TaxTMI 
TaxTMI 
2023 (2) TMI 1202
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....e Ld. Commissioner of Income-tax (Appeals)-53, Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2013-14 to 2020-21 respectively. The facts and the issues raised in grounds of appeal being common in all these appeals and cross-objections, therefore, same were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. 2. The Ld. CIT(A) has adjudicated the appeal for assessment year 2013-14 and result of the same has been followed in other assessment years being common facts and circumstances. Accordingly, we also take up the appeal of the Revenue for AY 201314 and cross-objection of the assessee for AY 2013-14. The grounds raised by the Revenue in its appeal for AY 2013-14 are reproduced as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 48,04,750/- on account of bogus purchase ignoring the fact that the assessee failed to prove the genuineness of purchases, and any expenditure in respect of which payments by account payee cheques is not enough evidence to prove the genuineness of the transaction?" 2. Whether on the facts and c....
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....s repaid and therefore cannot be added u/s 68 of the act. 7. On the facts and circumstances of the case and in law, the CIT' (A) rightly deleted the addition made on the point of interest on unsecured loan, which is only consequential. 8. On the facts and circumstances of the case and in law, the CIT' (A) rightly allowed the credit for TDS. 3. Briefly stated, facts of the case are that for the year under consideration, the assessee company executed works contracts including civil contracts for Local Authorities like Bombay Municipal Corporation (BMC), and Municipal Corporation of Greater Mumbai (MCGM) etc. The assessee filed its original return of income declaring total income at Rs. 7,79,23,750/- u/s 139(1) of the Income-tax Act, 1961 (in short 'the Act'). Subsequently, a search and seizure action u/s 132 of the Act was carried out in the cases of the assessee Group on 06.11.2019. Consequent to the search, assessment proceedings u/s 153A of the Act were initiated by way of issue of notice(s) dated 02.01.2021 for AY 2013-14 to 2020-21. In response, the assessee filed return of income declaring total income of Rs. 7,79,23,750/- for AY 2013-14. The assess....
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....d be issued for a period of six assessment years preceding the assessment year corresponding to financial year in which search was conducted, and the assessment year under consideration being beyond said period of six assessment years, therefore, the assessment made u/s 153A of the Act is void-ab-initio. 5.1 The learned counsel supported the ground and submitted that the Assessing Officer was not justified in completing the assessment for the year under consideration under the provisions of the section 153A of the Act being beyond six assessment years provided under the section 153A of the Act. 5.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that under the provisions of the section 153A of the Act, prior to 1/04/2017 assessment could have been made only for the six assessment years but with effect from 01/04/2017, the Finance Act 2017 has amended the provisions to include further relevant assessment year or years, which could be extended up to 10 assessment years subject to ceiling of undisclosed income. The word 'relevant assessment year'(s) has been defined by way of proviso and Explanation-1 to ....
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.... 6.1 The Ld. Counsel of the assessee submitted that in view of powers conferred by subsection 1 of section 3 of Taxation and other laws (relaxation of certain provisions) ordinance, 2020, by way of notification issued, the time limit for passing the assessment order was extended up to 30/09/2021. He submitted that though the assessment order is dated 30/09/2021, however the assessee gathered from the Income-tax Departmental portal (website) that no order was passed or issued on 30/09/2021 till 12:13 AM in the night. The assessee claimed to have enclosed a screenshot of the portal to its submission filed before us, however no such screenshot has been found. 6.2 The learned Departmental Representative (DR) submitted that the case of the assessee was centralized with Central Circle, which are not on the faceless mode and orders have been passed by the Assessing Officer in physical mode. Thereafter, the assessment order might have been uploaded on the Income-tax department portal after some gap of time and it might have been possible that same could not have reflected on the Income-tax portal immediately after midnight of 30/09/2021. He submitted that the allegation that assessment ....
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.... statement and bank statement etc. The Authorised officer of search team, from examination of the documentary evidences shown by the assessee, noted certain lapses in claim of purchases expenses. The search team identified and short listed 13 parties, which were having deficiencies viz. (i) the purchase bills were prepared using same style format / font, (ii) bills were not containting type and vehicle of the lorry use for transportation, delivery address, signature of employee or delivery (iii) invoices issued were not containing mandatory PAN (iv) no e-way bill, delivery challan, stock register etc. For the period of assessment year 2013-14 to 2020-21, the 13 parties were identified namely: V.H Enterprises, Vimalnath Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, Hitesh K. Shah (HUF), Maharashtra Pile Foundation, Jay Khodiyar Enterprises, Vimalnath Associates and Diyan Corporation. A chart of purchases from above parties recorded in books of account is reproduced as under: Name of Sellers FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY....
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....nged between the key persons of the assessee and sh Kantilal D jain. The individuals whose statement were recorded stated that they had issued bogus bills to the assessee company without actual delivery of goods or material. The Assessing Officer has reproduced statement of the relevant persons of supplier companies from page 7 to 20 of the assessment order. In the assessment order, the Assessing Officer has noted that three parties were not found at the places of their business mentioned in bills. The inspectors of the income-tax department, who were deputed for verifying their place of business submitted that business premises of M/s Rushabh Corporation, Rushabh Trading Company and M/s Hitesh K shah were found closed and persons in neighborhood denied of any business activity carried out from those places. In case of 'Kohudiyar Enterprises' also the Inspector reported that no entity or business was found to be running from the address of that party and nearby people denied of having any knowledge of said entity. The office of 'M/s Maharashtra pile foundation' was found to be closed for a very longtime. 7.3 The statements of persons recorded during survey proceedings and eviden....
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....h Court in the following cases, need special mention considering the facts of the case. i) M/s. NK Protein Limited (reported at 84 taxmann.com 195 & 292 CTR 354 (SC) ii) Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014) (Bombay High Court.) iii) CIT V/S N K Industries (in Tax Appeal No. 240 of 2009 vide order dated 26.2.2016 (Gujarat High Court) subsequent decision in the case of CIT V/S Simit P. Seth 356 ITR 451 (Guj. H.C). Thus, undisputed fact is that the purchases claimed to have been made from these parties remained unverified. 7.10 After carefully going through the legal instances available on this issue the onus lay upon the assessee to prove the genuineness of the transaction when it claimed that the purchases are genuine. From the above case laws and the discussion on investigation, it is crystal clear that - (1) The primary onus is on the assessee to establish the genuineness of the purchases claimed by it; ii) Since the primary facts are in the knowledge of the assessee it is his duty to provide the correct address or contact modes of the alleged suppliers; iii) If the investig....
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....nt through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. Copy of the statement enclosed. The Ld. CIT(A) may decide the case on merits based on the above facts. 2 Rushabh Corporation (Proprietor Reema Hitesh Shah 1. Party appeared before this office hand statement was recorded 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was foun....
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....cts. 7. Jay Khodiyar Enterprises 1. Party appeared before this office and statement was recorded. 2. The assessee has not stock book and purchase order and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock is not stored at any place by the assessee and hence not maintained any stock book. 5. Party provided its contact number & address in statement, the copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 8. Vimalnath Associates 1. Party has not attended the office. 2. The assessee has not submitted stock book. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 9. Diyan Corporation 1. Party has....
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....V.H. Enterprises and Mahavir Enterprises, though they did not attend before the Assessing Officer however they had submitted all the details. In respect of Maharashtra Pile Foundation, Vimalnath Associates Diyan Corporation Navkar Corporation, the ld CIT(A) noted that the parties submitted name and address which were verified by the Inspector of the Department. Regarding one party namely Bharti Enterprises, no comments are available in remand report. 7.8 Before the Ld. CIT(A), the assessee submitted that during the period the assessee executed project work on behalf of the Government Agencies including MCGM. The project was duly monitored and checked by MCGM and only after satisfaction the MCGM payment was made to the assessee. The assessee further submitted that without purchase material and payment to the labour contractor, the project could not have been completed. 7.9 It was further submitted that all necessary records regarding purchases were maintained and purchases were duly recorded in books of account and payment for the purchase material was made by account payee cheque. 7.10 The assessee further submitted that during the course of search no incriminating materia....
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....d and which were duly confronted to the assessee. In view of those information gathered, the books of accounts of the assessee were having false claim of purchase expenditure and therefore seizure of regular books of accounts indicating falsity of the transaction made, constitute incriminating material found. The Ld. CIT(A) also upheld existence of incriminating material in view of information gathered regarding purchase during the course of search proceedings. The contention of the assessee, however is that no incriminating material was found from the premises of the assessee vis-à-vis the purchases from those 13 parties. 8.2 We have heard rival submission of the parties on the issue-in dispute and perused the relevant material on record. In the case of Continental warehousing corporation (supra), the Hon'ble Bombay High Court held that if the assessments of any assessment year are pending as on the date of search, same will get abated due to search action and the assessing officer can make any addition in those assessment year(s) based on the facts and circumstances of the case, not necessarily only based on incriminating material. But, assessment years in relation to w....
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....in law in deleting the addition of Rs. 74 lacs paid by the Assessee in cash for the purchase of property bearing No.C-104, Naraina Vihar, Delhi? 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the provisions of Section 158 BB of the Income Tax Act, 1961 were not applicable to the facts of the case? 3. Whether the Income Tax Appellate Tribunal was correct in law in holding that the genuineness of the investment made for the purchase of property bearing No.C-104, Naraina Vihar, Delhi was to be considered in the hands of the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?" 8.4 The Hon'ble high court though answered the questions of law in favour of revenue but gave observation on the issue whether statement on stand alone basis can be an incriminating material. The relevant observations are reproduced as under: 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act....
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.... document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. 8.5 Similarly, in the decision dated 12/02/2021 in case of PCIT(Central) Vs Anand Kunar Jain (HUF) in ITA 23/2021, following question of law have been raised before Hon'ble Delhi High Court: 7. The Revenue is aggrieved with the aforesaid impugned order and has filed the present appeal under Section 260A of the Act, proposing the following questions of law: a. Whether the ITAT is justified in deleting the additions made on account of bogus long term capital gain on the ground that the evidences found during search at the premises of entry provider cann....
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....evidence in support of transport/delivery of material etc. from the assessee during the course of search proceeding,(c) none found at the premises of the supplier parties by the Inspector during verification etc. evidences, when seen in totality constitute material which is incriminating in nature. The entries in books of account regarding purchase are false, which also becomes an incriminating material for the purpose of invoking provisions of section 153A of the Act. 8.8 Therefore, we uphold the finding of the Ld. CIT(A) that qua the addition of bogus purchase their existed incriminating material. The cross-objection No. 3 of the assessee with respect to qua the bogus purchases is accordingly disallowed. 9.0 On the merit of addition for bogus purchase, the Ld. CIT(A) after considering submission of the assessee held that 4 parties which were duly produced before the Assessing Officer, no addition could have been sustained. The relevant finding of the Ld. CIT(A) is reproduced as under: "7.3.6 In the case of Rushabh Trading Co., Rushabh Corporation and Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the assessment proceedings, the appellant as well as the....
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....rnment agency on execution of project work assigned to it. The sale proceeds have been realised by the appellant firm from the government agencies. The AO has not doubted and disturbed the sales shown by the appellant as bogus or inflated. It is a settled principle of law that the AO cannot disallow 100% of purchases when the sales are not disturbed by the AO. Even the statements of Vinod Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V. Shah (Proprietor of V.H. Enterprises), Kantilal D. Jain (Proprietor of M/s. Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya Corporation) are taken into consideration, wherein they have admitted of having provided bogus accommodation entries, there is no evidence that the cash was received back by these parties from the appellant. Thus, the 100% disallowance of purchases made by the AO in respect of these 13 parties cannot be sustained and only profit element embedded in such purchase transaction only has to be disallowed. In this regard, the decisions in the following case are relevant In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 2013 355 ITR 290 (Gujarat), t....
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....d standing counsel and we find that facts of the present case are clearly distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited decisions. 20. In Bholanath Polyfeb (P.) Ltd. (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax. 21. We are in respectful agreement with the view expressed by the Gujarat High Court. 22. Thus, we do not find a....
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....ed by the Ld. CIT(A), we find that the Assessing Officer in the assessment proceedings made addition mainly for the reason that those parties were not produced before him during assessment proceedings and parties failed to provide proof of delivery of goods. The finding of ld CIT(A) are not acceptable due various reasons. Firstly, we find that during the remand proceedings out of those 13 parties, 4 parties were produced, but no proof of delivery of goods to the assessee has been produced by those parties. Secondly, out of those four parties, three parties were controlled by the same person i.e. sh Hitesh Kantilal Shah , who had provided annual payment of Rs. 40,000/- to the other suppliers like Vimalanath Corpoation, VH Enterprises for making available bank accounts of their firms for providing accommodation entry. Relevant part of statement of sh Vinod H shah reproduced by the Assessing Officer is extracted as under: "Q. 10. Please explain in how many entities you are proprietor, partner or Director. Ans. Sir, as stated above, I am basically not working. However, my distant relative, Hitesh Shah (Contact No. 9930195780) is managing and operating a HUF concern ie....
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.... in M/s Vimalnath Corporation? Ans. As stated above I have received an amount of Rs. 40,000 annually as commission for acting as a signatory in M/s Vimalnath Corporation. Q. 14 Please produce the books of accounts, Cheque books, bills and Vouchers etc of M/s Vimalnath Corporation. Ans. All the books of account, cheque book, bank book etc. are in the possession of Shri Hitesh Shah. No documents of M/s Vimalnath Corporation are lying with me. Q. 15 Pl explain who operates the Bank account of M/s Vimalnath Corporation Ans. The bank account is handled by Shri Hitesh Shah and I use to only sign the cheques, whenever he would send it across through his person. Q. 16 Pl.explain since when have you been acting as a signatory in M/s Vimalnath Corporation? Ans Sir, I have been acting as a signatory of M/s Vimalnath Corporation from F.Y. 2015-16." 9.5 Thirdly, The important issue is that whether the assessee has established consumption of those corresponding purchase with its stock or consumption register. It is the assessee who was required to establish the factum of consumption of the material with its documentary evidences b....
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....axmann.com 514 estimated 3 % of profit on bogus purchases. In the case of Kiran Navin Doshi Vs Income-tax officer (ITA No. 2601/Mum/2017) the Tribunal estimated profit at the rate of 12.5 % of the bogus purchases. (b) When the sales are doubtful or those sales are also accommodation entry bills, in such circumstances, the only addition which could be made in the hands of an assessee is commission income for issuing accommodation entry bills. 9.7.2 Secondly, situation where no stock inventory is maintained by the trader and the bogus purchases can't be linked with corresponding sale, then, it is obvious that the bogus purchase has been booked for reducing the profit and in such circumstances, the entire amount of bogus purchase is liable to be disallowed. 9.7.3 Similar, is the situation in case of Contractor or manufactures who consume the bogus purchases in their business. If the contractor is able to establish consumption of those bogus purchased goods in his business by way of evidence, it is presumed that assessee has procured goods from grey market and therefore difference of profit on such purchase from grey market can only be added. But where, an assessee is un....
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....o quantitative details or consumption of material purchased, and finally the sales or revenue were not exclusively with reference to goods purchases/consumed but inclusive of work contract services. However, the Hon'ble Lordship had occasioned to considered similar facts and circumstance in the case of "PCIT Vs Pinaki D Pinani" (Bombay ITA/1543 of 2017), wherein the assessee being civil contractor, with evidential stock records and sales, was able to demonstrate the quantity of material consumed in execution of work contract undertaken and thereby established the nexus. 8. In the light of aforesaid discussion, we are of the considered view that, the ratio laid down by the Hon'ble Supreme Court in the case of "NK Proteins Ltd vs DCIT" (Supra) is squarely applicable to the facts of assessee case, where the Hon'ble Supreme Court dismissed appeal of assessee and confirmed the findings of Hon'ble Gujarat High Court in respect of bogus or sham purchases, wherein the Hon'ble Lordships, after analyzing necessary facts, by para 6 of the order have held that; "6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct ....
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....f unsecured loans. The ground No. 3 relates to disallowance of interest expenses of Rs. 1,42,15,496/- in respect of those unsecured loan parties which have been held as unexplained by the Assessing Officer. 10.1 During the course of search proceedings total unsecured loans of Rs. 1,26,67,16,092/- were found recorded in the case of the assessee for assessment year 2013-14 to assessment year 20192020. During the course of search and survey proceedings on the premises of the assessee company, the key persons of the assessee company were asked to furnish details regarding said loans such as complete address of the loan giver, PAN, bank statements and other documentary evidences along with confirmations letter, ledger account, details of repayment of loan, details of TDS etc. During the course of examination of documentary evidence certain lapses--were identified by authorised officer and it was noted that in case of following 29 parties, the assessee produced only ledger copies and payment proof and no other evidence like PAN, address, confirmation letter, bank statement and TDS etc. were produced: No. Entity PAN FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY....
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....00 3,36,850 15,65,850 22 Samkit Gems Pvt. Ltd. AAQCS8731D 23 Snowdrop Vincom Pvt. Ltd. AAMCS8992E 2,00,00,000 21,96,000 24 Surya Diamond Pvt. Ltd. AANCS7279E 11,40,750 2,27,460 25 Takshila Exim Pvt. Ltd. AADCT9006B 76,50,000 10,00,720 26 Badam Trading Pvt. Ltd. AAFCB0891H 10,90,890 3,01,050 27 Lalita Gems Pvt. Ltd. AABCL7179H 3,29,500 2,27,700 28 Moxa Diamond Pvt. Ltd. AACCM1959H 1,69,200 15,02,000 51,64,250 1,30,88,000 29 Shikha Diamond Pvt. Ltd. AAJCS5918B 17,48,818 25,00,000 51,64,250 51,64,250 1,80,88,000 Total 1,44,38,191 10,50,69,000 9,17,46,572 9,03,45,979 1,16,53,010 6,62,810 10.2 Based on the information, profile of those unsecured loan creditors was prepared (using database of income-tax department) about their turnover &....
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....at loans were received through banking channels and ledger accounts, income-tax returns and repayment of the loan to said parties had already been submitted before the Assessing Officer. The Assessing Officer however was not satisfied by the reply given by the assessee. According to him the key persons of the assessee company had admitted in statement on oath that they have taken bogus accommodation entries unsecured loans. The Assessing Officer was of the opinion that cash generated while bogus purchases was handed over to unsecured loan creditors. The Assessing Officer was of the view that the assessee failed to produce material evidences in support of genuineness of the loan transaction and accordingly, the assessee failed to discharge its onus u/s 68 of the Act to establish identity, genuineness of the transaction and creditworthiness of the parties. The Ld. Assessing Officer relying on the decision in the case of Roshan Di Hatti v. CIT [1977] 107 ITR 937 (SC) and Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) etc. held all the 29 parties as unexplained cash credit making addition of Rs. 31,47,15,562/- for AY 2013-14 to AY 2018-19. The Assessing Officer also made addition....
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....e modus operandi admitted by the parties concerned. The controlling persons of unsecured loan parties have categorically admitted that they are involved in providing only bogas and accommodation entries for commission. The statements were given under oath in the Income Tax Act. The evidences gathered clearly proved that these parties have only provided accommodation entries for consideration /commission to the willing parties. These parties receive cash from the clients than through layering transfer the funds in the form loans. The assessee mainly generate cash through bogus expenses and this cash hand over to the entry operators. In present case also, assessee has generated cash through bogus purchase and taken unsecured loan entry by handing over cash to the entry operators. Hence the assessee's arguments on this lack any merit and deserve to be rejected. 8.7 Further, the entry providers in their statements have categorically stated that, the cheques and bills/documents were issued. There are no book entries to the real transactions either in the books of the assessee or in the books of these entry providers. Therefore, the statements on oath, solemn affirmation and....
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....red loans to various parties. The list of 29 parties include name of two parties i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, the appellant has not received any unsecured loan during F.Y. 201213 to F.Y. 2017-18 from Karnawat Impex Pvt. Ltd and Kriya Impex. Therefore, reliance of AO on the statement of Shri Rajendra Jain for making addition u/s.68 inrespect of unsecured loan from Karnawat Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the case of the appellant. The AO has also referred to Five companies managed & controlled by Shri Dipak Jain which had provided accommodation entries. AO has not mentioned names of Five companies controlled by Dipak Jain, however, it is gathered that only two companies i.e Sanmati Gems Pvt. Ltd. and Surya Diamond Pvt. Ltd. are mentioned in list of 29 parties. In the case of Sanmati Gems Pvt. Ltd, the AO has also accepted that no unsecured loan was received from it by the appellant company." 10.5.1 Further in para 8.3.6, the Ld. CIT(A) has mentioned that the parties 'Karnawat Impex Pvt. Ltd' and 'Kriya Impex' addition in respect of which made relying on the statement of Shri Rajendra Jain and since there....
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.... having fumished all this, did all that it could do and these materials showed prima facie not only the identity of the creditor but also the genuineness of the transaction and also the capacity of the creditor and, as such, the assessee completely discharged its initial onus under section 68. The revenue did not summon the creditor under section 131. It took no steps to verify the statement of the assessee. Thus, after the assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, the onus immediately shifted on the department which was not discharged by the department. Therefore, the impugned addition of the deposit to the assessee's income and the consequential disallowance of interest could not be sustained. The assessee is not supposed to know the capacity of the moneylender or the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that section 131 has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the powers o....
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....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 conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for. The head-note of the judgment of the Hon'ble High Court of Gujaratin the case of Deputy Commissioner of Income-taxv.Rohini Builders [2003] 127 Taxman 523 (Gujarat). Section 68 of the Income-tax Act, 1961 - Cash Credits - Assessing Officer made addition of Rs. 12,85,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties - Assessee had discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers/permanent account numbers and copies of assessment orders wherever read....
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....s of transactions and creditworthiness of the parties. In this factual and legal background, if you examine, the present case in the light of various evidences filed by the assessee, in order to prove credit found in the form of share capital and share premium, one has to see. whether the assessee has discharged its initial onus cast upon under section 68 or not. In this case, the assessee has filed various details. including share application form, copy of declaration, board resolution, bank statement of investor company, PAN card, acknowledgment of return of income, financial statement of investor company, form no. 2 for allotment of equity shares and bank statement reflecting, the amount received through banking channels. Once, the assessee has discharged its initial onus by filing various details, then the onus shift to the Assessing Officer to carry out further verification, in the light of evidences filed by the assessee to ascertain true nature of transactions between the parties before, he come to the conclusion that the transactions between the parties are genuine or not. In this case although, the Assessing Officer has issued section 133(6) notices to the parties, no furt....
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....e additions, it is the obligation of the Assessing Officer to provide copies of such statements/information and also to provide an opportunity of cross examination of the person, who gave the statement, when such opportunity has been availed by the person against whom, such statements are used. When, third party information is relied upon to draw an adverse inference against the assessee, the same needs to be provided and also opportunity of cross examination shall be given, if such opportunity is availed by the assessee. (Para 15]" (emphasis supplied externally) 10.4 The Ld. CIT(A) further relied on other decisions to substantiate that the assessee discharged its onus by bringing all documentary evidences on record, hence addition is not justified. In the concluding para the Ld. CIT(A) deleted the addition observing as under: "8.3.14 In view of the above facts and discussion made as above and also respectively following decisions of jurisdictional ITAT, Mumbai in the case of ACIT Vs. Dhanpal B. Shah, ITO Vs Bala Suresh Agarwal and ACIT Vs. Abani Sarbeshwar Das, the addition us. 68 in respect of unsecured loans taken from 18 parties i.e Aadishwar Diamonds, Ansh....
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....during the course of search proceedings relevant to the and unsecured loans. The appellant has also provided a copy of statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement was recorded us 132(4) on 08.11.2019 during the search proceedings. Even in their statement recorded us. 132(4), there is no mention about any incriminating evidences/material found or seized related to unsecured loans. Thus, it can be safely inferred that during the course of search proceedings, no incriminating material/evidences in relation to the unsecured loans were found/seized. It is a well settled law that in the unabated assessment order, no addition u/s 153A can be made unless there is some incriminating material with respect to the The Hon'ble ITAT, Special Bench, Mumbai has in the case of All Cargo Global Logistics Ltd. v. DCIT 137 ITD 287 (Mum) (SB) held that in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property discovered in the course of search. It has thus been held that in c....
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....ndependently by way of producing them and then confirming their creditworthiness. The Ld CIT(A) wrongly admitted the plea of the assessee that it had been a longtime since the loans taken and same were returned subsequently, but the Ld CIT(A) has conveniently ignored that the assessee had shown to have paid interest to them regularly, and thus can't say that those parties could not be produced before the Assessing Officer. 10.7 We have heard rival submission of the parties on the issue in dispute. As far as the addition of unsecured loan creditors is concerned, it has been assailed on legality of addition as well as on merit. Firstly, we examine whether the addition could have been possible to make addition legally. Secondly, we have to examine the addition on merit. 10.8 We have already held that AY 2020-21 and AY 2019-20, which were pending as on the date of search, got abated as on the date of search. It has been held by the Hon'ble Bombay High Court (jurisdictional High Court) in the case of Continental corporation (supra) that in assessments other than abated assessments, no addition could be made without the aid of incriminating material. Thus, except AY 2020-21 and 201....
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....eding also no such facts was brought to the knowledge of the Assessing Officer that no credit transaction was with those 9 parties during the period from AY 2013-14 to AY 2020-21. The CIT(A) accepted the contention of the assessee without providing opportunity to the assessing Officer on the evidences which were produced for the first time before him, which is evident from the following finding of the ld. CIT(A) : "From the above table, it is noticed that in case of Piyush Gems Pvt. Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the appellant and it is also evident from the details provided in the assessment order. From the above table, it is observed that in the case of Aditi Gems Pvt. Ltd, Badam Trading Pvt. Ltd, Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt, Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex, Lalita Gems Pvt. Ltd, Snowdrop Vincom Pvt. Ltd, Surya Diamond Pvt. Ltd, no unsecured loans were received during F.Y. 2012-13 to F.Y. 2017-18 by the appellant. However, the AO has made addition in respect of these parties as bogus unsecured loans u/s.68 of the Act. The addition made by AO in respect of those 09 parties are summarized as u....
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....od from AY 2013-14 to AY 2020-21 and bank statements of the assessee and respective parties to substantiate that no such loan transaction were recorded on the books of account of the assessee. The addition u/s 68 for interest amount in respect those 11 parties is also restored for deciding afresh after due verification of loan transaction during the period from AY 2013-14 to AY 2020-21. 10.13 Now, we take up the addition in respect of 18 unsecured loan creditors, which has been deleted by the Ld CIT(A). The Ld CIT(A) has relied,firstly, that no cross examination of sh Rajendra Jain and Deepak Jain, whose statement were relied upon by the Assessing Officer , was not provided. The relevant finding of the Ld CIT(A) is reproduced as under: "8.3.8 During the appellate proceedings, the appellant has submitted the copies of notices u/s 142(1) and showcause notice dated 15.09.2021 issued by the AO. From the perusal of notices u/s 142(1), it is seen that the AO had raised query about the unsecured loans. In response to that, the appellant had provided necessary details with respect to unsecured loans on 21.07 2021 and subsequently on perusal of showcause notice dated 15.09.2021,....
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....ddition in respect of unsecured loans In this regard, the following case laws are relevant In the case of Dhakeswari Cotton Mills Ltd v CIT [1954] 26 ITR 775(SC), theHon'ble Supreme Court of India has held as under: "....As regards the second contention although ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on matenal which may not be accepted as evidence in a court of law but there the agreement ends, because it is equally clear that in making the assessment under section 23(3) he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all and there must be something more than bare suspicion to support the assessment under section 23(3) The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v CIT [1944] 12 393. In the instant case the Tribunal violated certain fundamental rules of justice in reaching its conclusions Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the ass....
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....dated 14-2-1955 and 9-3-1959 ENT ITR 713, did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs 1,07,350 was remitted by the assessee from its Madras Office, and if these two letters were eliminated from consideration, there was no material evidence at all before the Tribunal which could support its finding What the manager of the bank wrote in his letters could not possibly be based on his personal knowledge but was based on here say The revenue authorities ought to have called upon the manager to produce the documents and papers on the basis of which he made the statement and confronted the assessee with those documents and papers. No explanation has been furnished by the revenue as to what happened when the manager appeared in obedience to the summons and what statement he made. It was not possible to hold in the face of the application for remittance signed in the name of T, that amount was remitted by the assessee and the finding to that effect reached by the Tribunal must be held to be unreasonable and perverse. Even assuming that these letters were to....
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....nciples of natural justice had been violated and therefore, addition was rightly deleted by Tribunal In this case the Hon'ble High Court of has held as under: There was no dispute that all the information asked for in the office letter dated 5-3-2003 was supplied by the assessee. That letter did not advert to any statement of Mor H or P Clearty there was no way that the assessee could have known about any statements recorded of those persons. The version given by the assessee, therefore, was correct or at least a plausible one [Para 10] The Tribunal had on those facts rightly come to the conclusion that since the revenue had relied upon the statement of M it should have been made available to the assessee with an opportunity of cross-examining him. That was not done by the Assessing Officer It clearly showed that the principles of natural Justice had been violated [Para 11] There was no infirmity in the view taken by the Tribunal on the facts of the case. It was quite clear that matenal collected by the revenue behind the back of the assessee was used against him without disclosing that material to him or giving any opportunity to him to cros....
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....ee. The Assessing Officer did not bring on record any other evidence to support such inference Each of these farmers appeared before the Assessing Officer to confirm that he sold his crops. Thus, there is no reason with the Assessing Officer to ignore their statements. Affidavits were enough and sufficient piece of evidence so as to accept the case of the assessee Reasons in detail have been given by the Commissioner of Income-tax (Appeals) in 45 pages The order of the Commissioner of Income-tax (Appeals) has been affirmed by the Income-tax Appellate Tribunal in paragraph No. 13 the Income-tax Appellate Tribunal has observed thus: "After hearing the rival contentions and on a perusal of the materials available on record, we noted that the Assessing Officer has examined the books of account during the course of the assessment proceedings but he did not find any mistake in the books of account Even the Assessing Officer failed to prove any transaction as non-genuine The Inspector made enquires behind the back of the assessee firm and without affording any opportunity the Inspector furnished his report to the Assessing Officer When the Assessing Officer confronted the assesse....
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....law This has also now become a finding of fact which cannot be challenged in this appeal, as the appeal is required to be heard only on substantial question of law. In the case of the appellant, the AO has made addition on the basis of statements of Shri Rajendra Jain & Shri Dipak Jain, both entry providers. However, the appellant was not made aware of these statement being used against it. The appellant was also not provided with the information gathered by investigation wing, which has been also relied upon by the AO. Thus, there has been clear violence of principle of natural justice by the AO while making addition of unsecured loans. 10.14 In our opinion , the addition of unsecured loan creditor , where the Assessing Officer relied on statement of Sh Rajendra Jain and Deepak Jain have already been deleted by the Ld CIT(A) holding that no credit entries are appearing in respect of those unsecured loan creditor during the period from AY 2013-14 to 2020-21 and so to reference of no cross examination for the purpose of deleting the unsecure loans , particularly, where the Assessing officer has not relied on statements of Rajendra jain and Deepak Jain, is unjustified. Fu....
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....ress of the alleged creditors and Revenue issued summon u/s 131 of the Act but the alleged creditors did not attend, thus ITO made the addition. The Hon'ble Supreme Court held that revenue apart form issue notice u/s 131 did not pursue the matter and did not examine the creditworthiness of the crditors and thus Hon'ble Supreme Court approved the action of the Tribunal that the assessee discharged its onus. In the case of DCIT Vs Rohini Builders (supra ) cited by the Ld CIT(A) the Hon'ble Court held that merely because the summon issued to the creditors could not be served and the interest paid to them was not disallowed , the creditors can't be held as unexplained. Further, the Ld CIT(A( relied on the decision of the Tribunal in the case of DCIT vs Acro Exports Trade P ltd (supra ) where in it is held that non-attendance of parties in response to section 133(6) of the Act cannot be attributed to the assessee. The Ld CIT(A) has cited number of decisions but the facts of those cases are distinguishable. In the case of the assessee, during the course of search itself the Department attempted to verify but those parties were not found at the address provided by the assessee. The Assess....
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....base and observed that they lacked the financial resources. The creditors shown to have given loan despite having outstanding credits in their balance sheets, which raises concern of genuineness of transaction also. In the case, the Assessing officer has also made addition for the interest payment to those unsecured loan parties. 10.18 The Hon'ble supreme court in the case of NRA Iron and steel ltd in Civil Appeal No of 2019 ( arising out of SLP (Civil ) No. 29855 of 2018 ) held as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and inves....
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....e was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the invest....
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....t correct. Hence the ground No. 4 of the cross objection is dismissed. 12. In ground No. 5 to 7 of the cross objections, the assessee has merely supported the action of the Ld CIT(A) in making the deleting the part addition of purchases and addition of unsecured loan creditors, which we already reversed. Thus, the ground No. 5 to 7 of cross objection raised are infructuous and accordingly dismissed. 13. In ground No. 8, also the assessee has supported the direction of ld CIT(A) to the Assessing officer for allowing credit of TDS after verification. This ground being only in support of finding of ld CIT(A), which has not been disputed by the Revenue, hence dismissed as infructuous. 14. In AY 2014-15, the assessee has raised grounds in cross objections, which are identical to grounds raised in cross objection for AY 2013-14, therefore following our finding in AY 2013-14, the grounds of cross objections are adjudicated mutasis mutandis. The revenue has raised ground challenging deletion of addition of bogus purchases, deletion of addition of subcontract expenses, deletion of addition unsecured loan creditors. The grounds related to bogus purchases and unsecured loan creditors....
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....bmitted by the assessee were claimed to be additional evidences, hence, same were sent to the Assessing Officer for his comments. Before, the Assessing Officer in remand proceedings, the sub-contractor parties were produced by the assessee. The summary of the remand report of the Assessing Officer is reproduced as under: Sr. No. Name of the party Remarks 1. Ashok Construction 1. Party appeared before this office statement was recorded on Oath 2. The assessee has not submitted stock book and stated that material has been utilized OM directly from the supplier on place of construction. As the stock is not stored at any place by the assessee and hence, not maintained any stock book. 3. Party has provided its contact number and address in statement. 4. Copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 2. Rajni Developers 1. Party appeared before this office and statement was recorded on Oath 2. The assessee has not submitted stock bookand stated that material has been utilized directly from the supplier on place of construction. As the stock is not stored at any place by the assessee and hence....