TaxTMI 
TaxTMI 
2021 (6) TMI 417
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....ned CIT(A) erred in deleting the addition of Rs. 3,24,00,050/- made by the Assessing Officer towards unexplained cash credit u/s 68 of the Income Tax Act, 1961, in the assessment for A.Y 2011-12 passed u/s 153C r.w.s 153A of the IT Act, 1961 in the case of the assessee. 2.1 The learned CIT(A) erred in deleting the disallowance of Rs. 22,35,023/- made by the Assessing Officer, towards interest claimed by the assessee on the sum of Rs. 3,24,00,050/- treated as unexplained cash credit u/s 68 of the IT Act, 1961, in the assessment for A.Y 2011-12 passed u/s 153C r.w.s 153A of the IT Act, 1961 in the case of the assessee. 2.2 The ld. CIT(A) ought to have appreciated that from the enquiry conducted by the Assessing Officer at Kolkata and the searches conducted by the Investigation Wing of the Income Tax Department at Kolkata and the documentary evidence brought on record by the Assessing Officer during the assessment proceedings clearly showed that the alleged lenders were only paper companies whose credit worthiness and the genuineness of the transactions were not established by the assessee. 2.3 Having regard to the documentary evidences gathered during the a....
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....ns of section 153C are not invocable in the facts and circumstances of the case. 3. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the assessment was completed without complying with the statutory requirements of law. 4. Since, assessee has taken a legal ground challenging validity of assessment passed u/s.143(3) r.w.s. 153C of the Income Tax Act, 1961 (hereinafter the 'Act') in light of certain judicial precedents that in absence of incriminating material found as a result of search, no addition could be made in the assessment which are unabated / concluded as on date of search, we deem it appropriate to first decide cross objection filed by the assessee. 5. The brief facts of the case are that a search action u/s.132 of the Act was conducted in the residential premises of Shri Pawan Kumar Goel, Director of assessee company. During the course of search, documents belonging to the assessee were seized. Thereafter, notice u/s.153C of the Act was issued calling for return of income for six assessment years immediately preceding assessment year in which search conducted. In response to notice u/s.153C of the Act, the assessee has filed a let....
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....ed financial statements of the creditors to prove creditworthiness. The genuineness of transactions was also proved by filing bank statements where total loan transactions were routed through proper banking channel. 7. The ld.CIT(A) after considering relevant submissions of the assessee, has rejected legal ground taken by the assessee challenging validity of assessment by holding that proceedings u/s.153C of the Act has been initiated on the basis of documents seized in the premises and statements recorded from Shri Pawan Kumar Goel, Managing Director of assessee company. The AO has also made use of statement of Shri Virendra Kumar Kesari and Shri Krishna Kumar Parsuramka, during the course of search conducted in Kolkata and on that basis adverse inference has been drawn against the assessee that assessee has obtained bogus accommodation entries of unsecured loans from various shell companies. Therefore, there is no merit in the arguments taken by the AR for the assessee that AO has not recorded satisfaction as required u/s.153C of the Act. 7.1 As regards, addition made towards unsecured loans, the ld.CIT(A) by following various judicial precedents including decision of Hon'b....
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.... the opportunity to cross examine to the assessee, another letter dated 26.4.2007 was issued to the AO directing to give opportunity to the assessee by calling for witnesses. However, it is noted that - no opportunity was given to the assessee and no remand report has been received in this regard from the AO. It is also noted that the AO had not given the opportunity to cross examine the witnesses to the assessee during the assessment proceedings as well. Considering the same, the additions made to the returned income are examined sans the statements which have been used in the assessment order without providing an opportunity to the assessee to cross examine the witnesses. The assessee has further made submissions as under on this issue. With reference to the above we would like to stale as under: We have already made detailed submission before your honors vide letter dated 13th December, 2016 and further in reply to your letter dated 29.12.2016 we stated that we have taken loan from the various companies through Mr. Krishna Kumar Parsuramka. We have submitted before your honors that if opportunity is given then said Shri Krishna Kumar Parsuramka has assured that....
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.... vii. Nemi Chand Kothari vs. Commissioner of Income-tax and another 264 ITR 254 (Gauhati,); viii. Deputy Commissioner of Income-tax vs. Rohini Builders 256 1TR 360 (Gujarat,); ix. Kishinchand Chellaram vs. Commissioner of Income-tax 125 ITR 173 (SC); x. Commissioner of Income-tax vs. Ashwani Gupta 322 1TR 396 (Del.); xi. Ranchi Handloom Emporium vs. Commissioner of Income-tax & another 235 1TR 604 (Pat.) 14. In this regard, the following judicial decisions are considered. 1. In the case of Andaman Timber Industries (2015)281 CTR 214(SC) the Hon'ble Apex Court has held that denial to the assessee of the right to cross-examine the witness whose statement was made the basis of the impugned order is a serious flaw which renders the order a nullity in as much as it amounted to violation of the principles of natural justice because of which the assessee was adversely affected. 2. In the case of M/s.Ujala Dyeing & Printing Mills Pvt Ltd. (328 ITR 437) the Honble Gujarat High Court had considered the case of the assessee for AY.2002-03 wherein, the company had filed its return declaring certain incomes. During the course ....
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....t to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors etc. Assessing Officer was not justified in making addition u/s.68 on account share application money merely on general inference to be drawn from the reading of the investigation report. The least that AO ought to have done was to enquire into matter by, if necessary invoking his powers u/s. 131 summoning the share applicants or directors. 5. In the case of M/s.Kapoor Chand Mangesh Chand (218 Taxmann 157) the Honble Allahabad High Court had considered a case where loan was advanced and repaid through the account payee charge. The PANs of lenders were furnished. The lenders had sufficient funds in their bank accounts. The court held that additions u1's.68 was not called for. 6. In the case of M/s.A.L.Lalpuria Construction Pvt Ltd.(215 Taxmann 12) the Hon'ble High Court of Rajasthan had con....
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....rawn by revenue that impugned transaction was a sham, could not be sustained - Held, Yes - Whether when balance sheet of 'S' Ltd, evidently reflected adequate sources for advancing impugned amounts to assessee and money had come through banking channels, inferences could safely be drawn that creditor was identified and had financial capacity to advance impugned amounts, and, thus, duty which lay on assessee u/s.68 could be said to have been discharged - Held - Yes. 15. The assessee has been regularly filing returns of income showing a positive taxable income over the years. The assessee appears to have taken certain loans from Kolkata based parties for interest. The loans had been taken through regular banking channels. The assessee is able to produce all identification and other papers reflecting the legal and regular nature of the lending companies. The loans taken have been backed by equitable mortgage of immovable properties in favour of the person who has been arranging loans for them. The loans taken had been clearly reflected in the balance sheets filed by the assessee over the years. The loans taken for interest have been regularly serviced by interest payments. Th....
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....e further submitted that it is a well settled principle of law by the decision of various High Courts and Hon'ble Supreme Court in the case of PCIT v.Meeta Gutgutia [2018] 257 taxmann.com 441 that no addition can be made in the assessment proceedings which are concluded / unabated as on the date of search. In this case, on perusal of additions made by the AO towards unsecured loans, it is very clear that the AO has made additions on the basis of regular books of accounts and financial statements filed by the assessee along with return of income filed u/s.139(1) of the Act. Further, there is no evidence of any incriminating material found as a result of search in connection with said addition. Although, the Department has found and inventoried certain incriminating material but on perusal of list of inventory of books of accounts found during the course of search, it is very clear that the AO has found and seized copies of confirmation letters obtained from loan creditors which are part of regular return of income filed for relevant assessment year. Therefore, said documents cannot be considered as incriminating material in connection with said addition. Therefore, the ld.AR subm....
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....of search. In this case, the AO has assessed income on the basis of material found during the course of search and hence, arguments of the assessee that addition made in the unabated assessment without any reference to incriminating material found during the course of search is baseless and unfounded under the law. 11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have carefully gone through arguments of the ld.AR for the assessee in light of provisions of section 153A of the Act. The provisions of section 153A / 153C of the Act, deals with a situation where assessments are framed in pursuant to search action conducted u/s.132 or requisition u/s.132A of the Act. As per said sections, in the case of a person where search was initiated u/s.132 of the Act or books of accounts are requisitioned u/s.132A of the Act, the AO shall assess or re-assess income of each assessment years falling within six assessment years referred to in clause (b) of said section. Sub-clause (b) of Section 153A empower the AO to assess or re-assess total income of six assessment years immediately preceding assessment year relevant ....
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.... shall be made for each of the six assessment years separately. The Co-ordinate Bench of ITAT, Chennai in the case of Shri M Kiran Kumar in ITA Nos. 1055 & 1054/Chny/2018 has taken a similar view and held that in absence of material found in the course of search operation, there cannot be any addition u/s.153A of the Act. In the present case, on perusal of facts available on record, we find that the AO has made additions towards unsecured loans on the basis of regular return of income filed by the assessee for the relevant assessment years without reference to any incriminating material found as a result of search. Although, the ld.DR has referred few documents found and seized during the course of search, but on perusal of said documents, we find that those documents are in fact confirmation letters obtained from said loan creditors in connection with unsecured loans taken and disclosed in books of accounts prepared for the relevant assessment years. Therefore, said documents cannot be treated as incriminating material found as a result of search to make addition towards unsecured loans taken and declared in regular return of income filed for relevant assessment year. 12. In....
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..... Keshari without providing said statement to the assessee and also without providing an opportunity of cross examination, even though the assessee has sought for such cross examination, in contravention of principles of natural justice. Therefore, on this count additions made by the AO cannot be sustained. 14. Coming to merits of the case. The ld.CIT(A) had recorded categorical finding that the assessee has filed various documents including confirmation letters from all loan creditors to prove identity, genuineness of transactions and creditworthiness of parties. We, further noted that the ld.CIT(A) has reproduced at para 9 of his order in respect of each and every loan creditors, the documents filed by the assessee to discharge its onus. As per the findings of the ld.CIT(A), the assessee has filed name, address and PAN card of the company and its Directors. The assessee has also filed financial statements of loan creditors and their bank statements. As per financial statements, creditors are having sufficient source of income to establish creditworthiness of loan transactions with the assessee. Further, all loan transactions are routed through proper banking channels. It is al....