TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 567
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....t 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 search (even in pursuance of joint warrant of Authorisation), no incriminating material was found which could impinge upon the genuineness of the unsecured loan. 5. Because the Learned CIT(A) has erred in law and on facts in confirming the following additions:- S.No. Name of lenders Amount of interest Total addition 1. M/s Neil Industries Ltd. 2,96,160.00 2,96,160.00 without appreciating the supporting documentary evidences & explanation of the appellant placed on record and ignoring the information obtained u/s 133(6) of the Act from the loan creditor. 6. BECAUSE the learned CIT(A) failed to appreciate that the assessee had duly discharged the onus of proving, all the three vital ingredients of section 68 of the I.T. Act, namely identity of th....
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....s made the addition on account of interest paid by the assessee on unsecured loans from Neil Industries Pvt. Ltd. which were raised during earlier years on the basis that the loan creditor, to whom interest was paid, was held to be bogus being carrying on the activity of providing accommodation entries only. It was submitted that the Assessing Officer has arrived at this conclusion on the basis of statements of certain persons who had admitted that such companies were providing accommodation entries only. Learned counsel for the assessee submitted that during the assessment proceedings the assessee had filed all the relevant documents including confirmed copy of account of Neil Industries Pvt. Ltd., copy of bank statement of Neil Industries Pvt. Ltd., copy of ITR-V of Neil Industries Pvt. Ltd. Learned counsel for the assessee further submitted that even the Assessing Officer, by issuing notice u/s 133(6) of the Act to the above loan creditor, had obtained the information directly from such loan creditor and no discrepancy was found between the replies filed by the assessee and in those filed by the loan creditor directly. It was submitted that during the assessment proceedings when....
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....ditworthiness, genuineness and identity of the loan creditor and had also deducted tax at source from such interest payments. We further find that the Assessing Officer had issued notices u/s 133(6) of the Act and had also obtained information directly from this loan creditor and this loan creditor has filed the information and documents directly with the Assessing Officer and Assessing Officer did not find any discrepancy in the documents submitted by the assessee as well as in the documents submitted by the loan creditor directly. A copy of notice issued u/s 133(6) is placed in paper book page 18 and the reply of the unsecured loan creditor is placed in paper book pages 80 to 177. We further find that in the assessment order in the case of Neil Industries Pvt. Ltd., interest paid by the assessee has been accepted to be its income. A copy of assessment order passed u/s 143(3) in the case of Neil Industries (P) Ltd. for assessment year 2014-15 is placed in the paper book pages 45 to 73. 4.1 We find that the only reason for disallowing the interest is that the authorities below have held the loan creditor to be bogus and being engaged in the business of providing accommodation entr....
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....see. That from the above provisions of the Act and the evidences furnished your good self will appreciate that the unsecured loans are genuine and the provisions of section 68 are not attracted in the case of the applicant. The notice issued may therefore, kindly be vacated and no addition as purposed be made in the assessment. In case any further clarification is required, kindly let me know." As per the contents of the above reply filed by assessee, we observe that though the Assessing Officer did issue summons to the witnesses to provide the assessee opportunity to cross examine the witnesses but witnesses did not appear whereas the counsel of the assessee was present for cross examination. The Assessing Officer without making further efforts and without ensuring the presence of witnesses, proceeded to disallow the interest ignoring all documentary evidences filed by assessee as well as by loan creditor directly. When this issue was taken before learned CIT(A), he held that there was no need to provide opportunity to the assessee for cross examination. For the sake of completeness, the findings of learned CIT(A) in this respect are reproduced below: "6.8 On the issue of cro....
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.... group on 31/08/2015, the cases of the assessee were reopened and returns were filed u/s 153A of the Act. Admittedly, there was no incriminating material on the basis of which the Assessing Officer has made the additions. The Assessing Officer has made the additions on the basis of entries in the books of account of the assessee. In these cases, the interest paid by the assessee during these years, has been disallowed on the basis that the loan creditors, to whom interest was paid, were involved in providing accommodation entries only. The assessee had filed complete information regarding the creditworthiness, genuineness and identity of the loan creditor and had also deducted tax at source from such interest payments. We further find that the Assessing Officer had issued notices u/s 133(6) of the Act and had also obtained information directly from these loan creditors and these loan creditors have filed the information and documents directly with the Assessing Officer and Assessing Officer did not find any discrepancy in the documents submitted by the assessee as well as in the documents submitted by the loan creditors directly. A copy of notices issued u/s 133(6) to both parties ....
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....ly the assessee applicant had requested your good self to provide various details and information as well as the Cross examination of the related persons. In compliance to the opportunity provided by your Good Self for Cross Examination of the aforesaid persons the assessee applicant attended your Office with his Counsel on the appointed date to avail the Cross examination but surprisingly enough, no body turned up on the said date. From your show cause notice it is seen that heavy reliance is being placed on the statements of such persons , who had violated the summons / direction of your Good self by not coming to your office . The Penal provisions as provided under the Act are applicable and the department must have taken serious action against them. The reasons - as to why they have not come, may kindly be provided. Apart from this various details and information as required vide our earlier letters are also awaited for our further submissions." The Assessing Officer did not provide the assessee opportunity to cross examine the witnesses and proceeded to disallow the interest ignoring all documentary evidences. When this issue was taken before learned CIT(A), he held that the....
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....ils relating to the transactions. It appears that the retraction statement was made purely to avoid clutches of law which had caught up with him and laid bare his nefarious activities. " Further, jurisdictional Hon'ble Allahabad High Court in the case of Motilal Padampat Udyog Ltd. Vs. CTT 293 ITR 656 has laid down the correct preposition of law of cross examination and held as follows; "Right of cross-examination of persons from whom the Assessing Officer has collected the evidence is not required by law. The requirement of the statute for a valid assessment would be met if all the evidence collected which is to be used against the assesses while framing the assessment order is placed before the assessee and he is given opportunity to rebut the evidence." Further, in a recent judgment of Hon'ble High Court, Delhi published on 04.04.2019 in itatonline.com in the case of Udit Kalra vs. ITO, it was held that "the astronomical growth of the value of the company share naturally excited the suspicion of revenue. The assesses's argument that he was denied the right to the cross examine the individuals who's statement laid to the enquiry and ultimate disallowance of ....
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.... 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 lender companies were engaged in providing accommodation entries. The statements of Directors of these lender companies hav....
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....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 year-wise 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 find that in reply to various notices by the Assessing Officer, the assessee has been filing replies and was also filing v....
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.... 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 diary was found and impounded as Annexure A-14 Page No.163 to 165, which, as per the authorities below, contained the details related to Emerald....
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....eunder: 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 exparte 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 Emerald Garden project to the persons named in the sold diary. Therefore, the very contents of the diary are matter of great suspect and are totally unreliable/unauthentic. (g) No adverse inference can be drawn from certain payment rec....
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....ssing 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 A-4 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 clear that the appellant company is receiving 25% consideration in cash which is not reflecting in the regular books of account. 5.7 During the post survey proceedings the incriminating document mentioned here-in-above and the statement of Shri Anoop Asthana was specifically confronted to....
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.... 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, whose statement was used by the Assessing Officer against the assessee, though the said statement was recorded at the back of the assessee. He merely states that during survey proceedings the statement of Shri Anoop Asthana proprietor of AAP was recorded; that in answer to question No.22, in the statement recorded on 25/....
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....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 stated to be mentioned. As to why and for what purpose the author had made such noting is not known, nor brought on record. The appellant has, all through, denied any knowledge of the contents of the diary. It also could not be expected to be aware of the contents recorded in the diary found at the time of survey at the premises ....
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....sthana 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 cross-examination 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 providing a cross-examination of the maker of the statement, is in complete violation of the natural justice principle of audi alteram partem. The following judgments, inter alia, are eloquent in this regard:- 1. Kishinchand Chellaram vs. CIT, 125 ITR 713 (SC). 2. Saraswati Industrial Syndicate Ltd. vs. CIT, 237 ITR 1 (SC). 3. Stat....
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....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 plywoods 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 sold exfactory and delivery basis. Revenue found that there was lot of price difference between goods sold at ex-factory and delivery basis in comparison with goods which were sold to buyers from depots. Investigation was carried out and statements of two buyers were recorded, on basis of which Show Cause Notice was served upon Assessee. Adjudicating Authority passed order confirming demand in Show Cause Notice on ground that price at which goods were sold to customers from depots may not be basis for determining value for purpose of exc....
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....ated 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' 'lenden' 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 nothing contrary to the appellant was found, although assessments for the assessment years 2013-14 & 2014-15 were made under section 153C on the same date, as on which the assessment for A.Y. 2015-16 was made, i.e., on 9.12.2016. Strikingly, the material forming the basis of the addition presently under consideration is the very same as that on which the completed assessments under section 153C for those earlier years were reopened, but no addition was made. 15. As regards receipts bearing no.1030 dated 31.05.2013, no.1396 dated 05.04.2014 and ....
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....case of the assessee has been prejudiced for want of providing him opportunity of cross-examination of Shri Anoop Asthana, whose unilateral statement recorded exparte 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 years, in which, no addition based on these documents was made. 18. Therefore, the grievance sought to be raised by the assessee is justified. It is accepted as such. Accordingly, the addition made is deleted. Nothing further survives for adjudication, nor was anything else argued. 19. In the result, the appeal is allowed. 5.5 In the above noted case, decided by Lucknow Bench of the Tribunal, the Bench has taken into account all the relevant case laws and has decided the issue in favour of the assessee." 5. In the present case, all documentary evidences, for the claim made....