The AO therefore doubted the creditworthiness of the lenders. The AO accordingly made addition u/s 68 of the Act. On appeal the Hon'ble High Court held that the onus of the assessee is 'to the extent of his proving the source through which he has received the cash credit.' The Hon'ble High Court held that ....
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....to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged visa- vis the transactions, which have taken place between the Assessee....
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....erting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala fide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Delhi) and CI....
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....veral bodies corporate were assessable as the appellant's income in the year of receipt of loans, since the assessee had failed to substantiate the genuineness of the loan creditors. We however find that the Settlement Commission by its consolidated order dated 10.06.2014 for the AYs 2005-06 to 2012-13 repelled the Revenue's said contention. The relevant findings of the Settlement Commission are as under: "....... that the search has revealed that the applicant company has been borrowing heavily from the market through the finance brokers both in cheque and in cash. As such, there was no question of indulging into entry transactions, which was resorted by persons having surplus, and more spare black money, whereas in case o the applicant company there was shortage of funds. He further stated that it may have been possible that loans might have been provided by third parties in name of the lending parties in connivance with Mr. Kejriwal. Neither the applicant company was aware of any such thing nor was it aware of the details of lending parties since the loans were received through the brokers. Moreover, most of the loans were repaid back when in case of jamakharchi transaction, s....
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....ditors were questioned by the Revenue but the Settlement Commission accepted the genuineness of the appellant's loan transactions with the loan creditors. In the circumstances since the loans aggregating to Rs. 11,97,00,000/- were received from the bodies corporate, who had also advanced loans in the earlier years, and there being no change in the factual matrix and the nature of documentation produced in support of the loan transactions being same, we do not see any reason to take contrary view. Therefore, the addition of Rs. 11,97,00,000/- made under Section 68 of the Act in respect of these loan creditors is hereby deleted. Consequent to our said finding, we also direct the AO to delete the disallowance u/s 69C of the Act amounting to Rs. 71,60,833/- being interest paid by the appellant on these loans. 59. During the relevant year the appellant received loan of Rs. 30,00,000/- from M/s Earthlink Estates Pvt Ltd. [Serial No.34 of the Table]. Although the loan actually received was only Rs. 30,00,000/-, in the order passed u/s 153A/143(3), the AO erroneously treated the loan amount to be Rs. 3,00,00,000/- and thereby artificially enhanced the addition u/s 68 of the Act. We note t....
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....ess of providing accommodation entries to various beneficiaries. Besides placing reliance on such statements, in few cases, the AO also discussed the financials of the loan creditors and opined that the financial position of the loan creditors was weak and therefore the creditworthiness of the loan creditors remained unproved. On appeal the Ld. CIT(A), without examining the merits of the averments made in support of the individual loan credits; upheld the AO's action principally on the ground that the AO's reasoning was backed by the observations made by the Investigation Wing of the Department in the appraisal report prepared pursuant to the search conducted u/s 132 of the Act. 61. After careful analysis of the documents placed before us and after examining the statements of the so-called entry operators, which the AO have selectively extracted in the assessment order, we find on careful examination of these statements that neither in the sworn statements the so-called entry operators had admitted of providing accommodation entries to the appellant/assessee nor they had admitted of receiving any cash from the appellant/assessee in lieu of cheques. In fact we note that although th....
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....nt of Shri Anirban Dutta was not recorded in connection with search u/s 132 conducted upon the appellant/assessee on 22-06-2016. We thus, first of all note that the statement of Shri Anirban Dutta was recorded in some other proceedings unconnected with the appellant's search. From the contents of the statement extracted at Pages 56 to 59 of the assessment order, we note that nowhere in his statement Shri Anirban Dutta had made any admission that M/s Narantak Dealcomm Pvt. Ltd., M/s Remahay Stores Pvt. Ltd., M/s Satyam Vyapaar Pvt. Ltd. and M/s Shaily Sales & Services Pvt. Ltd were controlled or managed by him. Although in his answer to Q No. 5, he had identified the names of fifteen (15) companies which he allegedly controlled but we find that none of the companies named by him, contain name of any of the companies from whom the assessee had received loans. The AO also did not bring on record any material which could have shown that the bank accounts of the loan creditors through which the loan amounts were disbursed were operated by Shri Anirban Dutta. We also note that even though in his statement, Shri Anirban Dutta had admitted of being engaged in providing accommodation entrie....
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.... the discussion (supra) and the addition of loan given to the assessee by these four loan creditors are erroneous. (B) The assessee received loan of Rs. 15,00,000/- from M/s Sharma Hire Purchase Limited, which according to AO was allegedly controlled by Shri Anuj Bhukediwala whose statement was recorded u/s 131 of the Act on 16-05-2016 at 51/1 Bonehari Bose Road, Howrah - 711 101. Thus, the statement of Shri Anuj Bhukediwala was also not recorded in pursuance of any proceedings against the assessee in connection with search u/s 132 of the Act conducted upon the appellant/assessee on 22-06-2016. We note that the AO had selectively extracted the contents of his statement which was recorded in some other proceedings unconnected with the appellant's search. From the contents extracted at Pages 64 to 68 of the assessment order, we note that nowhere in his statement Shri Anuj Bhukediwala had admitted that M/s Sharma Hire Purchase Limited was controlled by him. We further note that in his answer to Q No. 15 though he identified the group to whom he provided accommodation entries but the parties identified by him was neither Shri Sanjay Jhunjhunwala or Mani Square Limited. We find that th....
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....dation entries. From a perusal of the answers to the questions, we note that though he admitted to be providing accommodation entries to the named groups/parties but none of the parties identified by Shri Agarwal, inter alia, included the name of Shri Sanjay Jhunjhunwala or Mani Square Limited. We find that the statement of Shri B D Agarwal on its own did not contain any assertion/admission against the assessee or about his connection with Ms. Romanchak Merchandise Pvt. Ltd. the basis on which any negative inference can be drawn against the assessee or the loan creditor M/s. Romanchak Merchandise Pvt. Ltd. So, the statement of Shri Aggarwal cannot be relied upon to draw any adverse inference. So, we find that M/s. Romanchak Merchandise Pvt. Ltd had no connection with Shri B D Agarwalwa. We also note that before the AO used statement of Shri B D Agarwal as evidence, he himself never issued notice u/s 131 or 133(6) of the Act to Shri B D Agarwal to ascertain whether he has any connection with M/s. Romanchak Merchandise Pvt. Ltd. and with the appellant/assessee and about the facts of the case, particularly when no information appearing from his statement connected the loan transaction....
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.... particularly when no information was appearing from his statement which connected the loan transactions between appellant/assessee and the loan creditors M/s Lavanya Nirman Pvt. Ltd., M/s Kasturi Home Pvt. Ltd., M/s Himadri Enclave Pvt. Ltd., M/sTista Nirman Pvt. Ltd. and M/s Orbital Contractors & Financiers Pvt Ltd. We find that the statement of Shri Pankaj Agarwal on its own did not contain any assertion/admission whatsoever on the basis of which any prudent person instructed in law would have reached the conclusion that the loans received by the appellant from five bodies corporate, admittedly have any connection with Shri Pankaj Agarwal. Moreover, when the AO himself never examined the so-called entry operator, nor gave any opportunity to assessee to cross examine Shri Pankaj Agarwal the statement cannot be relied upon against the assessee or the loan creditors and by doing so, the AO erred in his action of making addition. On the facts discussed in the foregoing we therefore find that the addition made by the AO was both factually as well as legally unsustainable. (E) The assessee received loan of Rs. 1,00,00,000/- from M/s Susri Finance Pvt Ltd, which according to AO was al....
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.... two persons named by Shri Ramesh Poddar, who were allegedly acting under his directions and control, were not the Directors of the loan creditor. In his entire statement, Shri Ramesh Poddar neither named the loan creditor nor suggested that the loan creditor was controlled by him. He has also not admitted to be providing accommodation entries to either Shri Sanjay Jhunjhunwala or Mani Square Limited. We are of the opinion that the statement of Shri Ramesh Poddar at best could have raised suspicion in the mind of the AO and it would have been the starting point of an enquiry to dig out facts which could have unraveled any wrong doing connecting the assessee. However, the statement on its own did not contain any material whatsoever on the basis of which any prudent person instructed in law would have reached the conclusion that the loans received by the appellant/assessee from M/s Vicky Fincon Pvt Ltd was not genuine. Moreover the AO himself never examined the so-called entry operator, nor gave an opportunity to cross examine Shri Ramesh Poddar. We therefore find that the addition made by the AO by relying on such statement was untenable on facts and in law. (G) The assessee receiv....
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....ry operator, and provided any opportunity of cross examination of Shri R K Ajitsaria, the statement of Shri R. K. Ajitsaria cannot be relied upon and the AO erred in relying on the statement to make the addition which action of AO was factually as well as legally untenable. 62. The foregoing was the illustrative analysis of the statements of entry operators relied upon by the AO for justifying the additions made u/s 68 & 69C of the Act. On the same lines, as discussed in the earlier paras, the AO relied on statements of other entry operators. On examination of these statements we are satisfied that in none of the statements any of them had admitted of having any transactions or providing accommodation entries to the appellant nor the AO has brought on record any material to link these entry operators with the bodies corporate from whom the loans were received by the appellant. We therefore, for the facts and reasons, elaborately set out, in sub-paras (A) to (G) above, hold that the AO was unjustified in making additions u/s 68 & 69C of the Act based on the unsubstantiated and irrelevant statements of so-called entry operators. 63. Apart from relying on the statements of the entry....
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....lers Pvt Ltd were used for granting loan to the appellant. The fact that the loan creditor earned interest income of Rs. 1,81,41,518/- and the net profit for the year was Rs. 1,45,98,911/- clearly shows that the financial health of the creditor was indeed sound. On these facts therefore we are unable to accept the AO's conclusion that M/s Nikhar Dealers Pvt Ltd did not had the financial capacity to grant loan to the appellant and for that reason the loan was required to be treated as unexplained cash credit u/s 68 of the Act. The action of AO, therefore, cannot be accepted. (B) Similarly we find that the lower authorities was not justified in making the addition in respect of loan obtained from M/s Majestic Commercial Pvt Ltd on the ground that the financial position of the loan creditor as revealed by the Profit & Loss Account and Balance Sheet did not establish the creditworthiness of loan creditor. The financials of M/s Majestic Commercial Pvt Ltd is seen set out in Pages 38 & 39 of the assessment order. After analyzing the financials of the loan creditor, we note that the conclusion drawn by the AO that this loan creditor had negligible business activity and nil business prof....
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....in percentage of their gross revenues was miniscule. We therefore note that the conclusions drawn by the AO were clearly not supported by the data available from the audited accounts of these loan creditors. In our considered view, to decide the financial capacity and capability to advance loan, it was necessary for the AO to take into consideration the overall financial capacity and ability rather than only going by the profitability of the loan creditor. 65. From the above discussion it is evident that before rejecting the appellant's explanation with regard to financial capacity and ability of the loan creditors, the AO did not objectively take into consideration financial net worth of the creditors having regard to facts and figures available in the audited accounts. On examination of the financial statements of the loan creditors, we find that each loan creditor possessed sufficient investible funds out of which the creditors had advanced the loans to the assessee. We also find that in each case, the loan creditor had reported substantial interest income. Further, compared with the gross interest accounted in the books of the creditor, the amount of interest paid by the appel....
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.... with the appellant's case. (C) In the decision rendered in the case of Bhola Shankar Cold Storage Pvt Ltd Vs JCIT reported in 270 ITR 487, the question before the Hon'ble Calcutta High Court was whether, in absence of any independent verification, the share application monies received in cash from several individuals, who were not income-tax assessees, but claimed to be farmers, was rightly assessed by the AO u/s 68 of the Act. We note that the facts as well as the question involved in this judgment are of no relevance in the appellant's case. The Ld. CIT(A)'s reliance on this judgment is therefore, incorrect. (D) We have also gone through the decisions of the Hon'ble Delhi High Court in the case of Nova Promoters and Finlease Pvt Ltd reported in 342 ITR 169, Sophia Finance Ltd reported in 205 ITR 98, CIT Vs MAF Academy Pvt Ltd reported in 361 ITR 258, CIT Vs NR. Portfolio Pvt Ltd reported in 214 Taxman 408 and Navodaya Castle Pvt Ltd reported in 367 ITR 306. In our opinion the ratio laid down in these decisions cannot be applied to the appellant's case because the sums in question are not share application monies. In the cases decided by the Hon'ble High Court, the private li....
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....have any means to determine the veracity or correctness of the averments made in these statements. Moreover, as noted by us in the earlier paras, in their statements none of the persons had admitted of having any transactions with the appellant or Mr. Jhunjhunwala. In the aforesaid factual background if the AO intended to use these statements to draw adverse inference against the appellant, he himself ought to have examined these entry providers to ascertain the correct facts and in case if it is revealed by these entry operators as to any role of the appellant/assessee or connection with the loan creditors as suspected by the AO, then he should have collected material and in all fairness thereafter give a copy of the admission against the assessee or material discovered in the process and allowed the assessee an opportunity to cross examine the makers of the statement or the gave an opportunity to assessee to meet/rebut the material against it and after hearing the explanation or defence of the appellant/assessee, should have drawn his conclusion or else, the action of AO will be held to be bad in the eyes of law for violation of principle of Natural Justice. Without doing what we....
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....or to put it negatively to prevent miscarriage of justice. The AO was duty bound to bring on record the true and correct facts because while discharging the duties as an Assessing Officer, he was expected to function both as an investigator and adjudicator. In his role as an investigator, he was duty bound to investigate fully and bring out all the facts on record and while discharging the duty as an adjudicator he was required to comply with the principles of natural justice as discussed supra. We however note that before passing the assessment order, the AO failed to perform his twin duties, that of the investigator and adjudicator resulting in the additions being vitiated in the process. 69. We may in this regard, gainfully refer to the decision of Hon'ble Apex Court in the case of CIT Vs Odeon Builders Pvt Ltd reported in 418 ITR 315 involving similar facts as involved in the present case. In this decided case, the Revenue had disallowed the purchases made by the assessee holding it to be bogus based on the statements given by a third party. On appeal, the Ld. CIT(A) noted that on one hand the assessee had discharged its initial burden of substantiating the purchases by produc....
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.... the ITAT." 70. In this regard, we also rely on the following findings recorded by the Hon'ble Apex Court in the case of Andaman Timber Industries Ltd vs Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 reported in (2015) 62 Taxman 3 (SC),which reads as under: "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." 71. It is by now a settled proposition of law that where in the revenue proceedings any inference is drawn against the assessee on the basis of statements of any third person then such inference is legally unsustainable if opportunity of cross examining the Departmental Witness/third party is not granted to the affected person. In this regard, we may make useful reference to the decision of the Hon'ble Bombay High Court in the case of CIT Vs Reliance Industries Ltd (102 taxmann.com 372). In this case the assessee had claimed deduction for consultancy ....
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.... the Tribunal had held in favour of the assessee. 3. Having heard learned counsel for the parties and having perused documents on record, we notice that the entire issue is based on the appreciation of materials on record. CIT (Appeals) and the Tribunal concurrently held that there was sufficient evidence justifying the payment to Shri S.K.Gupta, a Consultant and that the Assessing Officer other than relying upon the retracted statements of Shri Gupta recorded in search, had no independent material to make the additions. No question of law arises." 72. Similar view was expressed by the Hon'ble Gujarat High Court in the case of CIT Vs Kanti Bhai Ravidas Patel (42 taxmann.com 128), wherein it was observed as follows: "5. We have heard rival contentions and gone through the material on record. Ld. A.O. has used third party statement of Vikas A. Shah in framing the assessment. The statement of Shri Vikas A. Shah recorded under Section 131(1A) not under Section 132 of the IT Act on 14/03/2005 and 19/04/2005. The ld. A.O. had used this statement without allowing cross examination of Vikas A. Shah which is against the principle of natural justice. This land had registered document ....
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....03.2010 affirming order of Commissioner (Appeals) dt. 05.03.2008, with modification that on the statement of Kripa Shanker Sharma, the income of Rs. 5 Lacs was assessed in the hands of assessee and it was observed by the Tribunal that the statement of Kripa Shanker Sharma was never confronted and no documentary evidence was supplied to the assessee, in absence whereof the income in the hands of the assessee on the basis of statement of Kripa Shanker Sharma deserves deletion. 3. The assessee as alleged carried out construction activities and disclosed income from subcontract and investment in building construction. After the search U/s 132 of the Act,1961 was carried out on 12.04.2005 in the case of another assessee M/s. B.C. Purohit & Company at Jaipur & Kolkata, evidence was gathered and from the investigation it revealed that in the garb of tax consultation the owners and employees of this group were running the racket of providing accommodation entries of gifts, loans, share application money, share investment and long term capital gains in shares. It will be relevant to record that the present assessee might have been in consultation with M/s. B.C. Purohit & Company and a me....
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....when the identity of existence of the investor is not disputed and accordingly upheld the view of Commissioner (Appeals), at the same time further observed that merely on the basis of oral statement of Kripa Shanker Sharma recorded before the search authorities that the assessee provided accommodation entries was not sufficient for the income to be assessed for a sum of Rs. 5 Lacs in the hands of the assessee and while allowing the cross objection filed by the assessee dismissed the appeal preferred by the revenue under order impugned. 4. We have heard the parties at length and of the view that what has been observed by the Commissioner (Appeals) & the Tribunal appears to be based on factual matrix and there appears no substantial question of law arises which may require interference by this Court to be examined in the instant appeal. 5. Consequently, the instant appeals are wholly devoid of merit and accordingly stand dismissed." 74. In view of the above judicial precedents (supra), we note that in the facts of the present case, save and except extracting the statements of so-called entry operators, the AO did not bring on record any credible evidence/material which could ....
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....he AO of the loan creditor as to the genuineness of the transaction as to whether the loan creditor's AO has accepted the loan transactions as genuine or not. Without doing this exercise the AO of the loan taker (debtor) cannot brand the loan creditor as unworthy of credence. Here, in this case on hand, the AO has not done this exercise and these loan creditors all are income tax assessees and all their detail were furnished before the AO and they have all shown the interest income as their income and while paying interest, the assessee had deducted tax at source also. In this regard, we may make useful reference to the judgment in the case of CIT Vs Dataware Pvt Ltd [ GA No.2856 of 2011] wherein the following observations were made by the jurisdictional Hon'ble Calcutta High Court; "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor ....
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....s to whom the payments were made in cash were staff of the appellant/assessee through whom the payments were made for meeting expenses of the appellant. The Ld. CIT, DR was unable to controvert this factual finding of the Ld. CIT(A). We note that since the payments were made to staff members which facts were duly recorded in the regular books of accounts, the additions of Rs. 15,07,993/- on the ground of being unaccounted payments was rightly deleted by the Ld. CIT(A). Ground No. 2 of the Revenue is therefore dismissed. 79. Now we proceed to decide the Issue (E) raised by the assessee. From the facts on record it is noted that M/s IQCIPL stood amalgamated with the appellant vide order of the Hon'ble Calcutta High Court dated 06.03.2017. It is noted that this fact was brought to the notice of the AO by letters dated 23.02.2018, 18.05.2018 and 04.10.2018 (paper book pages 47, 48, 51 & 52). The Ld. AR claimed that, despite giving due intimation regarding the amalgamation to the AO, the notice u/s 143(2) dated 05.10.2018 was issued by the AO in the name of the non-existent entity (M/s. IQCIPL) which according to the Ld. AR was an incurable defect u/s. 292BB of the Act and as a consequ....
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....nd the transferor company (M/s. IQCIPL) has been merged with the transferee company (M/s. MSPL)w.e.f. 01.04.2015 (appointed date) vide order of Hon'ble Calcutta High Court dated 06.03.2017. It is noted that M/s. MSPL had informed the AO about the amalgamation of M/s. IQCIPL with it vide letter dated 23.02.2018 which is available at page 47 of paper book. The intimation regarding the amalgamation of M/s IQCIPL with M/s MSPL was also given in their subsequent letters dated 18.05.2018 and 04.10.12018. Despite being informed about the amalgamation, it is noted from Page 152 of the paper book, that the AO issued notice u/s 143(2) for AY 2013-14 on 05.10.2018 in the name of M/s. IQCIPL which was admittedly non-existent on that date. The AO thereafter proceeded to frame the assessment in the name of M/s. IQCIPL which was a non-existing company after amalgamating with M/s. MSPL by the order of the Hon'ble Calcutta High court dated 06.03.2017 w.e.f. 01.04.2015. 82. It is by now well settled in law that any notice or order issued in the name of nonexistent entity which has since stood merged/ amalgamated / dissolved is ab initio void and bad in law. Once it is found that the notice assuming....
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....malgamation' does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsbury'sLaws of England, Fourth Edn.., Vol. 7, paragraph 1539. Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity. 7. In view of the above discussion, we agree with the Tribunal's view that the amalgamating company ceased to exist in the eye of Iaw, therefore, the appellant was not liable to pay tax on the amount of Rs. 58,735. The appeal is accordingly allowed and we set aside the order of the High court and answer the question in favour of the assessee against the revenue. There will be no order as to costs. 83. Now we deal with the Ld. CIT, DR's contention that, since the cause title of the assessment order bore the names of both amalgamating company M/s. IQCIPL....
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....rge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores; (ii) Secondly, under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities; (iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist. In Saraswati Industrial Syndicate Ltd., (supra) the principle has been formulated by this Court in the following observations: "5. Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganisation of scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or 'amalgamation' has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended ....
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....ng addressed, the amalgamated company had brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the participation by the amalgamated company would have no effect since there could be no estoppel against law : "11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said 'dead person'. When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings an assessment order passed in the name of M/s Spice would clearly be void. Such a....
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....ee Micra India Pvt. Ltd had amalgamated with Dynamic Buildmart (P) Ltd. Notice was issued to the original assessee by the Revenue after the fact of amalgamation had been communicated to it. The Court noted that though the assessee had participated in the assessment, the original assessee was no longer in existence and the assessment officer did not the take the remedial measure of transposing the transferee as the company which had to be assessed. Instead, the original assessee was described as one in existence and the order mentioned the transferee's name below that of the original assessee. The Division Bench adverted to the judgment in Dimension Apparels (supra) wherein the High Court had discussed the ruling in Spice Entertainment (supra). It was held that this was a case where the assessment was contrary to law, having been completed against a non-existent company. .... 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally ....
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....ved that, except variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify these additions is verbatim same as in AY 2013-14. 89. Following our reasons and conclusions recorded in Paras 43 to 77,(supra) while deciding Ground Nos. 6 to 11 of assessee's appeal in A.Y. 2013-14, we hold that the additions of Rs. 19,14,00,000/- and Rs. 5,07,90,497/- of the Act are also untenable on facts and in law. We therefore allow the Ground Nos. 2 to 7 raised by the assessee and direct the AO to delete the impugned additions made u/s 68 & 69C of the Act for AY 2014-15. 90. Additional Grounds raised in this appeal are against the legality of the assessment order on the ground that the notice issued u/s 143(2) of the Act was issued to M/s. IQCIPL, a non-existent entity consequent to its amalgamation with the appellant/assessee pursuant to the order of the Hon'ble Calcutta High Court dated 06-03-2017. After considering the rival submissions, it is observed that these additional grounds are identical to the additional grounds raised in AY 2013-14. Following our reasons and conclusions drawn in AY 2013-14 at Para 78 to 85, we hold that the assessment order framed in the name o....
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....p; 1,30,06,585 Ubi ca prebpl 22nd May-14 Flat Booking Mani Square Ltd 32,43,038 97,63,547 A/c Swarnamani 22nd May-14 Flat Booking Mani Square Ltd 32,10,576 65,52,971 A/c Swarnamani 22nd May-14 Flat Booking Mani Square Ltd 32,43,038 33,09,933 A/c Swarnamani 22nd May-14 Flat Booking Mani Square Ltd 32,10,575 99,358 A/c Swarnamani 93. The AO further extracted Page No. 78 of the impounded document vide Mazharnama SSP/HD/MZ/2 which was seized on 09-08-2016, which according to him, showed that cash of Rs. 1,29,07,228/- was paid by Shri S.S. Patodia for purchase of flats. He further referred to the sworn statement dated 05.08.2016 given by Shri S.S. Patodia u/s 131 of the Act wherein he admitted of making payment of the aforesaid sum in cash to the appellant. The relevant extracts of the Question Nos. 16 & 17 and the answers given by Shri Patodia is reproduced hereunder: Q.16. I am reproducing a portion of the cash book Impounded during the survey operations conducted u/s 133A of the I.T. Act,1961 at the office premise of M/s. Overtone Dealcom Pvt. Ltd. and other companies at 3A, Hare Street, Kolkata on 22.06.2016: Date Main ....
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....33,46,979/- by way of receipt of undisclosed "on monies" received on sale of flats and car parks in the relevant AY 2015- 16. On appeal, having regard to the statement of Shri S S Patodia, the Ld. CIT(A), sustained the addition to the extent of Rs. 1,29,07,228/-. The Ld. CIT(A) however deleted the addition of Rs. 43,04,39,751/- which was made solely on the theory of alleged on money receipt. In support of this finding, the ld. CIT(A) relied on the decisions of the Hon'ble Bombay High Court in the case of C.J. Saha & Sons (supra) and the decisions of the Kolkata & Delhi Benches of this Tribunal in the cases of Fort Project Pvt Ltd Vs DCIT(supra)and Minda Industries vs DCIT (supra). Aggrieved by the action of the Ld. CIT(A), both the assessee and the Revenue are in appeal before us. 95. We have heard the rival submissions of both the parties and examined the material placed on record. It is noted that Flat No. 23EA having built-up area of 4749 sq ft was booked by M/s Kalamunj Builder Pvt Ltd & M/s Kalamunj Developers Pvt Ltd vide agreement dated 08-03-2014. The Flat No. 24EA having built-up area of 4758 sq ft was booked by M/s Kalamunj Height Pvt Ltd and M/s Kalamunj Construction Pv....
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....ine was provided by him. So, this statement of Shri S. S. Patodia as well as the cash book containing the notings of cash payment cannot have been relied by the AO/Ld. CIT(A) to make/confirm the addition of Rs. 1,29,07,228/-. Apart from the selective extraction of certain entries found in SSP/HD/MZ/2 as discussed, we note that the AO did not bring any material on record which could lead to conclusion that the appellant was in receipt of on-monies/cash on sale of Flat Nos. 24EA and 23EA in its 'Swarnamani Project'. On the contrary, it is noted that the appellant had furnished evidences which showed that amounts impugned in the table above were actually received by it in cheque through proper banking channel. It is noted that the appellant had received the following payments from M/s Kalamunj Builder Pvt Ltd, M/s Kalamunj Developers Pvt Ltd, M/s Kalamunj Height Pvt Ltd and M/s Kalaunj Construction Pvt Ltd via banking channel which was credited in the books of accounts of the appellant. Gross Amount Credited TDS Deducted Date of TDS Deposited Net Amount Receivable Amount Received Date of Payment Balance Amount deposited as TDS during 21013-14 (1) (2) (3) (4) (5) (6) (7) ....
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....this we rely on the decision of the Hon'ble Supreme Court in the case of CIT vs Khader Khan Son 352 ITR 480 (SC) wherein it has been held that section 133A does not empower any income tax authorities to examine any person on oath, hence any such statement lacks evidentiary value and any admission made during the survey cannot by itself be made the basis of addition. Moreover it has also been brought to our notice that Shri S S Patodia had retracted from his statement, copy of which was placed on our record. The relevant excerpt is quoted below:- "By inadvertence, I having little knowledge of accounts and am an engineer, under pressure of the learned DDIT who conducted survey, stated during course of my statement recorded on 05.08.2016 u/s 131 of the Income Tax Act in reply to query no.16 that these payments were made by cash but sir out of the aforesaid amount of Rs. 1,29,07,2281- the sum of Rs. 1,26,92,5441- were made by banking channel to Mani Group of Companies vide RTGS drawn on Union Bank of India, Dharamtalla Branch from our various group companies. Details of payment made by the various group companies is enclosed herewith. The balance amount was either outstanding or ....
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....d draft and the balance in cash. The seller also revised his return of income and offered the entire sale consideration of Rs. 34.85 lacs to tax. The AO relying upon the statement of the seller made the addition of the difference of Rs. 30.75 lacs as undisclosed income of the purchaser. On appeal the Ld. CIT(A) deleted the addition. On further appeal, the Tribunal confirmed the action of the Ld. CIT(A). Tribunal observed that the seller had given conflicting statements as well as income-tax returns which showed that his action of admitting sale consideration and paying tax was nothing but an obvious effort to save himself from further harassment from the Revenue. Tribunal noted that apart from the statement of the seller, neither the AO conducted any independent inquiry nor did he discharge the burden of proving that the actual consideration received by the assessee was to the tune of Rs. 34.85 lacs, over and above Rs. 4.10 lakhs as shown in the sale registration documents. On Revenue's appeal, the Hon'ble High Court upheld the findings of the Tribunal. The Hon'ble High Court held that the addition made by the AO by merely relying on the statement given by the seller was untenable ....
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....iform view of the courts and also held by the Apex Court as reported in K.P. Varghese v. ITO [1981] 131 ITR 597 the burden of proving actual consideration in such transaction is that of the Reve-nue. Considering the entire gamut of the case, we find that the Revenue has failed to discharge its duties and as held by the learned Commissioner of Income-tax (Appeals) instead made up a case on surmises and conjectures which cannot be allowed. Under the circumstances, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) and we uphold the appellate order in this regard." 6. We also found that the Assessing Officer did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. If he would have taken independent enquiry by referring the matter with the Valuation Officer, the controversy could have been avoided. Failing to refer the matter was a fatal one. 7. In view of the foregoing conclusions, we find no error in the order of the Income-tax Appellate Tribunal and requires no interference. Hence no substantial questions of law arises for consideration of this Cour....
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....pending upon the facts and circumstances of each case. The Tribunal noted that the AO blindly relied upon the original statement made by 'KM' and presumed the seized material to be fully true while making the addition. The Tribunal further observed that 'KM' had retracted his statement. Accordingly the Tribunal held that the statement of 'KM' could not be considered as conclusive in nature against the assessee. The Tribunal also took note of the various discrepancies in the seized material as pointed out by the assessee and the Tribunal held that the AO should not have drawn adverse inference on the basis of suspicion, conjectures or surmises. It held that the Assessing Officer is required to act fairly and judicially as a reasonable person and not arbitrarily or capriciously. An assessment which is made on inadequate material cannot stand on its own leg. The Tribunal observed that the AO did not bring any corroborative evidence or material in support of the original statement of 'KM' to prove as to why the original statement alone should prevail. The addition made by the AO was thus deleted in full. 104. In view of the corroborative facts and evidences brought on record by the ap....
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....ions of Rs. 6,82,00,000/- [6,22,00,000 + 60,00,000] & Rs. 2,98,16,275/- made u/s 68 & 69C of the Act in the assessments framed u/s 153A/143(3) in the names of the appellant and M/s. IQCIPL. After considering the rival submissions, it is observed that, except variation in figures, the reasoning adopted both by the AO & Ld. CIT(A) to justify these additions is verbatim same as in AY 2013-14. 107. Following our conclusions recorded in Paras 43 to 77, while deciding Ground Nos. 6 to 11 of assessee's appeal in A.Y. 2013-14, we hold that the additions of Rs. 6,82,00,000/- & Rs. 2,98,16,275/-u/s 68 & 69C of the Act respectively are also untenable on facts and in law. We therefore allow the Ground Nos. 6 to 10 raised by the assessee and direct the AO to delete the impugned additions made u/s 68 & 69C of the Act. 108. Additional Grounds raised by assessee in this appeal are against the legality of the assessment order on the ground that the notice issued u/s 143(2) of the Act was issued to M/s IQCIPL, a non-existent entity consequent to its amalgamation with the appellant pursuant to the order of the Hon'ble Calcutta High Court dated 06-03-2017. After considering the rival submissions, it....
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....rd, we gainfully refer to the decisions of Hon'ble Calcutta High Court in the case of M/s. Akzo Nobel India Ltd. Vs. CIT in ITA No. 110 of 2011 dated 14.06.2016 and in the case of CIT Vs. Vijayshree Ltd. of the Hon'ble Calcutta High Court in GA No. 2607 of 2011 dated 06.09.2011. In the order in the case of Vijayshree Ltd. (supra) the Hon'ble Calcutta High Court held as follows: "The only issue involved in this appeal is as to whether the deletion of the addition by the Assessing Officer on account of Employees 'Contribution to ESI and PF by invoking the provision of Section 36(1 )(va) read with Section 2(24 )(x) of the Act was correct or not. It appears that the Tribunal below, in View of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was Justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court ....
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.... in the construction zone, disagreements arouse between the lessor and lessee regarding resumption of construction. Therefore, M/s Abasan Realty LLP and the appellant referred this dispute for reconciliation to fellow builders of Kolkata, namely Shri S Mohta of M Group and Shri S Dugar of PS Group. In an award dated 25-08-2015, it was resolved that Shri Hari Sharma shall pay interest/compensation on Rs. 31 crores calculated at a rate of 15% for a period of one year. The award however was never implemented and the construction remained suspended and no payment was ever made by Shri Hari Sharma. In the course of search conducted on 22-06-2016, the Department seized a document on which identification mark Page 52 of MSL/21 was put. The document is reproduced at Page 100 of the assessment order which contains the calculation of interest receivable from Shri Hari Sharma which was worked out by the CFO of the appellant. The AO further referred to another calculation sheet which was impounded with ID mark Page 112 of MSL/27. Relying on these loose papers, the AO concluded that the appellant was entitled to received interest from Abasan Realty (controlled by Hari Sharma) which was not acco....
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....ified at Page 52 of MSL/21 and Page 112 of MSL/27, we observe that the notings contained therein suggested unilateral claim raised by the appellant on M/s Abasan Realty LLP in terms of the reconciliation award passed on 25-08-2015. There is nothing in these documents which proves that Shri Hari Sharma or M/s Abasan Realty LLP had ever accepted such claim of the appellant. Even the AO has not brought on record any tangible material which shows that Shri Hari Sharma or M/s Abasan Realty LLP had acceded to the award and/or accepted the award or claim of the appellant. It was brought to our notice that the AO did not make any enquiries from either Shri Hari Sharma or M/s Abasan Realty LLP to ascertain the correctness of these loose papers impounded in the course of search. Instead we find that the AO simply added the interest calculated in these loose papers on the unsubstantiated fact that the appellant/assessee had acquired the legal right to receive interest. In our considered view, such presumption drawn by the AO was clearly not borne out from the facts on record. 118. From the facts on record, it is abundantly clear that M/s Abasan Realty LLP did not perform its obligation agree....
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....ounted only when actually realized/paid whereas under mercantile system of accounting, the income/expenditure is accounted when income/liability accrues though actually not received/paid. However neither of the two recognized accounting methods/systems contain specific rules governing/concerning "revenue recognition". Neither of the two methods contain any schematic framework under which one can definitively say as to whether an income in real sense has been earned by an assessee from his transactions with the third party. In the circumstances, whether or not income has been earned by an assessee in the real sense must be judged with reference to the totality of the facts and surrounding circumstances of each case. 120. As noted in the earlier paragraphs, the overall conduct of M/s Abasan Realty LLP and the fact that it has till date not made any payment whatsoever supports the appellant's contention that the interest calculated by the CFO of the appellant on loose papers did not represent 'real' income of the appellant and hence the same was rightly not recognized as income in the books by the appellant. 121. Useful reference in this regard may be made to the decision of the jur....
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....ttracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. ****** The question whether there was real accrual of income to the assessee company in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realization in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assesseecompany in respect of the enhanced charges for supply of electricity which were added by the Income-tax Officer while passing the assessment orders in respect of the assessment years under consideration. The Appellate Assistance Commissioner was right in deleting the said addition made by the Income-tax Officer and the Tribunal had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Inco....
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....he funds by the assessee-company and so on. We find that the Tribunal was right in observing as under : "We do not find any reason why the sound principles based upon realisability of the amount due on the objective criterion of a sticky account should not be accepted even if accounts are maintained under the mercantile system, which recognizes revenue not on the abstract theory of right of recovery but on the actual prospect of such recovery as so observed and recognized in the above referred cases of Hon'ble Supreme Court, which have been followed by the jurisdictional High Court of Delhi in the case of CIT v. Goyal M.G. Gas (supra )." 8. No substantial question of law arises for consideration. The appeal is accordingly dismissed." 123. In view of the judicial precedents (supra) and the facts as discussed earlier, we are of the considered view that the Ld. CIT(A) had rightly deleted the addition of Rs. 1,93,75,000/- made by the AO on account of interest allegedly receivable from Shri Hari Sharma. It is noted that neither there was any enforceable award nor any claim was raised by the appellant. There is also no material on record which shows that Shri Hari Sharma ackn....
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....accounted payments made by the appellant. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Ground No. 2 of Revenue's appeal in A.Y. 2013-14. Following our conclusion drawn in A.Y. 2013-14, we dismiss this ground of the Revenue. 130. Ground No. 4 of the revenue is against the action of Ld. CIT(A) in deleting the addition made by the AO on account of interest of Rs. 5,69,06,250/- receivable from Shri Hari Sharma [M/s Abasan Reality]. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Ground No. 3 of Revenue's appeal in A.Y. 2015-16. Following our conclusion drawn in Paras 114 to 123 of A.Y. 2015-16, we dismiss these grounds of the Revenue. IT (SS) No. 62/Kol/2019 (Assessee's Appeal - A.Y 2017-18) 131. Ground No. 1,7,8,9 and 10 are general in nature and therefore does not call for any specific adjudication. 132. Ground Nos. 2 to 6 of the appeal relates to the additions of Rs. 67,50,000/-and Rs. 1,33,74,309/- made u/s 68 & 69C of the Act. After considering the rival submissions, it is observed that, except variation in figures, the reasoning adopted both by....
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.... lacs and initialled dated 21.06.2016 which was found wherein page no. 15 was marked. According to the AO, one servant quarter was sold to one Manoj Rathi (customer) on 21.06.2016 in 'Swarnamani project'. According to the AO, since the assessee failed to substantiate the said sale in its regular books of account, Rs. 10 lacs appearing in the said page was added to the income of the assessee as undisclosed income. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who deleted the addition by noting that this loose paper does not reveal that the assessee has received Rs. 10 lacs nor any date of receipt can be seen from it. Therefore, he deleted the addition. Aggrieved, the revenue is before us. 139. Having heard both the parties and after perusal of page no. 122 of the assessment order, wherein the (MSL-8 page 15) has been scanned and reproduced, we note that it is a hand written 'parchi' written under the heading 'Swarnamani'. The scribbling on the loose sheet of paper states the name of Manoj Rathi, amount Rs. 10 lacs on account of servant quarter is seen which was marked on the top as 15. On a perusal of the same, AO was of the opinion that one servant quarter was....