TaxTMI 
TaxTMI 
2021 (10) TMI 1064
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....ds of appeal taken by the assessee in all the appeals are similar therefore, for the sake of completeness, the grounds of appeal in I.T.A. No.114/Lkw/2019 are reproduced below: "1. BECAUSE the Learned CIT(A) was wrong in law & on facts in confirming the assessment order passed by AO u/s 153A of the Act as the same was not in consonance with the settled position of law vis-a-vis search cases. 2. BECAUSE the learned CIT(A) has erred in law and on facts in upholding the assessment ignoring the settled position of law that provisions of section 153A, in case where proceedings are not pending, could not be applied in absence of any incriminating material. 3. BECAUSE the reliance on 'reports of investigation wing' etc. did not constitute 'material' relevant for the purpose of assessment in this case, as the 'appellant' had never been confronted with the same in right perspective and as such the addition made on the basis of such an ex-parte information and reports etc. is wholly vitiated. 4. BECAUSE the computation of income was not even relevant for the purpose of assessment and the same is vitiated, as during the course of sea....
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....ued by CBDT relating to the procedure to be adopted by AO in respect of addition under section 68 of the Act and the case laws relied upon by the authorities below are distinguishable from the facts of the present case. 11. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, material & evidences available on record. 12. BECAUSE in relation to the Grounds of Appeal, the appellant relies upon the averments made in the facts of the case. 13. BECAUSE the order of the CIT(A) is against the principle of natural justice erroneous and not tenable in law and on facts." 2. The brief facts, as noted in the assessment order, are that a search & seizure operation u/s 132(1) was carried out in Chaurasia Group on 27/11/2015 and the assessees of the group were required to file returns of income u/s 153A of the Act. The Assessing Officer, during the assessment proceedings, issued similar notices u/s 142(1) to the assessees wherein besides other issues he required the assessees to file satisfactory reply and explanation regarding unsecured loans taken from M/s Success Vyapar Ltd. and M/s Neil Industries Ltd. The ....
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....d tried its level best to fulfill such requirements. The Assessing Officer held that assessees had also not made any effort to produce such persons as these witnesses are interested parties in the cases and it does not serve any purpose of the assessees if they appear before the Assessing Officer for cross examination. The Assessing Officer held that they being part and parcel of whole racket of providing accommodation entries, they will try to protect the person, to whom they had given entries, from being exposed. However, the Assessing Officer obtained the information about the granting of unsecured loans to assessees from these two companies by issuing notices u/s 133(6) of the Act. 3. In reply to all these observations of Assessing Officer, the assessees filed relevant documentary evidences in support of their claim that assessees had obtained unsecured loans in regular course of business. It was also submitted that the loans were carrying interest and assessees had deducted TDS on such interest payments. It was also submitted to the Assessing Officer that a major part of the unsecured loans was repaid back even before the search took place. However, the Assessing Officer he....
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.... respect our attention was invited to paper book pages 368, 418 and paper book pages 273 to 418 where copies of direct replies by the loan creditors along with confirmed copy of account, copy of ITR, copy of bank account and copies of audited accounts was placed. It was submitted that the assessees have obtained from Assessing Officer certified copies of replies by the loan creditors and have made part of these documents in the paper book where the Assessing Officer has certified these documents. It was further submitted that Assessing Officer has taken note of the receipt of replies from the loan creditors and in this respect our attention was invited to paper book page 451 where vide order sheet entry dated 11/12/2017 the Assessing Officer has taken on record the reply in view of notice u/s 133(6) received through Dak. Our attention was invited to similar documents placed in paper book pages 259, 340-341 and from 360 to 391 in I.T.A. No.116 and a reference of which was made in the consolidated paper book. Similar references were made from the consolidated paper book for I.T.A. Nos. 105, 106, 107, 108, 111 and 112. It was submitted that in the assessment order the Assessing Office....
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....Infrastructure (India) (P.) Ltd. [2017] 397 ITR 82 (Delhi) Learned counsel for the assessee submitted that in these cases though in the assessment order the Assessing Officer has mentioned that summons u/s 131 of the Act, were issued to various persons and assessees was also directed to attend his office on 26/12/2017 whereas on going through the copy of entries in order sheet, there is no mention about the fact of having issued notice u/s 131 of the Act. It was submitted that the assessment order itself is not clear as to when summons u/s 131 of the Act were issued to the party and on which date such summons were served to the parties and it has also not been mentioned as to whether any reply has been filed by these persons in response to summons u/s 131 of the Act. Learned counsel for the assessees submitted that on the appointed date of 26/12/2017, the counsel of the assessee was present for cross examination however, nobody appeared for cross examination and Assessing Officer instead of further taking actions for making their presence has held that such persons must be receiving hundreds of notices on a daily basis and thereby he shifted the onus of providing its own witness....
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....tity of the lender company is not in doubt, creditworthiness of the company is not in doubt as these companies had sufficient funds to advance the loans. As regards the genuineness of the transactions, it was submitted that all the loans were taken through banking channels and interest was also paid after deducting TDS and a part of loans were also returned back with interest and this proves the genuineness of the transactions. Learned counsel for the assessees submitted that the assessment orders of such companies also proved the genuineness of the transactions as nothing adverse has been commented on such loans transactions in the assessment order and the interest paid by the assessees has been accepted as income of the loan creditors. Learned counsel for the assessee submitted that in a number of judgments it has been held that when the assessee had fulfilled its part of proving the three ingredients to the Assessing Officer, the addition u/s 68 of the Act cannot be made unless the submissions in this regard made by the assessee are proved wrong. Learned counsel for the assessees submitted that the only reason for making such additions was a report of the investigation wing wher....
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....d and it was prayed that the appeals may be dismissed. 5. We have heard the rival parties and have gone through the material placed on record. We find that a search was conducted on the group on 27/11/2015 and in view of that search various assessees were required to file returns u/s 153A of the Act and Assessing Officer completed the assessments u/s 153A of the Act except in the year of search where the assessment order has been passed u/s 143(3) of the Act. It is undisputed fact that additions in these cases are not based upon any incriminating material found during the search and rather have been made on the basis of transactions which were already recorded in the books of account of assessees. The facts in brief are that assessees had obtained certain unsecured loans from two loan creditors namely Success Vyapar Limited and Neil Industries Ltd. The Assessing Officer added back such unsecured loans holding them to be accommodation entries and disallowed the interest paid on these loans and also made a further addition of 5% as assumed commission on such transactions. The Assessing Officer held (on the basis of statements of Directors of such lender companies) that these lende....
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....ssessing Officer himself did not carry out any enquiry and straightforward relying on the statements recorded by some different officer, has made the additions. While making the additions he has also ignored the documentary evidences filed by the assessees and has also ignored a vital evidence that a substantial part of unsecured loans was already repaid even before the date of search. This fact of having repaid a part of unsecured loans before the date of search is apparent from the yearwise copy of account of such lenders, which for the sake of completeness has been made part of this order and is reproduced below: 5.1 While making the additions on the basis of statements of such persons, the Assessing Officer also noted in the assessment order that notices u/s 131 of the Act were issued to the persons who had given the statements for cross examination by the assessees but the fact of having issued notices u/s 131 of the Act is not coming out from the copy of order sheets placed at pages 262 to 264, 260 to 262, 218 to 220, 449 to 451, 423 to 425 and 414 to 416 of the paper book and neither the assessment orders state as to when these notices were served. We further fi....
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....tion by the assessee. Similar findings have been made by Lucknow Bench of the Tribunal in the case of Sigma Castings Ltd. vs. DCIT & other appeals in I.T.A. No.510/Lkw/2019 and others. 5.4 The findings in the case of Morning Glory incorporating the findings of Hon'ble Supreme Court in the case of Andman Timber Industries are reproduced below: 2. The brief facts of the case are that a search and seizure operation under section 132(1) of the Income-tax Act, 1961 was carried out at the residential and business premises of Dolphin Developers/Anand/Rotomac Group of cases on 25/6/2014 at Kanpur. Simultaneously, a survey under section 133A of the Act was also conducted at the registered office and the office of M/s Morning Glory Infra Ltd., situated at plot No.2, Block-I, Gotaiya Scheme No.VII, 7/102, Swaroop Nagar, Kanpur and 17/K/13, Sarvodaya Nagar, Kanpur. Shri Anoop Asthana, Prop. M/s Anoop Asthana Properties, main broker for Anand/Dolphin Group and Morning glory Infra Ltd. was also covered under section 133A of the Act. During the course of survey operation at the premises of M/s Anoop Asthana Properties, situated at Ratan Bhawan, 7/108, Swaroop Nagar, Kanpur, a diar....
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....made merely on the basis of presumptions, conjectures and surmises, without any credible material/corroborative evidence to establish receipt of any income/cash, outside the books of account, as explained hereunder: The Assessing Officer, as stated above, has simply primarily relied upon the contents of a diary purportedly impounded from the premises of one property broker, Mr. Anoop Ashthana, and his ex-parte statement recorded during the course of survey at his premises. Re: diary impounded from premises of Mr. Anoop Asthana It is respectfully submitted that the contents of the aforesaid diary found during survey in the case of Mr. Anoop Asthana marked as Annexure A-14, pages 163-165 whereof have been relied upon by the Assessing Officer, could not have been the basis for making such huge addition in the hands of the appellant for the following reasons: ............................................................................................. ............. (f) Pertinently, even the names of the individual parties appearing in the diary alongside the amounts, are completely alien to the appellant. The appellant had not sold any flat in the Em....
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....e feet, the quantum of while and black mentioned are Rs. 1,20,57,600/- and Rs. 42,12,000/- respectively. Further, another entry is made for the 3 BHK flat admeasuring 2325 sq. ft. area, wherein amount of white and black mentioned is 1,34,81,400/- and Rs. 47,08,125/- respectively. Thus, Assessing Officer has calculated the quantum of black amount at 25% of the total consideration. During survey proceedings the statement of Shri Anoop Asthana, proprietor of AAP was recorded. For answer to question No.22, in the statement recorded on 25/6/2014 Shri Anoop Asthana has categorically stated that page 163 of the annexure A4 are the entries relating to Emerald Garden and the amount of white and black represents the amount of cheque and cash. It is also stated that the black amount which is invariably in cash is directly paid to the appellant company by the investor to the Director of the appellant company. Shri Anoop Asthana also states that he only gets the commission income at the time of registration of the property. He is continuing to state in the same answer that this process has been followed in minimum 12 flats of the Emerald Garden which is booked through him. Thus, it is crystal c....
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....the appellant. Assessing Officer has correctly extrapolated the modus operandi for calculating unaccounted income of appellant. 5.11. The contention of the ld. AR that no opportunity of cross examination to Shri Anoop Asthana was ever accorded to the appellant is far away from truth and reality of the case. The incriminating document found and impounded in the business premises of the Anoop Asthana and the incriminating statements of Shri Anoop Asthana was specifically confronted to the Managing Director of the appellant company Shri Sanjeev Kumar Jhunjhunwala on 27/1/2014. This statement is part and parcel fo the assessment order page 6 to 9, therefore, the plethora of the case laws cited by the ld. AR of the appellant does not apply to the facts and circumstances of the present case." 9. Thus, the assessee specifically contended before the ld. CIT(A), that any cross-examination of Shri Anoop Asthana was not allowed to it. The ld. CIT(A) has held that the statement of Shri Anoop Asthana was specifically confronted to the Managing Director of the assessee company. However, he does not deny that the assessee was not allowed to cross-examine Shri Anoop Asthana, whos....
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....op Asthana, in his statement, had stated that entries in the said diary were made by staff member of Shri Anoop Asthana, without providing details of the so-called staff member. Thus, the author of the so-called diary in question is not even known till date. Shri Anoop Asthana nowhere stated that the diary was written by someone on his behalf and/or on his instructions. Therefore, the entire case is fundamentally based on a mere inference drawn about the nature of the contents of the diary written by someone unknown, more particularly, only on the statement of Shri Anoop Asthana about the contents of the diary written by someone else. Since the diary was undisputedly found from the possession of Shri Anoop Asthana and not from the appellant, the contents of the said diary, simplicitor, without any corroborative material/evidence could not have been, in the absence of any corroborative material / evidence, made the basis of drawing any adverse inference against the appellant, much less making any addition in the case of the appellant. In the diary, name of the project 'Emerald Garden Project' being constructed by the appellant along with certain names of individuals and amounts was ....
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....d diary. Therefore, the very contents of the diary are suspect and are totally unreliable/unauthentic. No adverse inference can be drawn from the payment receipts (3 in number) in respect of flats in Emerald Garden project found from the premises of Shri. Anoop Asthana, particularly when nothing adverse has been stated by Shri. Asthana in this regard. 12. These facts, as specifically contended by the assessee before the ld. CIT(A) have not been rebutted and the ld. CIT(A) has gone merely by the uncorroborated unilateral statement of Shri Anoop Asthana, qua which, no opportunity of crossexamination of the deponent, Shri Anoop Asthana, was afforded to the assessee at any stage whatsoever. It is not sufficient to observe, as has been done by the ld. CIT(A), that ".........the incriminating document found and impounded in the business premises of Shri Anoop Asthana and the incriminating statements of Shri Anoop Asthana was specifically confronted to the Managing Director of the appellant company Shri Sanjeev Kumar Jhunjhunwala on 27/1/2014........". It is trite law that merely confronting the statement recorded at the back of the assessee, to the assessee, in the absence of pr....
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....a statement rendered as based on no evidence and, accordingly, liable to be annulled. 16. In 'Amarjit Singh Bakshi (HUF) vs. ACIT' (supra), it has been held that opportunity to cross-examine the person giving a statement of culpable nature has to be given; and that in the absence of such an opportunity being given to the affected person, the statement ceases to be material for the purposes of assessment. 17. In CIT vs. SMC Share Brokers Ltd. (supra), it was held that a statement given by a broker at the back of the assessee could not be used to the detriment of an assessee and dismissal of Revenue's appeal was held to be justified. 18. In the case of 'Andaman Timber Industries vs. Commissioner of Central Excise', 281 CTR 241(SC), it has been held that "the assessee was manufacturing ply-woods and related products in its factory. Some of those products were sold from factory premises only to certain buyers. However, major portion of products manufactured were sold to other dealers from their numerous depots situated at different places in country. Assessee filed its declaration u/s. 173C of Central Excise Rules showing price of goods at which they were sol....
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....ve any value, particularly in the face of the fact that they are not corroborated by any independent evidence. Page No. 163: This is un-dated, but name of the project 'Emerald Garden' launched by the appellant was mentioned there. With reference to this, Shri Anoop Aathana who had been examined by the Authorised Officers, stated categorically that he had been working as a broker for last 30 years and all the prominent Developers of Kanpur were his clients. In his subsequent statement which appears at page 31 to 36 of the synopsis dated 10.12.2018, and in response to question no.7, he stated that 'cash money' as mentioned there was subject to negotiation between the Customer and the Developer. He further stated in his reply that he was not concerned with the 'incoming' and 'out-going' 'len-den' payments. Page Nos. 164 and 165: These were dated 18.01.2014 and 13.01.2013, falling in the assessment years 2014-15 & 2013-14 respectively, i.e., the earlier two years. No such addition had been made m the A.Y. 2013-14 & A.Y. 2014-15, from which it follows that all such enquiries, as were called for, had duly been made by the Assessing Officer and....
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.... course of survey at the office premises of Shri Anoop Asthana, and in the end, he categorically stated that it would not be proper to draw adverse inference in relation to income from commodity trading. 16. Thus, one cannot but come to the inexorable conclusion that the order under appeal suffers from the vice of not taking into consideration the assessee's contention, which contention also does not stand rebutted, that it was not provided with any opportunity of cross-examining Shri Anoop Asthana. 17. In view of the above, we hold that: (i) the case of the assessee has been prejudiced for want of providing him opportunity of crossexamination of Shri Anoop Asthana, whose unilateral statement recorded ex-parte qua the assessee has been made the sole basis of the addition, thereby violating the principles of natural justice; and (ii) the other material, i.e., three pages of the diary found in the search do not establish any case for addition in the hands of the assessee in the year under consideration, as none of these documents relate to the year under consideration, one of them does not contain any date/year and the other two pertain to earlier ....
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.... to discard his statement." 6.1 Similarly, Hon'ble Allahabad High Court in the case of Nathuram Premchand 49 ITR 561 (All) has clearly laid down the procedure for making the presence of witnesses. The relevant findings of Hon'ble court are reproduced below: "The facts, as they emerge from the statement of the case, are as follows: The assessee is a Hindu undivided family and carries on sarrafa business, purchase and sale of gold and silver bullion, purchase and sale of silver ornaments in the name and style of Nathu Ram Premchand. For the accounting year ending November 11, 1947, the relevant assessment year being 1948-49, the assessee submitted a return showing an income of Rs. 4,824 in the sarrafa business, and Rs. 1,030 as income from truck business. In the books of accounts there was a credit entry of Rs. 10,000 in the name of one Banarasidas, the brother-in-law of Premchand, who is the son of Nathu Ram, the karta of the Hindu undivided family. The Income-tax Officer treated this sum of Rs. 10,000 as income from other sources on the alleged ground that neither Banarasidas had been produced before him nor had the assessee offered an explanation with ....
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....ith the examination and attendance of witnesses. Rule 1 of Order XVI provides that by making an application any party to a suit may summon in court a witness whose attendance is required either to give evidence or to produce documents. In the present case the assessee was given dasti summons for the production of Banarasidas but his case was that Banarasidas refused to accept the same. In a situation like this, the provisions of Order XVI, rule 10, are attracted, which read as follows : "10.(1) Where a person to whom a summons has been issued either to attend, to give evidence or to produce a document fails to attend or to produce the document in compliance with such summons, the court shall, if the certificate of the serving officer has not been verified by affidavit, and may, if it has been so verified, examine the serving officer on oath, or cause him to be so examined by another court, touching the service or non-service of the summons. (2) Where the court sees reason to believe that such evidence or production is material, and that such person has. without lawful excuse, failed to attend or to produce the document in compliance with such summons or has intent....
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....such statements taken behind the back of the assessees and not confronted to the assessees do not have any evidentiary value and therefore, if we ignore such statements, taken behind the back of the assessees and not confronted to the assessee and take into account all other evidences filed by the assessees which are in favour of the assessees and wherein the Assessing Officer has also not found any discrepancy, the additions sustained by learned CIT(A) are liable to be deleted. 8. Further we note that the statement of Abhiset Basu forming part of assessment order does not carry signature of the officer who had recorded his statement. Moreover, nowhere in the statement, he has mentioned the name of assessees as beneficiaries and neither any question has been asked to him regarding loans to these assessees. Therefore, such statement do not carry any evidentiary value. As regards the statement of Pradeep Dey, we find that in the questions put to him, he has not mentioned anything about Success Vyapar Ltd. or Niel Industries Ltd. and neither any question has been put to him regarding any loans by these companies to the assessee companies and therefore, his statement also cannot be ....
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.... Jalsagar Commerce Pvt. Ltd. was engaged in the activities of providing accommodation entries and the appellant happened to be one of such beneficiary of such concern. It is also admitted fact that Shri Anand Sharma had been running the affair of the said company. iv. The statement of Shri Anand Sharma in which name of M/s Jalsagar Commerce Pvt. Ltd. cannot be completely ignored solely on the legal grounds raised by the Appellant. 11.1 Against the order of learned CIT(A), the Tribunal allowed relief to the assessee by holding as under: 5.12 In view of above discussion, it is clear that the incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkata, during the assessment proceedings and all such material have been shared with the appellant at least during the remand report proceeding. In view of nation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for crossexamination of same accommodation entry providers. Any way in the re....
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....ission of providing loan by Shri Anand Sharma to the assessee through M/s.Royal Crystal Dealers Pvt. Ltd., then even if there is a possibility of bogus accommodation entry routed through another intermediary company M/s.Jalsagar Commerce Pvt. Ltd., it requires a definite link of the transactions from M/s.Royal Crystal Dealers Pvt. Ltd. to M/s.Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the chain of transactions and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank accounts statement of loan creditor, return of income, assessment orders framed under section 143(3), confirmation of the loan creditor, then a proper examination could have very well established the link, if any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan cred....
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....ion, these are nothing but narration of the statements of various persons taken during the investigation. It is well settled principle as well as the directions of the CBDT issued under the Circulars that during the course of investigation, the department should concentrate and focus on collecting documentary evidence disclosing undisclosed income instead of obtaining the statement and then support of their claim merely on the basis of the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assessee has produced the documentary evidence and particularly the financial statements of the loan creditors, their bank account statement, then in the absence of any discrepancy or fault in these financial statements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and n....
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....ngs conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable n....
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....entioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned in the price list itself could be the subject-matter of crossexamination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this court in CCE v. Andaman Timber Industries Ltd., order dated 17.3.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Depart....
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....d, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." Thus the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination in para 11 to 17 as under :- "11. We have therefore proceeded to hear and decide the matter unassisted by the revenue. In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather & Platt (India) Ltd.(supra) and submitted that merely because a person is not foun....
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....ng Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case. 16. In the instant case although the appellant assessee has called upon us to draw an inference that the burden shifted to the revenu....
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.... the assessee amounting to Rs. 1 Crores from M/s Mehul Gems Pvt Ltd during the impugned assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information rec....
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....case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are 84 ITA Nos. 997 to 1002 & 1119/JP/2018 and ITA Nos. 1057 to 1062 & 1210/JP/2018. M/s. Kota Dall Mill, Kota. gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be....
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.... assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585- 591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2- 1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 th....
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....of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed." Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of....
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....d and repayments thereof. The assessments of these companies, wherein the interest paid by the assessees, has been accepted to be their income, also proves that the transactions were genuine. Therefore, all the three ingredients of section 68 are fulfilled and therefore, also the additions confirmed by learned CIT(A) cannot be sustained. The Learned counsel for the assessee has relied on a number of case laws for the proposition that once the assessee fulfilled its part of onus, the addition u/s 68 cannot be made unless proved otherwise by the Assessing Officer. In the present cases, other than the statements recorded by another officer (which we have already held to be of no evidentiary value) there is no material before the Assessing Officer to disapprove the evidences filed by assessees. 15. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd. [2012] 19 taxmann.com 26 (Delhi) has held as under: "5. With this discourse on the legal position, we advert to the cases at hand. In these appeals, there is a common thread which runs through all these cases insofar as nature of transaction is concerned. As would be seen when we discuss th....
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.... this behalf. He issued detailed questionnaire on 09.11.2006 wherein he also gave specific reasons in respect of each of the applicant which was of the following nature: (i) In the bank account of the various share applicants, they had deposited cash for specific purpose for applying for share in addition to providing entry to the assessee, the same modus was adopted in the other cases as well. (ii) Many companies did not exist at the addresses furnished. The registered letters sent to them had been received back undelivered. (iii) There were reports of the Inspectors (Income Tax) that many parties were not genuine assessees and were not in existence. 8. The assessee had given reply to the said questionnaire in which it had summed the position as under: "1. All the share applicants are existing assessees. 2. These companies are registered with the Registrar of Companies. 3. The share applicants have filed their respective confirmations. 4. The companies are genuine existing share holder. 5. The investments have been made by them by account payee cheques. 6. AOs remarks that the share applicant....
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....ies have been rotated. In certain other cases both cash has been deposited and entries rotated. The claim of the assessee that he was unaware of this state of affairs is much too difficult to digest. In the light of this fact, other contentions of the assessee company in its representation dated 17.11.2006 become redundant. The claim of the assessee company of its inability to produce the shareholders physically is hollow because no such shareholder exists to be physically present for any deposition. 10. We have taken note of the aforesaid assessment order in detail as the entire argument of the learned Counsel for the Revenue was backed by and based upon the reasons given by the learned AO(s). In support thereof, Mr. N.P. Sahni, learned counsel for the Revenue, also furnished Brief Note on Accommodation Entries as prepared by the Directorate of Income Tax (Investigation), the gist whereof is noted above as recorded in the orders of the AO. In the light of the aforesaid, Mr. Sahni referred to the judgments on onus which have also been taken note of above by us. 11. Before we deal with the same, let us find out the raison d'eter behind the orders of the Tribuna....
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....to supra, it is directed that the Department is free to proceed to re-open the individual assessments of such alleged bogus shareholders. The direction is being given under Section 151(i) read with section 153(3) of the Income Tax Act." 12. What does follow from the aforesaid? It is not in doubt that the assessee had given the particulars of registration of the investing/applicant companies; confirmation from the share applicants; bank accounts details; shown payment through account payee cheques, etc. As stated by us in the beginning, with these documents, it can be said that the assessee has discharged its initial onus. With the registration of the companies, its identity stands established, the applicant companies were having bank accounts, it had made the payment through account payee cheques. 13. No doubt, what the AO observed may make him suspicious about such companies, either their existence, which may be only on papers and/or genuineness of the transactions. When he found that investing companies are not available at given addresses or that the issuance of the cheque representing share application money or preceded by the deposit of cash in the bank accou....
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....such returns were for namesake, this could yet another be contributing factor in the direction AO wanted to go. Likewise, when the bank statements were filed, the AO could find out the address given by those applicant companies in the bank, who opened the bank accounts and are the signatories, who introduced those bank accounts and the manner in which transactions were carried out and the bank accounts operated. This kind of inquiry would have given some more material to the AO to find out as to whether the assessee can be convicted with the transactions which were allegedly bogus and or companies were also bogus and were treated for namesake. We say so with more emphasis because of the reason that normally such kind of presumption against the assessee cannot be made as per the law laid down in various judgments noted above. Just because of the creditors/share applicants could not be found at the address given it would not give the Revenue a right to invoke Section 68 of the Act without any additional material to support such a move. We are reminding ourselves of the following remarks of a Division Bench of this Court in its decision dated 02.8.2010 in the case of Commissioner of I....
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....venue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. 18. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of Sections 68 and 69 of the Act. On the on hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every sha....
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....te by us above, the AO(s) could have embark upon further inquiry. If that is not done and the AO(s) did not care to discharge the onus which was laid down, for this "negligence" on the part of the AO(s), he cannot be provided with "fresh innings". (iii) The order of the AO(s) had merged in the order of the CIT(A) and in some of the cases before us and before the CIT(A), the assessees had succeeded. (iv) This Court is acting as appellate Court and has to act within the limitations provided under Section 26A of the Act. The appeals can be entertained only on substantial questions of law. In the process, this Court is to examine as to whether the order of the Tribunal is correct and any substantial question of law arises therefrom. The Tribunal has passed the impugned orders, sitting as appellate authority, on the basis of available record. When the matter is to be examined from this angle, there is no reason or scope to remit the case back to the AO(s) once it is found that on the basis of material on record, the order of the Tribunal is justified. Even the Tribunal acts purely as an appellate authority. In that capacity, the Tribunal has to see whether the assessme....
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..... Referenc Particulars. Amount (in Rs.) e PB Page No. Opening balance as Opening balance as 5,56,21,464 1,33,05,265 on 01.04.2014 Loan taken Interest Credited TDS debited on 01.04.2014 40,00,000 68,83,343 6,88,334 Loan taken NIL Part-I, Part II, Interest Credited 16,25,708 Page- Page- TDS debited NIL 199 344 loan repaid on 31.03.2015 6,00,00,000 loan repaid NIL Closing balance as Closing balance as 58,16,473 1,49,30,973 on 31.03.2015 A.Y. 2016-17 Particulars Opening balance as on 01.04.2015 Reference Amount (in Rs.) PB Page No. 58,16,473 on 01.04.2015 Loan taken NIL Part-I, Loan taken Interest Credited NIL Page- TDS debited NIL 214 loan repaid 58,16,473 Closing balance as NIL on 31.03.2016 Particulars Amount (in Rs.) Referenc e PB Page No. Opening balance as 1,49,30,973 10,00,000 Part-II, Interest Credited Amount Debited loan repaid 15,97,115 Page- 1,88,739 334 NIL Closing balance as 1,73,39,349 on 31.03.2016 Document 2 M/s. S....
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....nce as 64,80,713 79,15,160 on 01.04.2015 on 01.04.2015 Supplem Loan taken NIL Loan taken NIL entary Interest Credited PB Interest Credited 4,97,781 8,57,179 45 555 (952421) Conslidat TDS debited ed A.Y. TDS debited 49,778 NIL (95242) 2013-14 loan repaid 69,28,716 loan repaid NIL of Page- 232 Closing balance as NIL on 31.03.2016 Closing balance as on 31.03.2016 87,72,339 Document 4Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 5 M/s. Shri Mehndipur Balaji Enterprises Pvt. Ltd. A.Y. 2013-14 [ITA No.-IT(SS)A-114/LKW/2019] S.N. Particulars of Documents M/s. Success Vyapar Limited Confirmed copy of account 1. 2. Copy of acknowledgement of ITR....
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....017 in response to notice u/s 253, 355-366 133(6) issued by Ld. AO alongwith confirmed copies of accounts, bank statement, copy of acknowledgement of ITR & copy of audited balance sheet with annexure. A.Y. 2016-17 [ITA No.-IT(SS)A-117/LKW/2019] S.N. Particulars of Documents Page No. of respective Paper Book M/s. Success Vyapar Limited 1. Copy of assessment order u/s 143(3) of the I. T. Act, 1961 for A.Y. 2013-14, A.Y. 2012-13 & A.Y. 2014-15 2. Notice u/s 133(6) dated 04.12.2017 3. Reply dated 08.12.2017 filed on 26.12.2017 in response to notice u/s 133(6) issued by Ld. AO alongwith confirmed copies of accounts, bank statement, copy of acknowledgement of ITR & copy of audited balance sheet with annexure. M/s. Neil Industries Limited 79-105 142 & 250 214-248, 256, 311-329 4. Confirmed copy of account 55 5. Copy of assessment order u/s 143(3) of the I. T. Act, 1961 for A.Y. 2014-15 106-135 6. Notice u/s 133(6) dated 21.11.2017 331-332 7. Reply dated 08.12.2017 filed on 19.12.2017 in response to notice u/s 133(6) issued by Ld. AO alongwith confirmed copies of accounts, bank statement, copy of a....
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....Page No. of respective Paper Book M/s. Success Vyapar Limited 1. Confirmed copy of account 48 2. Copy of acknowledgement of ITR 49 3. Copy of relevant page of Bank Statements showing the entry of payment made to assessee 50 4. Copy of assessment order u/s 143(3) of the I. T. Act, 1961 for A.Y. 2013-14, A.Y. 2012-13 & A.Y. 2014-15 75-100 M/s. Neil Industries Limited 5. Confirmed copy of account 51 6. Copy of assessment order u/s 143(3) of the I. T. Act, 1961 for A.Y. 2014-15 101-130 7. 8. Notice u/s 133(6) dated 21.11.2017 Reply dated 08.12.2017 filed on 19.12.2017 in response to notice u/s 133(6) issued by Ld. AO alongwith confirmed copies of accounts, bank statement, copy of acknowledgement of ITR & copy of audited balance sheet with annexure. 230 233 A.Y. 2016-17 [ITA No. - IT(SS)A-108/LKW/2019] S.N. Particulars of Documents Page No. of respective Paper Book M/s. Success Vyapar Limited 1. Confirmed copy of account 45 2. Copy of acknowledgement of ITR 46 3. Copy of assessment order u/s 143(3) of the I. T. Act, 1961 for A.Y. 2013-14, A.Y. 2012....
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.... Private Ltd Jalsagar Commerce 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Private Ltd Jalsagar Commerce 12-13 Private Ltd 53,05,000 78,95,00,000 1,07,08,434 96,37,591 31,72,80,655 47,85,95,188 Jalsagar Commerce 13-14 47,85,95,188 2,76,31,50,000 Private Ltd 0 0 2,97,53,40,000 26,64,05,188 Jalsagar Commerce 14-15 26,64,05,188 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Private Ltd Jalsagar Commerce 15-16 0 1,34,89,00,000 49,00,600 44,10,540 1,34,93,90,060 0 Private Ltd Jalsagar Commerce 16-17 0 87,11,00,000 1,67,23,178 1,50,50,86 87,27,72,318 0 Private Ltd 0 Document 12 M/s. Shri Mehndipur Balaji Enterprises Private Limited A.Y. 2013-14 [ITA No. IT(SS)A-114/LKW/2019] Name investor of Amount company Source of funds with investor (in Rs.) companies as on 31.03.2013 given assessee to 10 Source of funds with investor Reference companies as on 31.03.2012 PB company Share capital Loans and reserves (in Rs.) (in Rs.) M/s. Neil 70,00,000 49,44,71,195 17,29,37,000 Industries Share capital Loa....