TaxTMI 
TaxTMI 
2020 (9) TMI 1094
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....ingly, for the sake of convenience and brevity, 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, ....
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....on 22-09-2015 (i.e. before search in assessee's premises) revealed that the assessee had received onmonies (cash) of approximately Rs. 4.82 crores from M/s Satyam Bubna (HUF) against 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 sa....
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.... b) Legal Charges1,68,540 5,03,290 67,34,752 Thus, the above solidifies the fact of payment of cash consideration (referred as 'Otherwise' in the extracts above) to Mani Square Limited for purchase of fiat and car parks in Shiromani Project. Further, it is also noteworthy 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....
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....Consideration ( as per agreement rate) for sale of flats Rs. 50,64,57,725/- (Rs. 52,08,57,725 - Rs. 1,44,00,000) Agreement value represents 53.33% (100% - 46.67%) of total sales consideration. Thus, the balance 46.67 i.e. the cash component (ON MONEY) for sale of Flats comes to Rs. 44,32,09,864/- Rs. 44,00,000/- (Rs. 50,64,57,725 / 53.33%) * 46.67% Computation of ON MONEY (Cash Consideration) for sale of Car Parks Particulars Details No.of Car Park Sold 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 ....
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....e evidence gathered which are fairly detailed and authentic. In view of the above discussion, I agree with the findings of the A.O. that these papers does indicate received for unaccounted money on sale of particular flats by Mani Square Ltd. and therefore, in my opinion, the unaccounted cash money received of Rs. 4,81,38,000/- could be taxable in the hands of the assessee. ..... 5.10 I have perused the submission of the assessee and the case laws on this subject as to whether extrapolation should 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 ....
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....have undertaken a three step process wherein, (a) Firstly he issued summons u/s 131 of the Act to verify physical identity of parties (lenders), (b) Secondly to cross-check the names of the lenders with the departmental database of shell companies and (c) Thirdly to check the financial creditworthiness of the companies whose notices returned un-served. Undertaking this exercise, the AO identified fifty two (52) lenders, out of which according to AO, forty two (42) lenders were shell companies which had advanced loans of 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.....
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....also issued in the name of the non-existent entity. The AO however framed the assessment order in the name of "M/s IQ City Infrastructure Pvt Ltd amalgamated into M/s Mani Square Ltd vide Hon'ble High Court at Calcutta Order dated 12.12.16 in C.P. No. 864 of 2016 connected with C.A. No. 322 of 2016". The AO in this separate assessment order identified nine (9) loan creditors who had advanced loans to M/s IQCIPL, which according to him were in the nature of accommodation entries. The AO extensively reproduced statements of several 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....
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....u/s 153A of the I. T. Act, 1961. 5. That, the Ld. A.O. has erred and the Ld.CIT(A) has wrongly sustained the impugned addition made vis-à-vis the sale of flat and car park(s) in the Shiromani Project to Satyam Bubna (HUF), by placing reliance on third party material and third party statements - in spite of the fact that the said material seized from the premises of Ambica Dattu Group and the statement of Satyam Bubna u/s 132(4) were neither provided, nor confronted to the Assessee, and neither was the opportunity of cross examination provided 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" ba....
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....oks of accounts. 12. That, since the order of the Ld.CIT(A) on the above issues suffers form illegality, and infirmity and is devoid of any merit, the impugned additions sustained by the Ld.CIT(A) ought to be quashed and your Assessee be given such relief(s) as prayed for. 13. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds. 14. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds. Revenue's grounds of appeal "1. 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. 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 pa....
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....ng the ratio of the decision of the Hon'ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383, we deem it fit to admit this legal issue for adjudication. 12. After giving thoughtful consideration to the facts of the present case and the grounds raised in appeal by both parties and taking their consent, we frame the following issues/questions for our adjudication. (A) Whether in absence of any incriminating material found in the course of search at the premises of the appellant, the additions/disallowances made in the assessments of the appellant and M/s IQCIPL which were unabated [since assessment of AY 2013-14 was non-pending] on the date 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....
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....evant section itself clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending, then such appeals or other proceedings do not abate. We should keep in mind that merely because an assessee is subjected to search u/s 132 of the Act, such action by itself does not give carte blanche to the Department to subject such an assessee to the rigors of the assessment afresh for all the six years. It is for this reason that the Parliament in its wisdom has categorically created two classes among the six years, (a) un-abated assessment and (b) abated assessments. Consequent to a search conducted u/s 132 of the Act, the AO is required 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 fo....
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....search material or information available with the Ld AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete assessment proceedings. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the 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....
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....the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed - "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- 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)....
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....ng material, inter alia, are for instance, where the search action u/s 132 of the Act reveals information (oral or documented) that the assets found from the possession of the assessee in form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income (which includes earlier AY's return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible which suggests or leads to an inference that the assessee is conducting transactions outside the regular books of account which are not disclosed to the Department. Incriminating material may also comprise of document or evidence found in search which demonstrates 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....
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....y and every seized material which comes in AO's possession cannot be construed as 'incriminating material' straightaway. For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as 'incriminating material' unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to understand or correlate so as to justify the AO's inference of undisclosed income from such seized incriminating material. 19. With these principles in mind, we now proceed to examine each of the seized documents referred to by the AO in the order impugned for AY 2013-14. The first seized document 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 c....
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.... Bubna (HUF). Further, to support this contention, the Ld. AR invited our attention to the information gathered by the assessee under the Right to Information Act, 2005 [in short the RTI], which revealed that no adverse inference was drawn with regard to these documents ID marked RB/12 in the income-tax assessment against M/s Satyam Bubna (HUF) (third party). The Ld. AR also raised a legal objection to the AO's action of referring to these documents ID Marked RB/12, which were admittedly seized in the course of search conducted on 22-09-2015 at the premises Ambica Dhatu Group (third party), in the proceedings u/s 153A of the Act in the assessee's case. According to the Ld. AR, the documents ID marked RB/12 did not constitute incriminating material found in the course of search at the premises of the assessee and 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 fro....
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....st the assessee qua the relevant AY 2013-14. It is however observed that the AO had assumed that the amounts mentioned as 'otherwise' represented on-monies/cash paid by M/s Satyam Bubna (HUF) to the assessee for the relevant AY 2013-14. The AO however has not been able to spell out as to how he arrived at such conclusion. The fact that some of the notings on the said document pertained to the assessee and were found recorded in its books may at best trigger suspicion in his mind but this fact alone and by itself does not, suggest that each and every noting on the loose papers pertained to the assessee or that all other amounts mentioned in this document represented on-monies/cash paid to the assessee over and above the agreed sale consideration outside the books of accounts. However, no corroborative material has 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....
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....come Tax Act that has been passed in the name of Satyam Bubna (HUF) for the AY 2010-2011 and AY 2013-2014. 3. If the answer to Q.No.1 is yes, then please also provide for the certified copy of the order sheet of the assessing officer w.r.t. the search assessment proceedings conducted in the case of Satyam Bubna (HUF) for the AY 2010-2011 and AY 2013-2014. 22. It is noted that in response thereto, the AO of Shri Satyam Bubna HUF furnished the following reply: "Subject: Reply to your RTI Application vide Registration no: CCITK/R/E/20/00007 dated 02/02/2020. The information required is as such: Query no 1: No Query No 2 & 3: NA" 23. Upon going through the above response to the RTI query, we find substance in the Ld. AR's submission that when Shri Satyam Bubna had stated that these documents i.e. RB/12 were rough calculations, 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 assess....
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.... Assessee. ....... 6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the ITAT. The ITAT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016] 380 ITR 573. 8. Consequently, the impugned order of the ITAT calls for no interference of this Court. The question framed by this Court on 7th February, 2017 is answered in negative, that is, in favour of the Assessee and against the Revenue." 7. A question was posed to the learned counsel for the Revenue whether 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....
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....d against the assessee, then the ld AO of the other person (i.e the party from whose premises materials were seized) should record a satisfaction in terms of section 153C of the Act and transfer those materials to the AO of the assessee and the AO of the assessee should have initiated proceedings u/s 153C of the Act on the assessee on the very same material. In the instant case, the materials used in third party premises had been used against the assessee in section 153A assessments which is not tenable as per law." 26. Upholding the contention of the assessee, this Tribunal deleted the addition/s made by the AO in the unabated assessments framed u/s 153A of the Act holding that no incriminating document was found in the course of search conducted upon those assessee/s. The relevant findings of this Tribunal are as follows: 10. We have heard the rival submissions. We find that it is not in dispute that there were no 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 sei....
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....ct. section 153A of the Act provides for the procedure for completion of assessment where a search is initiated under s.132 of the Act or books of accounts or other documents or any assets are requisitioned under s.132A of the Act. The case propounded on behalf of the assessee is that additions/disallowances made in section 153A of the Act proceedings has no rational connection with incriminating material, if any, discovered as a result of search and in the absence of any speaking material against the assessee found as a result of search, the AO is estopped from exercising unfettered powers in the matter of unabated and already concluded assessments. It is further case of the assessee that the assessment order also does not make any reference to any incriminating material found as a result of search while making additions/disallowances. The additions/disallowances were made by taking cognizance of some TEP received in the course of the 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 cre....
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....-monies/cash received on sale of flats & car parks in the Shiromani Project was clearly beyond the scope of authority vested under section153A of the Act owing to absence of any incriminating material or evidence deduced as a result of search conducted at the premises of the assessee in so far as unabated assessment for AY 2013- 14 is concerned. 29. With regard to the documents ID marked MSL/23 Pages 1 to 3, MSL/8 Page 13, SJ/MHD/MZ Page 2 and MSL/21 Page 32 to 36 referred to by the AO in the impugned order, the Ld. AR invited our attention to Para 5.4 to 5.6 of the Ld. CIT(A)'s order to show that the Ld. CIT(A) had held that these papers do not contain any incriminating content to make addition in the hands of the assessee with reference to the Shiromani Project. The relevant findings of the Ld. CIT(A) in the appellate order are as follows: "5.4. The AO has also mentioned seized material MSL/23, Page-1, 2, 3 which indicate that the 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 par....
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....tax Department between the years 2013 to 2015. The Ld. AR pointed out that none of the statements referred to by the AO, justifying the additions made in the assessment order were recorded in the course of search conducted against the assessee on 22.06.2016 or in any proceedings connected with the said search. It is noted from the assessment order that the AO has stated that these statements and data were obtained by him from departmental database and public domain on which he placed reliance to justify the additions made u/s 68 & 69C of the Act. These averments of the AO make it clear that the alleged statements and data from public domain was not collected or found in the course of search conducted on 22-06-2016. And neither the so-called entry operators were summoned by the AO nor examined by him independently in relation to the income-tax assessment of the assessee. It also appeared from the discussion in the assessment order that except, making selective reference to part 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 asses....
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.... decided case also the AO had made additions by way of unexplained share capital in assessment framed u/s 153A of the Act. The basis of the addition was the third party statements of alleged entry operators who had purportedly admitted of providing accommodation entries to the assessee. On appeal the Ld. CIT(A) confirmed the order of the AO. Before this Tribunal the question which came up for consideration was whether addition made by the AO u/s 68 of the Act was tenable when no proceedings were pending before the Assessing officer on the date of search and no incriminating material was found/unearthed by the search team from the premises or possession of the assessee. The assessee had contended that the statements of entry operators referred to by the AO for making the addition/s u/s 68 did not constitute 'incriminating material found in course of assessee's search' and therefore the addition made in the assessment framed u/s 153A was legally invalid. Answering the question in 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 'incriminati....
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....ed on 31/12/2017 assessing the total income at Rs. 56,23,550/- and raised consequential demand of Rs. 28,25,940/-. In the assessment order the ld. ACIT, Central Circle--3(2), Kolkata (A.O.) made the following additions to the assessee's income. a. Addition u/s 68 of the Act on account of share capital- Rs. 50,00,000/- b. Addition of alleged expenditure on commission paid - Rs. 25,000/- For raising the share capital u/s 69C. Total Rs. 50,25,000/- 6) Mr. Keshav Kumar Bubna, the Director of the assessee company (BSL) and is the prima donna of the Bubna Group. He had admitted on oath that the assessee company was not having any business, earlier they were into textiles. (7)Company had issued shares (F.V.10+30 Premium) to two shares subscribing companies (SSCO), thus the premium of Rs. 30 is not based on commercial expediency, in which no prudent person/ company would invest. As on 31/03/2010 Banktesh Synthetic limited, the assessee co. had allotted shares to two (2) share subscribing companies with face value of Rs. 10 with Premium of Rs. 30 total Rs. 40 each per share. It is against the human probability that anyone will invest....
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....leted on 30.03.2015 and no adverse inference was drawn in the said assessment order regarding the share capital raised during the previous year relevant to the A.Y. 2010-11. Thereafter, again on 02.03.2016, a search and seizure operation (second search) was conducted in the case of Banktesh Group and the assessee company's name was covered in the search warrant. Pursuant to the search operation, a notice u/s 153A of the Act was issued to the assessee for A.Y. 2010-11 and in response, the assessee filed the Return of Income on 10.12.2016, declaring a total income of Rs. 5,98,550/-. Thereafter, an assessment u/s 153A/143(3) of the Act was completed on 31.12.2017 assessing the total income at Rs. 56,23,550/-. In the Assessment Order, the Ld ACIT, Central Circle-3(2), Kolkata (AO) made addition u/s 68 of the Act on account of share capital, to the tune of Rs. 50,00,000/-. IT SS) A No. 142/Kol/2018 A.Y 2010-11 M/s. Banktesh Synthetics Ltd We note that on the basis of the search conducted on 29.05.2012, the assessee's assessment stood completed u/s 153A/ 143(3) of the Act, on 30.03.2015. We note that again, during the course of second search operation conducted ....
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....le recording statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. For the sake of convenience and clarity, the relevant instructions dated 10.3.2003 issued by CBDT is reproduced hereunder:- To All Chief Commissioners of Income tax (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search & seizure and survey operation - regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search& seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the I....
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....ade out by the AO at Pages 263 to 267 of the assessment order from MSL/HD/1 formed part of the regular books and all these expenses were recorded in the books. The Ld. CIT(A) also found that the assessee has given cogent reason that the entries are duly accounted for in the books. Before us the Ld. CIT, DR was unable to dislodge the aforesaid factual finding of the Ld. CIT(A) that the entries are duly accounted for in the books and we also note that no grounds of appeal has been preferred by the revenue challenging this finding of fact on this issue by the Ld CIT(A), therefore this finding of fact of Ld CIT(A) that the entries are duly accounted for in the books crystallizes. And therefore it is held that the statement of cash expenses drawn up by the AO from MSL/HD/1 formed part of the regular books of the assessee and therefore by no stretch of imagination be construed to be 'incriminating' in nature. 36. For the reasons discussed in the preceding paragraphs and the judicial precedents discussed above, we hold that the seized documents referred by the AO for justifying the various addition/s made in the assessment orders passed in the name of the appellant/assessee and M/s IQC....
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....sactions were made by him. We further note from the reply dated 02-02-2020 gathered by the assessee in response to the RTI query made from the AO of Satyam Bubna HUF, goes on to show that the AO of the third party Satyam Bubna HUF had not made any addition on account of alleged undisclosed cash payments made upon purchase of flat & car park from the appellant/assessee. The orders passed u/s 143(1) of the Act in the case of M/s Satyam Bubna HUF for AYs 2010-11& 2013-14 are found placed at Pages 382 to 393 of the paper book. And a conjoint reading of the RTI application by the assessee and the reply to it by the department (supra at para 21) corroborates that the income of M/s Satyam Bubna HUF for both these years was assessed at the same sum as returned by it. In the aforesaid facts and circumstances inter-alia we found that when no addition on account of alleged payment of on-monies/cash was made in the hands of Satyam Bubna HUF from whose possession the documents ID marked RB/12 were found in search at their premises, and the said document was never considered to be incriminating in nature in the assessment of the person searched and to whom the document pertained; then as a neces....
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....le, therefore he rightly deleted the addition made. On this score, these grounds of the Revenue fail. Additionally, we also find merit in the Ld. CIT(A)'s reliance on the following decisions holding that the theory of extrapolation cannot be applied on mere theoretical or hypothetical basis in absence of any incriminating & corroborative evidence or material brought on record by the AO to warrant the same. (A) C.J. Shah & Co., [2000] 246 ITR 671 (Bombay H.C.) "3. It is well-settled that in cases where material is detected after search and seizure operations are carried out, the Assessing Officer is required to determine the undisclosed income. In such cases additions are generally based on estimates. In matters of estimation some amount of latitude is required to be shown to the Assessing Officer, particularly when relevant documents are not forthcoming. However, it does not mean that the Assessing Officer can arrive at any figure without any basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Tribunal and yet on the wrong basis of the incoming and outgoing cash transacti....
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....d documents RM/5 and according to assessee which proved that same were manufactured by search party at the time of search and did not represent actual state of affairs.........We find that AO rejected assessee's plea that seized papers were forcibly manufactured by search party at the time of search on the pretext that the said issue had been raised after 22 months from the date of search and furthermore there was no evidence that Sri Vivek Kathotia was forced to write said papers by search party. The AO observed that assessee had suo motu offered sums mentioned in RM/5 as its income for asst. yr. 2008-09 and even CIT(A) also rejected assessee's stand on similar grounds. We find that said seized papers were not manufactured by search party at the time of the search but were found from the possession and control of assessee in the course of search. As such, the presumption under s. 292C regarding the correctness of the contents of seized documents applies to RM/5 also. Further, it is assumed that the presumption regarding the correctness of contents of seized documents under s. 292C is applicable to RM/5, the said presumption is rebuttable and assessee unsuccessfully tried t....
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....rdance with cash system of accounting. 7. Further, Hon'ble Rajasthan High Court in the case of CIT v. Rajendra Prasad Gupta [2001] 248 ITR 350/117 Taxman 507 wherein Hon'ble High Court observed that under the scheme of provisions for block assessment it is apparent that it related to assessment of ''undisclosed income'' of assessee excluding incomes subjected to regular assessment in pursuance of returns filed by assessee for such period. And further observed that a perusal of s. 158BB of the Act makes it clear that returns are required to be filed in pursuance of a notice under s. 158BC(a) and assessment has to be framed on that basis in the light of material that had come into possession of assessing authority during the course of search which was the foundation of proceedings. The correctness or otherwise of the returns filed in pursuance of the notice under s. 158BC(a) has to be examined with reference to the material in possession of the assessing authority having nexus to assessment of ''undisclosed income''. If the returns filed did not accord with the materials which were already in the possession of the authority the income ....
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....come only in the year of completion of the project in accordance with the project completion method of accounting followed by the assessee. The AO was not justified in extrapolating few notings of RM/5 to balance flats of other three projects given that no incriminating evidence pertaining thereto was found during the course of search and even authenticity of document RM/5 was under challenge. Under these circumstances, we are of the view that Revenue as well as assessee were bound by presumption under s. 292C of the Act in respect of seized papers and addition on account of on-money can be limited to the seized materials. Since assessee himself has offered entire on-money seized as per document RM/5 in its return of income, no further addition can be sustained." (C) M/s Savitri Developers Pvt Ltd ITA No. 401/Amd./2014 and 3188/Amd/2014 (Ahemdabad - Trib.): "4.3 The CIT(A) took note of the detailed submissions made on behalf of the assessee and found considerable merit therein. The CIT(A) accordingly observed that the AO was not justified in making extrapolation on basis of statement of two purchasers and estimation of probable on-money receipts from remaining other fla....
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....ion of remaining amount of Rs. 3,28,13,355/- in the hands of the assessee. 8.1 In the first appeal, the CIT(A) found merit in the plea of the assessee that suo motu disclosure conceded in the course of search proceedings was without any incriminating material towards any clandestine income. The disclosure was made to buy peace and avoid protracted litigation. The CIT(A) also opined that extrapolation of such confession to the remaining flats is not possible on the basis of statement of two purchasers. The CIT(A) accordingly deleted the additions measured on the basis of extrapolation theory but however retained the additions to the extent of admission actually made by two purchasers over and above the disclosure made. While the Revenue seeks addition for on account of on-money receipt for all the flats applying extrapolation theory, the assessee seeks to challenge the addition of Rs. 14.10Lakhs sustained by the CIT(A) on the basis of statements of two purchasers on the fact of generic declaration already made. 8.2 The statement of two purchasers is the bedrock for additions in controversy. It is an admitted position that the statements of two purchasers allegedly claiming ....
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....e taken cognizance of, as it will apparently lead to miscarriage of justice. Therefore, we find total justification in the action of the CIT(A) in directing the AO to delete the estimated additions towards unaccounted receipt in respect of flats sold on the basis of some unverified and bald statement. Once such statements of the purchasers are taken out of reckoning, the edifice of estimated additions towards sale of residential flats would crumble down. 8.3 Besides, estimated cash receipts on-money of sale of all flats merely on the basis of statement of two purchasers without any tangible corroboration clearly falls in the realm of conjunctures and surmises. It is obvious that driven by misplaced suspicion, the AO has presumed the presence of on-money in respect of each of the residential flat sold. The action of the AO is a mere ipse dixit which is not objectively justifiable by some inculpatory evidence. It is only elementary to say that estimation of unaccounted money cannot be made only on the basis of contemplation. The order of the AO in making additions of Rs. 3.28 Crores is thus clearly arbitrary and unsustainable in law. It is well settled that the Revenue authorities ca....
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....of the judgments of the Hon'ble Delhi High Court as aforementioned, we find no reason to interfere with the findings of the Ld. CIT (Appeals) on this issue and we, accordingly, dismiss ground No. 2 of the Department's appeal. 39. For the reasons set out above therefore, the Ground No. 1 of the Revenue's appeal stand dismissed. 40. Now we proceed to decide the issue (C), which is again repeated for easy reference (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? As noted earlier, the AO had drawn up summary statements in the assessment orders setting out the details of the unsecured loans which were outstanding as on 31.03.2013 and the interest paid thereon. According to AO he had issued summons u/s 131 of the Act to the loan creditors most of which remained non-complied and that on cross checking the names of the lenders with the departmental database of shell companies, he concluded that all the lenders were paper/shell companies. The AO thereafter set out an entry operator wise summary of the loan creditors and extensively reproduced statements of several ....
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....onus for establishing the identity and creditworthiness of the loan creditors and the genuineness of the transaction. He pointed out that none of the documentary evidences filed by the appellant/assessee were found defective nor any falsity or infirmity in the documents filed by it could be pointed out the AO. The Ld. AR submitted that the additions u/s 68 & 69C of the Act were made primarily on the basis of the statements of alleged entry operators. The Ld. AR took us through the statements of the entry operators, which were reproduced in the assessment order, to show that the AO himself neither independently examined these persons nor any opportunity to cross examine these persons was given to the appellant. He submitted that no enquiry or investigation whatsoever was conducted by the AO in this regard. The Ld. AR pointed out that the AO had mechanically extracted the statements of the persons, which prima facie showed that contents of these statements had no relation or link with the appellant's case. The Ld. AR submitted that the AO had made the additions in the assessment order without bringing on record any corroborative evidence and he also invited our attention to the order....
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.... 25,00,000 1,04,384 14 Nagancheji Credit Pvt. Ltd. 25,00,000 2,74,520 15 Desire Vincom Pvt. Ltd. - 5,49,863 16 City Wings Courier & Travels Pvt. Ltd. 50,00,000 3,45,205 17 Dayanidhi Vyapaar Ltd. 25,00,000 84,658 18 Orbital Contractors & Fin. 25,00,000 1,96,438 19 PCJ Finvest Pvt. LTd. 30,00,000 84,822 20 Samrat Finvestors Pvt. Ltd. 50,00,000 3,30,411 21 Seema Holdings Pvt. Ltd. 4,62,50,000 26,66,959 22 Pragya Commodities Pvt. Ltd. 35,00,000 1,63,726 23 Postitive Management Pvt. Ltd. 50,00,000 1,33,151 24 Premium Dealers Pvt. Ltd. 1,00,00,000 10,06,027 25 Starwise Tie-up Pvt. Ltd. 50,00,000 4,02,740 26 Vidyalaxmi Retails Pvt. Ltd. 50,00,000 1,93,973 27 Sharma Hire Purchase Ltd. 15,00,000 99,616 28 Panchkoti Mercantile Pvt. Ltd. 60,00,000 4,91,178 29 Lavanya Nirman Pvt. Ltd. 1,92,00,000 14,66,170 30 Kasturi Home Pvt. Ltd. 1,16,00,000 7,44,362 31 Himadri Enclave Pvt. Ltd. 15,00,000 23,671 32 Starlite Vyapaar Pvt. Ltd. - 7,58,137 33 Hector Mercha....
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.... order it is discerned that the AO made independent enquiries from some of these loan creditors. From the information set out at Pages 23 to 25 of the assessment order, it is noted that summons were issued u/s 131 of the Act to loan creditors at Serial No.1 to 33 above. And out of the 33 loan creditors, lenders at Serial No.1 to 7 had responded to the notices, notices were served on lenders at Serial No.8 to 15 but no reply was received and the notices sent to the lenders at Serial No.16 to 33 remained un-served. We note that the AO did not make any enquiries whatsoever from the loan creditors mentioned at Serial Nos.34 to 52. According to AO, the nonattendance and/or non-service of the summons indicated that the transactions with the loan creditors were not genuine. 46. From the material on record, it is noted that the transactions in question involved receipt of unsecured loans which were fully re-paid along with interest by the time enquiry was attempted to be made by the AO in the year 2018. In the transactions under enquiry, the appellant/assessee had debtor-creditor relationship with the parties and the appellant was a debtor. It is common knowledge that in a relationship ....
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....creditors' identity, creditworthiness and genuineness of the transactions. Having received these documents, the AO was not able to point out as to which other documentary proof was required or expected by him, which had not been submitted by the appellant/assessee, or found any infirmities on these documents. On these facts and in our considered view therefore the adverse inference drawn by the AO u/s 68 and 69C of the Act solely on the premise that the summons went non-complied or remained unserved was not justified. 48. At this juncture, we may gainfully refer to the observations made by the Hon'ble Apex Court in a similar case of CIT Vs Orissa Corporation Ltd reported in 159 ITR 78, which are reproduced hereunder as follows: "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out w....
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....or. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within knowledge.- When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. " ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Asse....
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....s, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to fi....
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....ed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness." 50. Further the Hon'ble jurisdictional Calcutta High Court in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata (347 ITR 347)also held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction o....
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.... 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of UdhavdasKewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that 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. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our vi....
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....rt in the case of CIT Vs Apex Therm Packaging (P) Ltd reported in 42 taxmann.com 473 is also found to be of much relevance. In this decided case in the course of proceedings u/s 143(3) of the Act, the assessee had furnished complete details of loan creditors along with their PAN, financial statements, loan confirmations, bank statements etc. The AO however added the entire loan received u/s 68 of the Act and also disallowed the interest paid thereon. On appeal the Ld. CIT(A) allowed the assessee's appeal which was also affirmed by this Tribunal. On appeal by the Department u/s 260A, the Hon'ble High Court observed that when full particulars, inclusive of the confirmation with name, address, PAN, IT returns, balance sheet & profit and loss account in respect of all the lenders were furnished and that it has been found that the loans were received through cheques, then the AO was not justified in making addition u/s 68 of the Act. Accordingly the Hon'ble High Court dismissed the appeal of the Department. The relevant findings of the Hon'ble High Court are as follows: "5. Heard Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue. At the outset, it is requir....
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....nus of assessee. The Assessing Officer has not brought any material on record in its support. The CIT(A) while deleting the addition has also relied on the decision of the Hon'ble Gujarat High Court in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 and the decision of Hon'ble Supreme Court, in the case of Orissa Corpn. Ltd. 153 ITR 78. Before us, nothing has been brought on record by the revenue to controvert the findings of CIT(A). Revenue has relied on the decision of Hon'ble Delhi High Court in the case of N.R. Portfolio (supra). We however find that the ratio of the aforesaid Delhi High Court decision are distinguishable on facts and therefore cannot be applied to the facts of the present case. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus dismiss this ground of revenue." 6. We are in complete agreement with the reasoning given by the CIT(A) as well as the ITAT. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender wer....
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....th their statement of income. All the loans were received by the assessee by account payee cheques and the repayments of loans have also been made by account payee cheques along with the interest in relation to those loans. It is rather strange that although the Assessing Officer has treated the cash credits as nongenuine, he has not made any addition on account of interest claimed/paid by the assessee in relation to those cash credits, which has been claimed as business expenditure and has been allowed by the Assessing Officer. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/paid to them after deduction of tax at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee before the Assessing Officer. Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the a....
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....essee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 9. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 10. Thus taking into consideration the totality of the facts and circumstances of the case, and, in....
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.... "12. The Court has examined the decision of the Gauhati High Court in Nemi Chand Kothari (supra). Therein the Gauhati High Court referred to Section 68 of the Act and observed that the onus of the Assessee "to the extent of his proving the source whom which he has received the cash credit." The High Court held that the AO had ample 'freedom' to make inquiry "not only into the source(s) of the creditor, but also of his (creditor's) subcreditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself." Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under: "What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-credito....
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....n Mod. Creations (P.) Ltd. v. ITO [2013] 354 ITR 282/[2011] 202 Taxman 10 (Mag.)/13 taxmann.com. 114 (Delhi), the position was clarified by the Court and it was held: "It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the subcreditors nor is it the burden of the Assessee to prove the creditworthiness of the subcreditors." 14. In Mod. Creations (P.) Ltd. (supra) this Court negatived the case of the Revenue that the onus was on the Assessee to prove the source of the sub-creditor. It was observed as under: "14. With this material on record in our view as far as the Assessee was concer....
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....n the light of the aforesaid decisions of the Hon'ble Apex Court and jurisdictional and other High Courts, let us now examine the facts of the present case. From the analysis of the loan creditors we note that during the FY 2012-13, the appellant had received loans aggregating to Rs. 11,97,00,000/- from eight parties set out at Serial No.12, 13, 14, 29, 31, 35 & 36 of Table from whom the loans were received in the earlier years as well to whom interest of Rs. 71,60,833/- was paid. Besides, the appellant had paid interest of Rs. 1,06,48,905/- to 19 parties at Serial No. 15, 32, 33, 37 to 52 of the Table in respect of loans brought forward from the earlier years. We note that no addition u/s 68 of the Act in respect of the loans brought forward from the earlier years was made in the past assessments. In the circumstances therefore we find that if in the past assessments, the Revenue did not draw adverse inference in respect of the principal loan amounts received from these 27 parties, then there was no apparent reason for the AO to dispute and disbelieve the genuineness of the transaction involving only the interest payment. We also note that in respect of interest paid during the re....
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....nt should not be relied upon without putting the same to the test of further scrutiny. (iii) During the course of hearing, it was submitted by the AR that if these are the only jama kharchi transactions, the normal tendency of any person is to carry the entries for a long periods, and normally, there will not be any repayment in a short period. It was also submitted by him that not only the money has been borrowed from these parties, but the repayment has also been made by cheque, and the interest on the same has also been paid by cheque, on which the TDS has also been deducted. (iv) The CIT, ITSC, vide his letter dt. 31.03.2014 requested the applicant to file the copy of complete accounts along with the details of interest on TDS deducted, the details were filed by the applicant on 3.4.2014. It was submitted by the AR that the applicant and its group is not acquainted with Shri Suresh Kejriwal and they had not entered into any jama kharchi transactions with Suresh Kejriwal. The loan received from them has since been re-paid and many of the repayments are before the date of search. (v) We have gone through the submissions made by the AR and the conduct of....
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....o find that no notice u/s 131 or 133(6) of the Act was issued to M/s Earthlink Estates Pvt Ltd though the address of the creditor was made known. We also note that unlike other cases, where the AO had relied on third party statements of entry providers to justify the addition, the AO did not bring on record any material which would even suggest let alone show that the loan received from M/s Earthlink Estates Pvt Ltd was in the nature of accommodation entry or that the loan was not genuine. In this factual background therefore we find that the addition had been made by the AO simply on surmise and conjecture and without bringing on record any tangible and cogent material which proved that the loan received from M/s Earthlink Estates Pvt Ltd was not genuine. Applying the ratio discussed in Paras 48 to 55 above, we hold that the appellant had discharged the primary onus of proving identity and creditworthiness of the loan creditor and genuineness of the transaction and therefore even the addition of Rs. 30,00,000/- [wrongly taken as Rs. 3,00,00,000/- by the AO] sustained by the Ld. CIT(A) is not tenable. Accordingly the addition of Rs. 30,00,000/- is hereby deleted. Following our said....
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....that although the AO had heavily relied upon the statements of the sundry creditors/entry operators, the AO had neither personally or independently examined even a single entry operator in the capacity as the Assessing Officer to verify the correctness of the facts or to dig or probe and unearth the link if any with the Appellant/assessee. However, the unfortunate part is that the AO blindly relied on the bald statements of these operators and in the process has not brought out any link to connect them with the Appellant/assessee. And if the AO wanted to use the statements of the so-called entry operators, then the AO during the assessment proceedings ought to have summoned these entry operators and examined them thoroughly and should have unearthed the links, materials or relevant evidences if any against the appellant/assessee and thereafter called the assessee and confronted him with any materials or statement which he discovers and which material he wishes to rely against the assessee and after giving an opportunity to assessee to cross examine the maker of the statement etc, and in the event, the maker of the statement could pass the cross examination, then the statement of th....
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....r, we note that though he identified the groups/parties to whom he provided accommodation entries but none of the parties or groups identified inter alia included the name of Shri Sanjay Jhunjhunwala or Mani Square Limited. As stated earlier, the AO before he relied upon the statement of Shri Anirban Dutta as evidence, he himself never issued notice u/s 131 or 133(6) of the Act to Shri Anirban Dutta and examined him to ascertain the facts regarding the appellant's case, particularly when no information contained in his statement dated 16.11.2015 connected the loan transactions of the appellant/assessee with 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. The statement of Shri Anirban Dutta which was available in the public domain an year before search was conducted in assessee, could have raised suspicion in the mind of the AO and at best would have been the starting point of further enquiries. However, we find that 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....
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....Bhukediwala was given to the assessee, the AO erred in relying on the statement. So, we find that the addition made by the AO by relying on such statement was erroneous and, therefore, the addition was untenable on facts and in law. (C) The assessee received loan of Rs. 50,00,000/- from M/s Romanchak Merchandise Pvt Ltd. According to AO this body corporate was allegedly controlled by Shri B D Agarwal whose statement was recorded u/s 133A of the Act on 09-04-2015 at 21, Hemanta Basu Sarani, Kolkata - 700 001. This fact also shows that the statement of Shri B D Agarwal was not recorded in pursuance of any proceedings against the assessee and in connection with search u/s 132 conducted upon the appellant on 22-06-2016. Instead the statement of Shri B D Agarwal was recorded in some other proceedings unconnected with the appellant's search. From the contents of the statement extracted at Pages 78 to 81 of the assessment order, we note that nowhere in his statement Shri B D Agarwal had admitted of providing accommodation entries in the form of unsecured loans to the appellant/assessee. On careful perusal of the entire statement it is noted that he had admitted of providing accommodati....
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....Enclave Pvt. Ltd., M/sTista Nirman Pvt. Ltd. and M/s Orbital Contractors & Financiers Pvt Ltd. According to AO all the loan creditors were allegedly controlled by Shri Pankaj Agarwal whose statement was recorded u/s 131 of the Act on 03-02-2015 at 138B Manicktala Main Road, Kolkata - 700 054. From the foregoing facts it is evident that the statement of Shri Pankaj Agarwal was not recorded in pursuance of any proceedings against the appellant/assessee in connection with search u/s 132 conducted upon the appellant on 22-06-2016. From the contents of the statement extracted at Pages 126 to 129 of the assessment order, we note that he had stated that he was providing accommodation entries only till the year 2011 and thereafter he was engaged in the business of producing films. This fact, on its face, itself suggests that the loans obtained by the appellant in the relevant FY 2012-13 could not have been provided by Shri Pankaj Agarwal or his entities. Further in his answer to Q No. 14, he had identified the names of six companies which he allegedly controlled but we find that none of five loan creditors which provided loan to assessee does figure in it. Thus, we find that nowhere in his....
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....extracted at Pages 147 to 148 of the assessment order that he had admitted that previously he was involved in providing accommodation entries but now he was rendering accounting services. It is further observed that in his answer to Q No. 18, he has admitted of providing accommodation entries to three bodies corporate, none of which figures the name of Shri Sanjay Jhunjhunwala or Mani Square Limited or the loan creditor M/s. Susri Finance Pvt. Ltd. We thus note that the selective extracts of the statement did not contain any assertion/admission/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 from M/s Susri Finance Pvt Ltd. had any connection with Shri P K Jain. Moreover when the AO himself never examined the so-called entry operator, nor opportunity of cross examination of Shri P K Jain was given to the assessee, the AO's action of relying on this statement to make the addition is erroneous and is against the principle of Natural Justice. We, therefore, find that the addition made by the AO by relying on such statement was untenable on facts and in law. (F) The assessee rece....
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....essee in connection with search u/s 132 conducted upon the appellant on 22- 06-2016. Instead the statement of Shri R K Ajitsaria was recorded in some other proceedings unconnected with the appellant's search. From the contents of the statement extracted at Pages 189 to 191 of the assessment order, we note that nowhere in his statement Shri R K Ajitsaria had admitted of providing accommodation entries in form of unsecured loans. On perusal of the entire statement it is noted that he had admitted of providing accommodation entries in form of bogus commodity profits. In his answer to Q Nos. 8, 9 & 10 he had set out the modus operandi followed by him for providing accommodation entries in the form of bogus commodity gains/losses through a commodity brokerage entity controlled and managed by him. Neither did he admit of providing accommodation entries in form of unsecured loans nor did the name of M/s Nancheji Credit Pvt Ltd feature in his statement. We also note nowhere in his statement, Shri R K Ajitsaria had identified either Shri Sanjay Jhunjhunwala or Mani Square Limited let alone admitted of providing accommodation entries to them. We find that the statement of Shri R K Ajitsaria ....
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....of the financial strength and net worth of the loan creditors from their audited accounts. This fact can be analyzed from the following facts, which the Ld. CIT(A) cited in his impugned appellate order. (A) In respect of loans received from M/s Nikhar Dealers Pvt Ltd, apart from relying on the statement of Shri Amit Dalmia, both the AO and the Ld. CIT(A) fortified the addition on the ground that the financial position revealed by its Profit & Loss Account and Balance Sheet did not establish the creditworthiness of the loan creditor. In support of this conclusion, the AO set out the salient financial details at Page31 of the assessment order. We note that the conclusions drawn by the AO were based on mere suspicion and conjectures and not supported by the overall financial data available from the audited accounts. In order to decide the financial capacity and capability to advance loan, it is necessary for the AO to take into consideration the overall financial capacity and ability. In the present case, we note that the AO discarded the financial capacity of M/s Nikhar Dealers Pvt Ltd in the most perfunctory manner without discussing the relative financial strength or worth....
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....ms amounted only to 6.60%. During the FY 2012-13, the creditor had earned interest income of Rs. 1,62,75,613/- from its loan portfolio which inter alia comprised of interest of only Rs. 4,62,329/- received from the appellant. The net profit of the company for the relevant year was Rs. 65,78,979/- against which provision for tax of Rs. 20.77 lacs was provided for by the loan creditor. From the foregoing facts and figures, it is evident that the loan creditor was engaged in the business of money lending and it had substantial business activities as well as reasonable profitability. On these facts therefore we are unable to accept the AO's conclusion that M/s Majestic Commercial Pvt Ltd did not have the requisite financial capacity to grant loan to the appellant. (C) It is noted that the AO had treated the loans aggregating to Rs. 245 lacs received from M/s Pragya Commodities Pvt Ltd, M/s. Starlite Vyapar Pv Ltd, M/s. Starwise Tie-up Pvt Ltd and M/s. Earthlink Estates Pvt Ltd to be in the nature of unexplained cash credit on the premise that they had weak financial credentials. The AO had set out the financial details of these loan creditors at Page 245 to 253 of the assessme....
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....of the lower authorities that the loan creditors did not have financial credentials to advance loans and on that ground justify the addition u/s 68 & 69C of the Act. 66. As far as the decisions cited by the Ld. CIT(A) in his impugned appellate order for upholding the additions made u/s 68 & 69C of the Act are concerned, we have examined the facts involved in each of these judgments and found them to be materially different from the facts involved in the present case, for the following reasons: (A) As far as the decision of Hon'ble Calcutta High Court in the case of CIT Vs Precision Finance Pvt Ltd reported in 208 ITR 465 is concerned, it is noted that in this decided case, the income tax file numbers of the creditors provided by the assessee were either found to be non-existent or did not tally with the Department's records. It is on this fact that the Hon'ble High Court held that the appellant was unable to prove the identity and creditworthiness of the creditors and therefore upheld the addition made u/s 68 of the Act. In the facts of the present case however it is neither the AO's case that the loan creditors are not income-tax assessee's nor has he alleged that the ....
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....ooperate with the Department and provide the requisite evidences as called for. In the present case however, as noted earlier, the relationship was that of the debtor-creditor and which had ceased to exist when the loans were fully repaid. As such it was not a case of continued relationship at the time when the enquiries were conducted by the AO. We therefore do not find merit in the reliance placed by the Ld. CIT(A) on these decisions for upholding the addition. 67. For the aforesaid facts and the reasons discussed in the foregoing therefore we hold that the addition of Rs. 24,76,50,000/- being principal loan amount received by the appellant from twenty four bodies corporate did not constitute its income chargeable u/s 68 of the Act. Consequently, for the same reason we also do not find any justification in sustaining the disallowance of Rs. 1,41,11,013/- being the interest on such loans u/s 69C of the Act. 68. Moreover, we also find that these additions were made by the AO without adhering to the principles of natural justice which constitutes bedrock in any quasi judicial proceedings. We have already discussed in the earlier paragraphs that the AO's reliance on the stateme....
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....e was nothing contained in these statements which would in any manner suggest that the entry providers had any relation or connection with the appellant or that they had provided accommodation entries to the appellant/assessee. Be that as it may be, if these statements of the so-called entry operators somehow triggered suspicion in the mind of the AO in relation to appellant's loan transactions with the bodies corporate, then as said earlier the AO was duty bound to conduct enquiry independently from the said persons and not simply rely on the statements recorded by some officers of the Department in unconnected proceedings admittedly behind the back of assessee and cannot be used against the assessee without testing it on the touch stone of cross-examination. The AO is no doubt an authority appointed by the State to exercise statutory powers to ascertain the income of a subject and the tax payable by him to the State. It is well settled that the principles of Natural Justice shall be presumed to be necessary unless there exist a statutory interdict. The principle of Natural Justice, a cardinal part of which is "audi alterem partem" (the right to be heard), is the bed rock of all q....
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....ed the disallowance made by the AO. On the self-same reasoning this Tribunal and later on the Hon'ble High Court also dismissed the appeal of the Revenue. On further appeal, the Hon'ble Supreme Court also concurred with the findings of the Ld. CIT(A) and did not find any infirmity in the orders passed by the lower appellate authorities and accordingly dismissed the appeal of the Revenue. The relevant portion of the judgment of the Hon'ble Supreme Court reads as under: "3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantia....
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....not allowable. The Tribunal held that the disallowance; based solely relying on the statement of S, recorded in the course of search without there being any independent material was not justified. On appeal by the revenue the Hon'ble Bombay High Court upheld the order of the Tribunal. In this judgment, it was thus in principle held that unless and until there is a corroborative evidence or material to substantiate the statement of a third party, it is not open for the Tax Authorities to draw conclusions against the assessee solely based on the statement recorded in the course of search. The relevant findings of the Hon'ble High Court are as follows: "Question Nos.1 and 2 are elements of the same issue and relate to the addition of Rs. 3.39 crores (rounded off) made by the Assessing Officer by disallowing expenditure of the said sum incurred by the respondent-assessee in form of payments to one Shri S.K. Gupta. The Assessing Officer on the basis of statement of said Shri Gupta recorded during search operations held that the said person had not rendered any service to the assessee-company so as to receive such payments. CIT (Appeals) however deleted the addition inter-alia o....
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....for determining the market value on date of registration. The statement given by Vikas A. Shah was self service statement without any supporting evidence. There was no search carried out on the appellant. The seized papers were found in the possession of Shri Vikas A. Shah. The third person evidence cannot be base for addition on the basis of any entries therein. The ld. CIT(A) had also considered following decisions. I. Prathana Construction (P.) Ltd. v. Dy. CIT [2001] 70 TTJ 122 (Ahd.) II. Asstt. CIT v. Prabhat Oil Mills [1995] 52 TTJ 533 (Ahd.) III. Jindal Stainless Ltd. v. Asstt CIT [2009] 120 ITD 301 (Delhi) After considering all the facts and legal position of this issue, we do not find any reason to intervene in the order of the CIT(A). Accordingly, we uphold the order of the CIT(A)." 6. It is required to be noted that the order passed by the ITAT in the case of the copurchaser- Abhalbhai Arjanbhai Jadeja was further carried before this Court by way of Tax Appeal No. 233/2013 and other allied appeals and it is reported that vide order dated 03/04/2013, the Division Bench of this Court has dismissed the said appeal confirming the o....
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....s and share application money, reference of which has been made in para-4 of its order, appears to be the accommodation entries and the present assessee was middle man and invoking Sec.68 of the Act, it was considered to be part of the income in the hands of the assessee. However, on appeal preferred before the Commissioner (Appeals) by the assessee U/s 143(3) r/w 147 of the Act, 1961 all the factual statements were examined at length and the Commissioner (Appeals), after due appreciation of material which came on record, observed that from independent enquiry the copies of bank account were obtained by the assessing officer and found that for clearing of the cheques issued by these companies either cash was deposited in the same account or in another account of the group company in fact was M/s. B.C. Purohit of which the present assessee was considered to be one of the group member. However, it was further observed that summons issued U/s 131 of the Act were served upon all such applicant/ creditors and their confirmation letters were filed and the companies were assessed to tax being the private limited companies, the existence of their separate legal entity ordinarily could not ....
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....y him in the assessment order nor did he grant the appellant/assessee an opportunity to cross-examine the witnesses whose statements were extracted in the assessment order. Except the bald references to the recorded statements, the AO did not bring on record any material which could link the appellant with any wrong doing as held by him that the assessee's unaccounted monies were introduced in the garb of unsecured loans. For the reasons set out in foregoing, we are of the considered view that the AO's failure to personally examine the witnesses and his denial to allow the appellant opportunity to cross examine the third parties/Departmental witnesses on whose statements he was relying upon was a serious and fundamental error which resulted in the additions as well as the action of AO to point out any material and irrelevant to justify the addition made u/s 68 & 69C of the Act in the assessment order untenable and so it cannot be sustained. 75. Moreover, as noted by us supra, the AO in the most perfunctory manner and based on conjecture rejected the financial capacity of the loan creditors to advance loans. Before drawing adverse inference regarding creditworthiness, the AO did ....
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....essing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." 76. For the reasons as discussed in the foregoing, the additions of Rs. 39,73,50,000/-& Rs. 3,20,13,463/- made u/s 68 & 69C of the Act in the hands of the appellant therefore stand deleted. 77. We further note that in the impugned order the Ld. CIT(A) upheld the additions of Rs. 2,15,00,000/- & Rs. 25,76,219/- being loan received & interest paid by M/s IQCIPL [since merged with the appellant] on the ground that the factual matrix of the addition was same as in the case of the appellant. Since in the foregoing paragraphs, we have elaborately discussed the reasons for deleting these additions, we hold that these reasons mutatis mutandis apply in relation to addition of Rs. 2,15,00,000/- & Rs. 25,76,219/- as well. Accordingly, following our findings recorded....
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....ntity in the eyes of law from the appointed date i.e. on 01.04.2015 and, therefore, assessment order framed after issuance of invalid mandatory statutory notice u/s. 143(2) of the Act is null in the eyes of law and, therefore, AO's order in respect of non-existing entity is void in the eyes of law and, therefore, has to be quashed. The Ld. Counsel for the appellant, in this regard, relied on the decision of the Hon'ble Supreme Court in the case of M/s. Saraswati Industrial Syndicate and M/s. Spice Infotainment Ltd. He therefore urged us to quash the additions made by the AO to the tune of Rs. 2,15,00,000/- u/s. 68 of the Act and Rs. 25,76,219/- u/s. 69C of the Act in the relevant AY 2013-14 and likewise for AYs 2014-15 and 2015-16. 80. Per contra, the Ld. CIT, DR vehemently opposed the argument of the Ld. Counsel for the assessee and submitted that the assessment has been passed by the AO in the name of "M/s IQ City Infrastructure Pvt Ltd amalgamated into M/s Mani Square Ltd vide Hon'ble High Court at Calcutta Order dated 12.12.16 in C.P. No. 864 of 2016 connected with C.A. No. 322 of 2016". Therefore, according to Ld. CIT DR, the AO has passed the order in the name of the amalg....
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....ndatory notice to scrutinize the assessment of the amalgamated company (appointed date of amalgamation dated w.e.f. 01.04.2015) u/s. 143(2) of the Act was issued on 05.10.2018 in the name of the already amalgamated company/non-existing entity [M/s IQCIPL] was void ab initio and therefore, the AO usurped without jurisdiction to assess the non-existing entity (M/s. IQCIPL). So the framing of assessment u/s. 143(3) of the Act without assuming valid jurisdiction is null in the eyes of law. It is settled law that the issuance of mandatory notice in the name of a non-existent entity is an incurable defect and cannot be treated as a procedural irregularity and section 292BB of the Act cannot come to the rescue of revenue. Instead it is a jurisdictional defect which renders the proceedings / assessment non-est in the eyes of law. This legal proposition finds support in the judgments of the Hon'ble Supreme court in the case of M/s. Saraswati Industrial Syndicate Vs. CIT (1990) 186 ITR 278 (SC) and M/s. Spice Infotainment Ltd. Vs. CIT (2012) 247 CTR 500 (Del) which decision was upheld by the Hon'ble Supreme Court. We therefore find that notice issued by the AO u/s 143(2) of the Act in the na....
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....hat this identical argument was taken by the Revenue before the Hon'ble Supreme Court in the case of CIT Vs Maruti Suzuki India Limited reported in 416 ITR 613 wherein the Hon'ble Apex Court dealt with it as follows: "17. Mr Zoheb Hossain, learned Counsel appearing on behalf of the appellant submitted that: (i) The High Court was not justified in quashing the final assessment order under Section 143 (3) only on the ground that the assessment was framed in the name of the amalgamating company, which was not in existence, ignoring the fact that the names of both the amalgamated company and the amalgamating company were mentioned in the assessment order; (ii) Even on the hypothesis that the assessment order was framed incorrectly in the name of the amalgamating company, it would amount to a "mistake, defect or omission" which is curable under Section 292B when the assessment is, "in substance and effect, in conformity with or according to the intent and purpose" of the Act; (iii) During the assessment proceedings and the subsequent proceedings in appeal, the amalgamating company was duly represented by the amalgamated company. No prejudice was cause....
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....s to a new company, or by the transfer of one or more undertakings to an existing company. Strictly 'amalgamation' 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's Laws of England (4th edition volume 7 para 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." (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed; (v) Fifthly, a notice under Section 143 (2) was issued on 26 September 2013 to the amalgamating company, SPIL, which was followed by a notice to it under Section 142(1); (vi) Sixthly, prior to the date on....
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....participation by the appellant would be of no effect as there is no estoppel against law. 12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act." Following the decision in Spice Entertainment, (supra) the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in: (i) Dimension Apparels (supra); (ii) Micron Steels; and (supra) (iii) Micra India (supra). 21. In Dimension Apparels, (supra) a Division Bench of the Delhi High Court affirmed the quashing of an assessment order dated 31 December 2010. The Respondent had amalgamated with another company and thus, ceased to exist from 7 December 2009. The Court rejected the argument of the Revenue that the assessment was in substance and effect in conformity with the Act by reason of the fact that the assessing officer had used correct nomenclature in addressing the Assessee; stated the fact that the company had amalgamated and mentioned the correct address of the amalgamated compan....
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....ntally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a coordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra). (emphasis supplied) 85. In view of the above ratio decidenti of the Hon'ble Apex Court and judicial precedents (supra), the assessee succeeds on the legal issues raised as additional grounds and since in this case, the mandatory notice to scrutinize the assessment of the amalgamated company (appointed date of amalgamation dated w.e.f. 01.04.2015) u/s. 143(2) of the Act was issued on 05.10.2018 in the name of the already amalgamated company/non-existing entity [M/s IQCIPL] was ab-initio void and therefore, the AO usurped to assess....
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....ramed in the name of M/s. IQCIPL was without jurisdiction and so assessment framed is non-est and null in the eyes of law and, therefore, all the additions made against M/s. IQCIPL which were confirmed by the Ld CIT(A) stand deleted. The additional grounds of assessee are accordingly allowed. IT (SS) No. 60/Kol/2019 (Assessee's Appeal - A.Y 2015-16 as well as ground No. 2 of Revenue appeal) 91. Ground Nos. 1,12,13 and 14 are general in nature and therefore does not call for any specific adjudication. 92. Ground Nos. 2 to 5 of the assessee appeal are against the addition of Rs. 1,29,07,228/- confirmed by the Ld. CIT(A) on account of cash/on-monies allegedly received by the appellant on sale of Flat Nos. 23EA and 24EA in its 'Swarnamani Project'[Another Project] , which was made on the basis of on-monies/cash alleged to have been received from Shri S S Patodia and Ground No. 2 of the Revenue's appeal in IT (SS) No.76/Kol/2019 is connected with the same issue. The Revenue's ground No 2 is against the Ld. CIT(A)'s action of deleting the addition of Rs. 43,04,39,751/- made by the AO u/s 68 of the Act, by extrapolating unaccounted sales across all units sold by the appellant in ....
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....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 A/c Sub A/c Received Paid R. Balance Remarks 22nd May Flat Booking Mani Square Ltd 32,43,038 97,63,547 A/c Swarnamani 22nd May Flat Booking Mani Square Ltd 32,10,576 65,52,971 A/c Swarnamani 22nd May Flat Booking Mani Square Ltd 32,43,038 33,09,933 A/c Swarnamani 22nd May Flat Booking Mani Square Ltd 32,10,575 99,358 A/c Swarnamani Ans: Sir, these transactions refer to amount paid to Mani Group of Companies in cash against the two flats that I purchased from Mani Group in Swarnmani .Initially Mani Group demanded Rs. 2000/- per sq. fl. in cash for each of these two flats I purchased, but because of my old business relation I requested Mani Group to reduce this rate and finally rate was fixed toRs. 1400/- per sq. ft. that i needed to pay in cash for these two flats my group companies purchased from Mani Group of Companies. I have paid the amounts in cash aggregating to approx.R....
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....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 Pvt Ltd vide Agreement for sale dated 08-03-2014. The AO added the following sums by way of, paid by the purchasers to the appellant over and above the declared sale consideration. Flat Paid 23EA 32,43,038 23EA 32,10,576 24EA 32,43,038 24EA 32,10,575 TOTAL 1,29,07,228 96. The above data was gathered from a cash book impounded from the business premises of M/s Overtone Dealcom Pvt Ltd and the edifice of the impugned addition is the above statement of Shri S S Patodia. From the orders of the lower authorities, it is noted that the contents of above extracted statement of Shi S S Patodia has been taken to be gospel of truth for justifying the impugned addition. This action of the lower authorities has been challenged by the appellant/assessee as untenable both factually as well as legally. It is true that Section 132(4A) read with Section 292C of the Act, raises a presumption that that the contents of books of ac....
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.... 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) 32,10,576 32,106 30.05.2014 31,78,470 31,58,626 22.05.2014 19,844 32,10,576 32,106 30.05.2014 31,78,470 31,58,626 22.05.2014 19,844 32,43,038 32,430 30.05.2014 32,10,608 31,87,646 22.05.2014 22,962 32,43,038 32,430 30.05.2014 32,10,608 31,87,646 22.05.2014 22,962 1,29,07,228 1,29,072 1,27,78,156 1,26,92,544 85,612 98. It is noted that each figure of 'Gross Amount Paid' in Column (1) fully tallies with each of the figures mentioned in the alleged cash book found in SSP/HD/MZ/2. The period of payment reconciles as well. It is noted that these payments were received on 30- 05-2014 which is much prior to the date of search, i.e. 22-06-2016 and the receipts are corroborated by the entries in the bank statements, therefore it cannot be termed as an after-thought action. It is further obs....
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....e 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 adjusted with TDS. Sir, I confirm that I have made payment of Rs. 1,26,92,544/- by banking channel and not by cash. And out of balance amount of Rs. 2, 14, 6841- (1,29,07,228 - 1,26,92,544 = 2,14,684) the sum of Rs. 1,29,072/-was the TDS amount and Rs. 85, 612/- was the outstanding balance. Sir, we request your honour to verify the same from our bank statement. " 100. In the above letter dated 20-12-2018, Shri S S Patodia has thus affirmed that the sum of Rs. 1,29,07,228/- was paid via banking channel after deducting tax at source, which finding of fact we have already recorded supra at para 98, which now stands further corroborated. The statement of Shri S. S. Patodia recorded on 05.08.2016 pursuant to survey in his premises is infirm because it has been obtained by pressure/coercion from the Officer (DDIT) a....
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....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 in law and thereby upheld the order of this Tribunal and the Ld. CIT(A). The relevant findings of the Hon'ble High Court are as follows: 5. We heard counsel. The seller had initially given conflicting statement about the sale consideration he received. When confronted by the Revenue on 11-12-1998, the seller admitted that he had deposited Rs. 4.10 lakhs received through draft in the bank and the rest amount was held by him in cash. The Revenue authorities could well have seized the cash invoking section 132 of the Act, but for obvious reasons this was not done. Had the cash been seized from the seller, the matter would have been concluded in favour of the Revenue. In a subsequent submission, the seller claimed on 20-11-2000 that he had paid Rs. 15 lakhs out of the sale proceeds to settle old family debts....
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.... 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 Court. Accordingly, the above tax case is dismissed." 102. It is material to mention here that the Revenue went in further appeal before the Hon'ble Supreme Court. The Hon'ble Apex Court in its judgment reported in 294 ITR 49 did not find any infirmity in the order of the Hon'ble High Court. 103. We may also make useful reference in this regard to the decision of the Chennai Bench of this Tribunal in the case of M.M. Financers (P) Ltd Vs Dy CIT reported in 17 SOT 5. In the decided case search actions were conducted at business premises of assessee and also at premises of a known business associate, 'KM'. From the premises of 'KM' an unsigned MOU between the assessee and five others on one hand and 'KM' and 'KMR' firm on the other, was found wherein transaction for purchase of 95 acres o....
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....sment 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 appellant which showed that the payment of Rs. 1,29,07,228/- was actually received in cheque (para 98 & para 100 refers)and the ratio laid down in the judicial precedents (supra), we do not find merit in the Ld. CIT(A)'s action of confirming the addition of Rs. 1,29,07,228/- by way of alleged on-monies received upon sale of Flat Nos. 23EA and 24EA u/s 68 of the Act. The AO is accordingly directed to delete the same. Ground Nos. 2 to 5 of the assessee's appeal succeeds and therefore stands allowed in favour of the assessee and against the Revenue. 105. As a consequence of the above discussion and the finding of fact recorded in para 98 & para 100 supra , the Revenue's ground No 2 against the Ld. CIT(A)'s action of deleting the addition of Rs. 43,04,39,751/- made by the AO u/s 68 of t....
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....ade 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 is observed that these additional grounds are identical to the additional grounds raised in AY 2013-14. Following our conclusions drawn in AY 2013-14 at Paras 78 to 84, we hold that the assessment order framed is without jurisdiction since AO issued mandatory notice u/s 143(2) of the Act in the name of M/s IQCIPL is non-est and therefore null in the eyes of law and, therefore, all the additions made against M/s. IQCIPL which were been confirmed by the Ld CIT(A) stand deleted. The legal issue raised by assessee as additional grounds succeeds and are accordingly allowed. IT (SS) No. 76/Kol/2019 (Department's Appeal - A.Y 2015-16) 109. Ground No. 2 of the Revenue's appeal has already been dealt with along with the Ground Nos. 2 to 5 of the assessee's appeal in IT (SS) No.....
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....ssioner 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 in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1 st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal." 113. In view of the aforesaid decision of the Hon'ble Calcutta High court, we are of the view that Ld. CIT(A) has rightly allowed the deduction in respect of....
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....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 accounted in the books of the assessee. According to AO the right to receive interest had accrued during the relevant year and therefore added interest of Rs. 1,93,75,000/- computed for the period 01.11.2014 to 31.03.2015 to the total income of the appellant on the ground that the appellant regularly followed mercantile system of accounting. 115. On appeal, the Ld. CIT(A) sought a remand report from the AO on this issue wherein the AO stated that the impugned interest was rightly assessed to tax on accrual basis, since according to him the appellant had legal right to receive interest in the relevant year. The Ld. CIT(A) however did not agree with the AO's findings. According to Ld. CIT(A) merely because the arbitrators had directed S....
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.... 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 agreed in the sub-lease agreement for which dispute was referred for arbitration/reconciliation to fellow builders. It is noted that even after the award of the fellow builders, M/s Abasan Realty LLP did not act on the same. Neither did it pay the interest which it was/is required to pay within 31-10-2015 nor did it ensure that the bottlenecks in construction are removed and the work resumed. Instead, the construction got suspended and no payment was ever made to the appellant by either M/s Abasan Realty LLP or Shri Hari Sharma. In the circumstances it is erroneous to hold that the appellant/assessee could have been able to realize interest from M/s Abasan Realty LLP or Shri Hari Sharma in real terms. Further such compensatory int....
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....f 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 jurisdictional Hon'ble Calcutta High Court in the case of Sri Kewal Chand Bagri Vs CIT reported in 183 ITR 207. In the decided case, the assessee had advanced interest bearing loan to its father. Due to setback in father's business, the loan itself had become doubtful. In the circumstances the assessee did not recognize notional interest income on such doubtful loan. The AO however rejected the assessee's claim and added interest income since the assessee followed mercantile system of accounting. On appeal the Hon'ble High Court upheld the assessee's claim stating as follows: "In the instant case, it was true that the assessee had been maintaining his accounts on the basis of mercantile system....
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....d 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 Income-tax Officer did not represent the income which had really accrued to the assessee-company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said views of the Tribunal." [Emphasis supplied] (p. 757) 5. The relevant observations of this court in Goyal M.G. Gases (P.) Ltd.'s case (supra) are as under : "Applying the law laid down by the Supreme Court, what has to be seen in the present case is whether there was any real accrual of interest to the assessee. Both the CIT(A) as well as the Tribunal came to the conclusion that there was real accrual of interest. It has been noted that the interest had ....
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....pra )." 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 acknowledged his liability for payment of interest. It is further taken note that Shri Hari Sharma has not paid any interest to the appellant. On these facts and circumstances, we hold that no 'real income' accrued to the appellant and hence no addition on account of interest receivable was warranted in the given facts of the case. Accordingly, this ground of the Revenue stands dismissed. IT (SS) No. 61/Kol/2019 (Assessee's Appeal - A.Y 2016-17) 124. Ground No. 1,8, 9 and 10 are general in nature and therefore does not call for any specific adjudication. 125. Ground Nos. 2 to 7 of the appeal relates to the additions of Rs. 2,....
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....o. 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 the AO & Ld. CIT(A) to justify these additions is verbatim same as in AY 2013-14. 133. 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. 67,50,000/- & Rs. 1,33,74,309/- u/s 68 & 69C 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 delete the impugned additions made u/s 68 & 69C of the Act. IT (SS) No. 78/Kol/2019 (Department's Appeal - A.Y 2017-18) 134. Ground No. 1 of the revenue is against the action of Ld....
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....r 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 sold to one Manoj Rathi who was a customer in the Swarnamani project for Rs. 10 lacs and the same transaction has not been recorded in the regular books of account, so the AO added it. So, we note that the AO has made the addition based on this fact that from a perusal of MSL-8 page 15 it reveals that the assessee has received sale consideration of Rs. 10 lacs on the sale of servant quarter to a customer Manoj Rathi without entering it in the regular books of account, so, according to AO, it was the undisclosed sale consideration of the servant quarter received by the assessee on 21.06.2016. ....