TaxTMI 
TaxTMI 
2020 (12) TMI 254
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....t paid on such loans under Section 69C of the Act. Briefly stated the facts of the present case are that, search u/s 132 was conducted against the Mani Group, on 22-06-2016. The ld. Counsel for the assessee Shri S. K. Tulsiyan brought to our notice that prior to the date of search, the income-tax assessments u/s 143(3) for AYs2011-12, 2012-13 & 2013-14 stood completed and was not pending before the Assessing Officer on the date of search on 22.06.2016 and therefore by operation of law these assessment years were unabated assessments on the date of search. According to him, the following facts are un-disputed . That the original return of income for AY 2014-15 was filed on 29.11.2014 and the time limit for issuance of notice u/s 143(2) had not expired as on the date of search (22.02.2016) and therefore this was an abated assessment year. As regards AYs 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 and hence were abated assessments. The summary of the additions/disallowances in dispute in the appeals for AYs 2011-12 to 2014-15, 2016-17 & 2017-18 are as follows: Issue 2011-12 2012-13 2013-14 ....
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....payment of the loans and interest ( for genuineness) d. Bank statement evidencing that payment has been made via banking channels ( for genuineness) e. Confirmation of Loans from all the parties from whom the said unsecured loans stood taken during the year ( for genuineness) f. TDS certificates showing such TDS deduction on the interest paid against such unsecured loan creditors by the Assessee ( for genuineness) 5. According to the ld. AR, the entire additions were made by the Assessing Officer in respect of unsecured loan taken from the loans creditors and the interest which assessee paid to these lenders. It was pointed out by the ld. A.R that in order to prove the identity of lender who gave the loan to the assessee, the assessee furnished the followings: (a) the identity of loan creditor stood established by the very fact that the names, addresses of the lenders, PAN numbers, bank details and confirmatory letters were filed before both the lower authorities, (b) the creditworthiness stood proved by the financial statements, bank details and payment by account payee cheques and (c) the genuineness of the transaction was established by the details ....
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....on is permissible in the order u/s 153A unless it is based on any relevant tangible & cogent incriminating material found during the course of search. The relevant extracts of the decision are as follows: "We note that the provisions of Section 153A of the Act, forms part of Chapter XIV of the Act contain special provisions for completing assessments in case of search conducted u/s 132 of the Act or requisition made u/s 132A of the Act. These provisions can be invoked only in cases where the Income-tax Department has exercised its extra ordinary powers of conducting search and seizure operations after complying with stringent pre-conditions prescribed in Section 132 of the Act. We do not deny the ld. CIT, DR's contention that once a search u/s 132 is conducted against a person, then irrespective whether any incriminating material is found, the AO is required to proceed against such person for completing the assessments u/s 153A of the Act for the specified six assessment years. To this extent, there is no quarrel. However we find that Section 153A itself creates the fine distinction/differentiation amongst specified six assessment years depending whether prior....
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.... as under:- "37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise. The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". Although Section 153A does not say t....
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....9 Taxman 223 (Del HC) ; CIT vs Murli Agro Products Ltd reported in (2014) 49 taxmann.com 172 (Bom HC) ; CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that Revenue's SLP against the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (Supra) was dismissed by the Hon'ble Apex Court which is reported in 380 ITR (St.) 4 (SC). 15. We also find that the Hon'ble Jurisdictional High Court in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 endorsed the aforesaid view of Hon'ble Delhi High Court in Kabul Chawla's case. The Hon'ble High Court also placed reliance on their own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC) and held as follows: "Subject matter of challenge is a judgement and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA No.1775/Kol/2012 and allowed a cross-objectio....
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....als, which in his opinion, constituted 'incriminating material' to aid the additions made by the AO. Hence, the limited issue for our consideration is, whether the additions, which the AO made in the assessment orders, were based on or made with reference to any incriminating document unearthed in the course of search. The ld. Counsel of the assessee drew our attention to Paras 4.1 & 4.2 of the order of the ld. CIT(A) wherein he has listed out the purported incriminating material on the basis of which the additions had been made by the AO. The relevant Para 4.1.1 of the order of the ld. CIT(A) is extracted herein below: "Para 4.1.1. It needs to be decided as to whether in the appellant's case there was any incriminating material present or not? On a perusal of the assessment order and the appraisal report, it is evident that the basis of the addition inter alia is that the DDIT has pointed out many incriminating materials on the basis of which the assessment order has been framed. Some of these materials are: i) That the Mani Group has obtained unsecured loans from large number of corporate. Field enquired carried out by DDIT on test check basis. It was found that....
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.... documents, etc. In short, any fact / evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, being only a device / make belief on non-existent facts or suppressed misrepresented facts, would constitute incriminating material." 9. Before we proceed to examine the relevant materials pointed out by the ld. CIT(A), it is first imperative to see as to on what basis did the AO justify the impugned additions u/s 68 & 69C of the Act. On perusal of the notices issued u/s 142(1) dated 23.08.2018, 14.09.2018 & 10.10.2018 [Pages 205 to 224 of paper book], we note that the AO had initially requisitioned several details & documents from the assessee, inter alia including the details of the unsecured loans raised during the relevant years. It is noted that in none of these notices issued u/s 142(1) the Assessing Officer did not mention of any 'incriminating material', which was found in the course of search, based on which such details of unsecured loans had been requisitioned. Upon obtaining the details of unsecured loans, it is noted that the AO made enquiries from the loan creditors u/s 131 of the Act, and some of the ....
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....ts referred by the AO to justify additions made u/s 68 & 69C of the Act did not constitute 'incriminating material unearthed in the course of search' conducted upon the assessee, by observing as under: "31.Coming next to the additions made u/s 68 & 69C in the hands of the assessee and M/s IQCIPL (since merged into the appellant company), the AO for justifying the addition had referred to the statements of so-called entry operators recorded by different officers of Income-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....
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.... assessee to cross examine, cannot justify the additions u/s 68 & 69C and the statements cannot be said to be incriminating material or documents found and/or collected in the course of search conducted against the assessee and so, cannot be used against the assessee. 32. For the above finding of ours, we rely on the decision rendered by the coordinate Bench of this Tribunal in the case of Bankatesh Synthetic Pvt Ltd Vs ACIT in IT(SS) No. 142/Kol/2018 dated 24.04.2019. In this 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 conten....
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....2016 a search and seizure operation was conducted in the case of Banktesh Group and the assessee company's name was covered in the search warrant. 4.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/- 5.Assessment u/s 153A/143(3) of the Act was completed 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.1....
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....ote that after completion of original assessment dated 14.04.2011, for A.Y.2010- 11, a search and seizure operation was conducted in the case of Banktesh Group on 29.05.2012 (first search) and the assessee company was covered in the search warrant, therefore, A.Y.2010-11 is an unabated assessment. Consequent upon the said search operation, assessment u/s 153A r/w 143(3) of the Act was completed 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), Ko....
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....ission made by certain parties at the time of search without corroborating the same with material evidences found during the course of search. In this regard, the instructions issued by the Central Board of Direct Taxes (CBDT in short) in F.No.286/2/2003-IT(Inv) dated 10.3.2003 would be relevant to be looked into wherein it is mentioned that while 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 & seizureand 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. ....
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....'incriminating material' to aid the impugned addition. The ld. CIT(A) observed that in the said reports it was stated that the Inspector deputed to verify the existence of the loan creditors did not find most of them. The ld. counsel of the appellant however pointed out that the ld. CIT(A) never brought on record the said appraisal report and wondered as to how he can say and introduce it as incriminating evidence and hence his reference to the same was impermissible. He further contended that the ld. CIT(A) had tried to make out a new case and introduce new evidence, which was never utilized by the AO to justify the impugned addition. Inviting our attention to the show cause issued in the case of sister concern, M/s Mani Square Ltd [Pages 321 to 413 of paper-book] where these reports had been selectively extracted, the ld. AR pointed out that there was nothing contained in these reports, which could be said to constitute incriminating material found in the course of search qua the appellant. After carefully analyzing these facts, we find substance in the appellant's primary contention that the appraisal report was never brought on record and admitted as incriminating evidence b....
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...., which the ld. CIT(A) who enjoys co-terminus power as that of Assessing Officer could have exercised, which he did not bother to do. So, the appraisal report cannot be termed as incriminating material qua the assessee. For the reasons aforesaid, and taking note that the AO never utilized the same as 'incriminating material' for the purpose of making additions u/s 68 & 69C of the Act, the observation of Ld CIT(A) in respect of contents of appraisal report cannot be termed as 'incriminating material' and Ld CIT(A) erred in terming it as 'incriminating material'. 12. The ld. CIT(A) has further referred to the statements of the key person of the Mani Group, Mr. Sanjay Jhunjhunwala and the declarations given by his employees in the course of search as 'incriminating material'. The order of the ld. CIT(A) is however conspicuously silent with regard to the contents of these statements recorded by the Investigating authority and as to what incriminating material was contained therein. The ld. counsel for the assessee pointed out that neither did Mr. Sanjay Jhunjhunwala nor his employees had either admitted in their statements that the unsecured loans received by the appellant was in th....
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....available on record prior to the search. The subsequent enquiries u/s 131 of the Act conducted by the AO in the course of assessment proceedings u/s 153A of the Act could not be said to be 'incriminating material found in the course of search upon the assessee'. Moreover in Paras 16 to 22 (infra), we have discussed and held that the non-service of summons was not a decisive factor in the present case, as the assessee had brought on record sufficient evidences to substantiate the identity, genuineness and creditworthiness of the loan creditors. In our opinion in the facts of the present case in hand, therefore, the further investigation conducted by the AO in the proceedings u/s 153A of such unabated assessments to make the impugned additions, was nothing but a different opinion formed by the AO on the same set of facts which were already available on record and it did not constitute 'incriminating material found in the course of search upon the assessee'. 14. For the reasons discussed in the preceding paragraphs, we hold that the material referred to by the lower authorities for justifying the additions made in the unabated assessments for AYs 2011-12 to 2013-14 did not constitu....
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....rding to AO summons were served on (7) seven parties and the summons on fifteen (15) parties remained un-served [mentioned in table above] against which adverse inference was drawn. At the outset, the ld. counsel for the appellant invited our attention to the details of the addresses of the fifteen (15) loan creditors set out in the assessment order and the addresses of their registered offices as available in the MCA records. The ld. counsel pointed out to us that the AO had issued notices to twelve (12) parties on the wrong addresses, which fact was brought to the notice of ld. CIT(A), still no action was taken at the end of ld. CIT(A) to fairly cross-check the veracity of this fact, therefore non-service of summons could not be viewed adversely against these twelve lenders whose address has changed and that cannot be a ground to adversely view against these lenders who are regular tax payers which we will discuss in detail infra. As regards the remaining three (3) parties to whom notices remained un-served, it was urged that where the assessee had brought on record sufficient evidences to substantiate the identity, genuineness and creditworthiness of the parties and they a....
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....mons went un-served was not sustainable in the eyes of law, particularly when the appellant had furnished all the relevant documents which it was required to maintain in ordinary course to substantiate its loan transactions with independent third party loan providers. 18. At this juncture, we may gainfully refer to the observations made by the Hon'ble Apex Court in the case of CIT Vs Orissa Coprn (P.) 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 whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the concl....
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.... 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 Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors 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 s....
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...., 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 subcreditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know wha....
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.... subcreditors 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." 20. Further the 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 of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for furth....
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.... 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 view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income- tax (Appeals) on facts having examined the docume....
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....itors 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 required to be noted that the Assessing Officer directed to make the addition of Rs. 33,55,011/- under Section 68 of the Income Tax Act with respect to 17 lenders. However, it has been found that with respect to most of the lenders, except two, necessary do....
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....60 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 were furnished and when it has been found that the loans were received through cheques and the loan account were duly reflected in the balance sheet, the Assessing Officer was not justified in making the addition of Rs. 33,55,011/-. Under the circumstances, no que....
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....edits as non-genuine, 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 amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits ....
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.... 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 particular, the fact, that the Assessing Officer has not disallowed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax deducted at source has been deducted out of the interest paid/credited to the creditor....
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....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) sub-creditors 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-creditors 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. In other words, while Section 68 gives the liberty to the Assessing Officer to ....
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....ed 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 sub-creditors." 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 subcreditor. It was observed as under: "14. With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the....
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....parties set out at Serial Nos. 1 to 8 from whom the loans were received in the earlier years as well to whom interest of Rs. 1,58,38,049/- was paid. Besides, the appellant had paid interest of Rs. 2,03,780/- to one party mentioned at Serial No. 9 of the Table whose loan was 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 nine 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 relevant year, the appellant had complied with relevant provisions of Section 194A of the Act [TDS] and necessary evidence in respect thereof was also furnished. In the circumstances we find that inrespect of payment of interest to these nine parties, provisions of Section 69C of the Act had no application. Accordingly the addition made u/s 69C to the e....
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....he assessee pointed out that vide letter dated 21.10.2019 the AO supplied the statements of alleged entry operators based on whose statements the impugned additions were being justified and also required the assessee to be present before him on 30.10.2019 to cross examine these persons. Upon examining the contents of the statements, the appellant had observed that none of them were either recorded in the course of its search nor by the AO on his own. And most important and the best part was that neither the name of the assessee was mentioned by any of these persons nor in these sworn statements had the so-called entry operators admitted of providing accommodation entries to the appellant. Since the appellant was not accused of any wrong-doing in these third party statements provided by the AO, it was contended before the AO by letter dated 30.10.2019 that the exercise of the cross-examination being conducted by the AO was a futile exercise however, according to the lower authorities this reply of the appellant suggested that it did not intend to cooperate during the cross examination and therefore the ld. CIT(A) held that the opportunity to cross-examine had been afforded to the ap....
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....ege any wrong doing on the part of the assessee or its directors, so when the assessee had gone through the copies of the statement gives during remand proceedings, it realized that these statements did not contain any material incriminating the appellant so there was nothing to examine leave alone crossexamination them so, was termed as futile and nugatory. In the aforesaid facts we wonder as to how the ld. CIT(A) has said that assessee did not avail the opportunity of cross-examination. In the aforesaid circumstances, we are of the opinion that when the maker of a statement does not allege any wrong doings or admits to have done anything wrong along with assessee, then question of cross-examination does not arise and so, the assessee rightly did not cross-examine them. Here the most important fact is that the statements relied on by lower authorities did not allege any wrong on the part of assessee, os in the first place those statements were wrongly relied upon by ld. CIT(A) and Assessing Officer. Next let us examine how the Assessing Officer erred in his omission to carry out proper enquiry by not even summoning these operators and how his erroneous reliance on their bald state....
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....ri Pankaj Agarwal admitted that M/s Damodar Niketan Pvt Ltd, M/s Lavanya Nirman Pvt. Ltd., M/s Kasturi Home Pvt. Ltd., M/s Himadri Enclave Pvt. Ltd., M/s Aradhana Plaza Pvt Ltd, M/s Jamuna Enclave Pvt Ltd, M/s Marigold Nirman Pvt Ltd, M/s Shital Plaza Pvt Ltd, M/s Sreedev Computers Pvt Ltd and M/sTista Nirman Pvt. Ltd were controlled or managed by him. We also note that even though in his statement, he had admitted of being engaged in providing accommodation entries till the year 2011 yet nowhere in his statement Shri Pankaj Agarwal had identified either Shri Sanjay Jhunjhunwala or Mani Square Hospitality Pvt. Limited as beneficiary of accommodation entries provided by him. Further, we note that before the AO used the statement of Shri Pankaj Agarwal as evidence against the assessee, he himself never issued notice u/s 131 or 133(6) of the Act to Shri Pankaj Agarwal to ascertain the facts of the case, particularly when no information was appearing from his statement which connected the loan transactions between appellant and the loan creditors, M/s Damodar Niketan Pvt Ltd, M/s Lavanya Nirman Pvt. Ltd., M/s Kasturi Home Pvt. Ltd., M/s Himadri Enclave Pvt. Ltd., M/s Aradhana Plaza Pvt....
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....rative analysis of the statements of entry operators relied upon by the AO for justifying the additions made u/s 68 & 69C of the Act. On examination of each of these statements, we are satisfied that in none of the statements any of them had admitted of having any transactions or providing accommodation entries to the appellant nor the AO has brought on record any material to link these entry operators with the bodies corporate from whom the loans were received by the appellant. We thus agree with the ld. counsel of the appellant that, if the AO intended to use these statements to draw adverse inference against the appellant, then he himself first of all ought to have examined these entry providers to ascertain the correct facts and it is only on such examination if it was revealed by these entry operators as to any role of the appellant or connection with the loan creditors as suspected by the AO, then he should have collected material to substantiate the facts and in all fairness thereafter give a copy of such admission / allegation against the assessee or material discovered in the process of enquiry and allowed the assessee an opportunity to cross examine the makers of the stat....
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.... - 32. Having regard to the above financial position of the loan creditors, we note that the lower authorities did not objectively take into consideration the financial net worth of the creditors and the facts and figures available in the audited accounts. On examination of the financial statements of the loan creditors, we find that each loan creditor possessed sufficient investible funds out of which the creditors had advanced the loans to the assessee. We also find that in each case, the loan creditor had reported substantial interest income and they are income taxpayees. Further, compared with the gross interest accounted in the books of the creditor, the amount of interest paid by the appellant was relatively lower. We also note that the interest paid by the appellant was accounted in the books of the loan creditor and before payment of interest, the tax was duly deducted u/s 194A of the Act. Having regard to the totality of the facts and circumstances of the case therefore, we do not find merit in the conclusion 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 Ac....
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....We note that the facts as well as the question involved in this judgment are of no relevance in the appellant's case. The Ld. CIT(A)'s reliance on this judgment is therefore, incorrect. (D) We have also gone through the decisions of the Hon'ble Delhi High Court in the case of Nova Promoters and Finlease Pvt Ltd reported in 342 ITR 169, Sophia Finance Ltd reported in 205 ITR 98, CIT Vs MAF Academy Pvt Ltd reported in 361 ITR 258, CIT Vs NR. Portfolio Pvt Ltd reported in 214 Taxman 408, CIT Vs Nivedan Vanijya Niyojan Ltd reported in 263 ITR 623 and Navodaya Castle Pvt Ltd reported in 367 ITR 306. In our opinion the ratio laid down in these decisions cannot be applied to the appellant's case because the sums in question are not share application monies. In the cases decided by the Hon'ble High Court, the private limited companies had received share application monies on private placement. By its very nature, the shares of private limited companies are transacted between the small circle and therefore the Court held that it was unnatural for the shareholders who continued to have stake in the company did not cooperate with the Department and provide the requisite evidences as ....