TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1631
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....iscussed the issues raised in remand report in his order. 2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A) has erred in accepting additional evidence u/s 46A even through conditions mentioned in clauses (a)-(d) of 46ACD were not satisfieds. 3. Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A) has erred in accepting retraction made by the assessee made after more than a year as genuine even though there was strong evidence on record about accommodation entries provided by companies controlled by Sharad Darak, a known entry provider; and whether CIT (A) has erred in accepting the retraction of assessee as genuine ignoring the decision of Hon'ble SC in the case of Bannalal Jat constructions Pvt Ltd Vs ACIT [2019] 106 Taxmann.com 128(SC). 4. Whether on the facts and in the circumstances of the case and In law, the Ld. CIT (A) was justified in deleting the addition after finding it non-abated assessment year, while the addition was made on the basis of incriminating documents found during the search and seizure proceedings. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. ....
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....e AO was not satisfied with the reply and explanation filed by the assessee as well as retraction of Shri Naveen Jain vide letter dated 29.08.2017 as it was not a valid retraction not explaining the mistake in the statement recorded u/s 132(4). Therefore, a mere retraction after gap of more than one year cannot be accepted. Thus, Ld. DR has submitted that the AO has made the addition on the basis of the incriminating material and the ld. CIT (A) has deleted the same by accepting additional evidence filed by the assessee and without considering objections raised by the AO in the remand report. Therefore, there is clear violation of principles of natural justice as well as Rule 46A of the Income Tax Rules. The AO has made his own inquiry and not simply relied upon the inquiry conducted by the investigation wing of the department in other cases. Merely because these transactions are through banking channel would not epso facto proves that the transactions are genuine when it was found during the investigation that the alleged loan creditor companies are dummy and paper companies controlled by Shri Sharad Darak for providing accommodation entries. It was also found during the investiga....
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....ecorded in the books of account of the assessee and therefore, nothing was found during the search which is not disclosed by the assessee in the return of income filed under section 139 or not recorded in the books of account of the assesse. Even the statement of Shri Naveen Jain recorded u/s 132(4) cannot be held as incriminating material in absence any iota of material or evidence found during the search. The assessment order is silent about any incriminating material except referring to the statement of Shri Naveen Jain and some earlier investigation carried out by the department in the year 2014 in the third party case. Earlier investigation was only a survey u/s 133A and what was impounded the books of account of the lender companies cannot be considered as incriminating material as all these transactions are already part of the books of account of the assessee as well as the lender company. Rather the said impounded material supports the case of the assesse. The ld. Learned counsel for the assessee has submitted that the assessee relied upon various judgments before the Ld. CIT (A) which includes; (i) Pr. CIT vs. Meeta Gutgutia 395 ITR 526 (Delhi) (ii) CIT vs. Kabul Chawla 38....
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....ished the fact of genuineness of transaction taking loan and repayment of the same. Copy of the ledger account showing the transactions of loan are repaid of the same along with interest after deducting TDS has been duly signed and certified by the authorized signatory of M/s. M/s. Jay Jyoti India Pvt. Ltd. Therefore, the confirmation of loan transaction and repayment of the same was also produced by the assessee before the authorities below. Even in the books of M/s. Jay Jyoti Indi Pvt. Ltd. these transactions are reflected which confirmed the claim of the assessee of taking this loan and repayment of the same. Both taking loans as well as repayment of the same are through banking channel. He has referred to the bank account statement of M/s. Jay Jyoti India Pvt. Ltd. showing grant of loan to the assessee on various dates through cheques and also showing the repayments by the assessee with interest. He has referred to the acknowledgement of the return of income of M/s. Jay Jyoti India Pvt. Ltd. along with computation of income for A.Y.2012-13 shown the complete address, PAN details of the ledger company has engaged in the genuine business. He has referred to the financial statemen....
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.... book showing that the company has net worth about Rs. 7 cr. which is also multiple times of the sum advance to the assesse. 2.4 Ld. AR has submitted that the Ld. AO has made reference to the statement of Shri Naveen Jain who was only a non-executive director of the assessee and did not look after day to day activities of the assessee company. Further while recording his statement on 14.07.2016 Shri Naveen Jain was under severe pressure and stress as the search was going on since last three days and therefore, the alleged confession extracted from him cannot be used for making additions without any corroborative evidence. Once the assessee furnished all the relevant documentary evidences comprising of confirmation, income tax returns, other supporting documents then the assessee discharged its onus to prove the identity, creditworthiness of the creditor and genuineness of the transactions and the assessing officer has not brought any material on record to prove the contrary or to show that evidence produced by the assessee is bogus. The assessee has produced the retraction letter dated 29.08.2017 of Shri Naveen Jain as well as letter of Shri Sunil Jain who is managing directo....
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....h are placed on record and sufficient to prove the creditworthiness. He has then referred to the decision of this tribunal in case of M/s Radhishwari Developers Pvt. Ltd. vs. PCIT dated 27the July 2021 in ITANo.493/Ind/2018 as well as in case of Globe Realcom Pvt. Ltd. vs. ACIT dated 26.04.2022 in IT(SS)ANo.170 to 174/Ind/2020 and submitted that in all these cases this tribunal has dealt with the issue of loan given by M/s. Jayant Securities & finance Ltd. as well as M/s Jay Jyoti India Pvt. Ltd. which are the companies allegedly controlled by Sharad Darak and finally the addition made by the AO was deleted. 2.8 Thus, Ld. Counsel has submitted that on identical grounds the AO made addition in those cases based on the same report of the investigation wing regarding the involvement of Shri Sharad Darak in providing accommodation entries through these companies controlled by him. He has also relied upon the decisions of Indore Bench of this Tribunal in case of Shri Sanjay Shukla vs. ACIT dated 15.03.2022 in ITANo.333/Ind/2020 & M/s Tirupati Construction vs. Dy. CIT dated 14.07.2016 in ITANo.522/Ind/2014 and decision of Mumbai Bench of this Tribunal in case of JCIT vs. M/s. Shalimar H....
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....d copy of arbitration order. It was submitted by the appellant that the additional evidences further proves genuineness of the transactions and were collected after the assessment proceedings. The additional evidences have been forwarded to the AO for his comments. The AO submitted the remand report dated 14.09.2020 which is placed on record and have been perused. The Ld. AO raised objection to admission of additional evidences, but did not submitted anything on veracity of additional evidences filed by the appellant. Since, the additional evidences had been obtained after the completion of assessment proceedings, there was no occasion to file such evidences in the course of assessment proceedings. Therefore, there was sufficient cause for not producing the evidences during assessment proceedings. Therefore, the appellant's case is falling under rule 46A(1)(b) of Income Tax Rules. Therefore, additional evidences produced during the course of appellate proceedings have been admitted for the sake of natural justice." 3.2 Thus, it is clear that the additional evidence submitted by the assessee in support of its claim was forwarded to the AO for his comments. The AO submitted the....
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....he books of account are bogus. Therefore, once the transactions of the loan are duly recorded in the books of account of the assessee as well as in the books of account of the lender companies then the addition made by the AO treating these transactions as bogus entry provided by the lender companies cannot be said to be based on any incriminating material found or seized during the course of search and seizure proceedings carried out on 12th July 2016 in case of the assesse. The assessing officer has referred to the investigation report of the department u/s 133A on 22.01.2014 along with statement of Shri Dinesh Agrawal dated 22.01.2014 and statement of Shri Sharad Darak dated 21.02.2014. All these statements were recorded in the survey proceedings carried out in the month of January 2014 or February 2014 and therefore, have no connection with search and seizure proceedings in the case of the assessee carried out on 12th July 2016. Further the AO has made only reference to these survey and statements but nothing was brought on record as what exactly revealed in those statements recorded on 22.01.2014 and 21.02.2014. Therefore, it can at the best be considered as the personal knowl....
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....ndicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can b....
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....tors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section ....
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....he Constitution cannot be treated as non- existent." "18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee." "19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section 158BC of the Act." 3.6 Thus, the Hon'ble High Court was of the view that the statement recorded u/s 132(4) would certainly constitutes information and if such information is relatable to the evidence or material found during search, the same could be used as evidence in any proceedings under the Act. However, such statements on a standalon....
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....ether 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. 24. In our view, a plain reading of Section 15888(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute Information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 25. (...) However, as stated earlier, a statement on oath can only be recorded of a ....
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....idence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 29. In Commissioner of Income Tax v. Naresh Kumar Aggarwal: (2014) 3699 ITR 171 (T&AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. (...)" 10. Now, coming to the aspect viz the ....
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....the additions were made by the AO based on the transactions recorded in the books of account and not on the basis of any incriminating material found or seized during the course of search proceedings then the addition so made in the proceedings u/s 153A for assessment years which are not abated due to search and seizure action is not sustainable as held in a series of the decisions of Hon'ble High Courts including the decision of Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla (supra) in para 37 & 38 as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO wi....
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....he Hon'ble jurisdictional High Court dated 02.02.2023 in case of Pr. CIT vs. M/s Great Galleon Ventures ltd. Income Tax Appeal No. 222 of 2022 wherein it has been held as under: This appeal u/S 260A of the Income Tax Act 1961(for short, the Act of 1961 hereinafter) is directed against the order dated 23.12.2021 passed by the Income Tax Appellate Tribunal, Bench Indore in ITA No. 67/Ind/2021(Revenue's Appeal) for the Assessment Year 201516. The substantial question of law which has been raised by the appellant in this appeal is "whether in absence of any incriminating documents seized during the course of search, the Assessing Officer is justified in making the addition in non-abated assessment orders u/S 153-A r/W Sec 143(3) of the Act of 1961." The assessment is u/S 153A r/W Sec 143(3) of the Act of 1961 for the assessment year 2015-16. Learned Tribunal was in seisin with the appellant and cross appeals arising from respective orders passed by the Commissioner Income Tax(Appeals). The appeal before the CIT(Appeals) was directed against the addition of income by the Assessing Officer taking production on presumptive basis and working out estimated income. ADVER....
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....lling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second provis....
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....that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.' (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vii) Completed assessments can be interfered with by the AO while making the assessment under Sect....
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.... 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under Section 132 or books of account, other documents or any as....
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....e jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'tot....
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....ion to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assum....
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....nce Ltd. (Mumbai & Indore) are fully recorded in books of the appellant. These are the part of books of account of the appellant. Such document cannot be termed as incriminating document. Thus, the statement of Shri Navin Jain recorded u/s. 132(4) of the Act cannot be treated as recorded on the basis of incriminating document seized as a result of search and seizure proceedings. Such statement forming basis of addition that too in absence of supporting incriminating document, cannot be constitute information found as a result of search and seizure proceedings. There are various judicial pronouncements wherein it has been held that no addition can be made in non-abated assessments in absence of incriminating material. The two moot question which arises here are that (i) whether the year are abated or non-abated assessment years and (ii) whether the ld AO can made addition in search assessment proceedings without having any incriminating material on record and that too in non-abated assessment years. In the instant case, search and seizure operations u/s 132 of the Act was carried out on 12.07.2016 and return of income for AY 2011-12 was filed on 23.09.2011 and time limit for issuing....
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....x years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the total income of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. v....
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....ely following the decision of Hon'ble Delhi High Court in the case of Kabul Chawla (supra), Hon'ble Bombay High Court in the case Corporation (supra) of Continental Warehousing and also Hon'ble Gujarat High Court in the case of PCIT Vs. Meeta Gutgutia (supra), we hold that no addition can be made in respect of concluded assessments u/s 153A of the Act unless there is any incriminating material found during the course of search. We would like to make it clear that where the assessment is completed u/s 143(1) or 143(3) of the Act unless A.O. has a time to issue notice u/s 143(2) of the Act, A.O. cannot make an addition u/s 153A of the Act, unless there is an incriminating material found during the course of the search. 23. The coordinate bench of the Tribunal in the case of Sainath Colonisers Vs. ACIT (Central)-II Bhopal in IT (SS)A Nos. 289 to 291/Ind/2017 dated 28.2.2019 has considered the similar issue and has held that if there is no incriminating material found during the course of search and the time limit for issue of notice u/s 143(2) of the Act expires, no addition can be made u/s 153A of the Act. For the sake of convenience relevant portion of the order ....
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....he Hon'ble High Court of Delhi in the case of Kabul Chawla (2015) 61 taxmann 412. 11. We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied by the Ld. Counsel for the assessee are of the considered view that no addition/disallowance was called for Assessment Year 2008-09 to 2010-11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act. Accordingly all the three appeals of the assessee are allowed." 24. In so far as the arguments of the Ld. D.R. in respect of following the ratio of the Hon'ble Supreme Court in the case of Vegetable Products (supra), the Ld. D.R. by relying on the decision in the case of CCV Dilip Kumar (supra) has submitted that the ratio laid down in the case of Vegetable Products (supra) cannot be applied. We find that in the case of CCV Dilip Kumar (supra) has considered the exemption provisions and held that exemption provisions has to be considered strictly and in a case of ambiguity view which favour....
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....olled by the entry provider Sharad Darak. These companies have been proven beyond doubt to be bogus/shell companies with no business activity/staff or even books of accounts. The assessee has only managed such entries in the guise of unsecured loans. These companies also find place in the bogus LTCG scam report sent by the department to SEBI. Hence the question of providing further evidences to the assessee in this matter does not arise. The contention that no accommodation entries as alleged have been taken in the books of Shri Krishna Devcon Ltd. as these are bank transactions and subjected to TDS deduction is also not acceptable. The transactions being done through banking channels and reflected in books of accounts of transacting parties does not legitimize the source of unsecured loans Le. shell companies. Two of the Sharad Darak Controlled companies namely Jayant Securities & Finance Ltd. and East West Finvest India Ltd. also feature in the Investigation Report of the Directorate of Income Tax (Inv.). Kolkata as bogus loss booking paper companies (Exit providers) in the racket of providing bogus exempt LTCG u/s 10(38). 8.10 The disparities in figures of Interest expense....
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.... the addition cannot be made solely on the basis of the statement which was subsequently retracted by giving reasons therein. Though the AO has made wague reference to the investigation report DIT, Kolkata as well as survey conducted in the other cases however, except the personal knowledge of the AO, there is nothing on record as what actually the outcome of this investigation referred by the AO. Therefore, in absence of any record and evidence substantiating the said knowledge or assumption of the AO cannot be basis of the addition. Further the assessee produced the record to show that part of the unsecured loan was already repaid before the search and seizure action carried in the case of the assessee and therefore, the said transactions of repayment through banking channel cannot be doubted as bogus transaction when it was duly recorded in the books of account prior to the date of search. The assessee has produced the ledger account which is otherwise part of the regular books of account of the assessee duly audited wherein all the transactions of loan received from lender companies are duly recorded. The assessee has paid interest @ 9% and also deducted TDS @ 10%. The AO has n....
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....of the documentary evidences filed by the assessee but proceeded on the assumption that these transactions are accommodation entries. ii. In case of M/s East West Finvest India Ltd. the assessee has produced a copy of ledger account in the books of the lender company, copy of bank statement of the assessee for relevant year, copy of certificate of registration of the lender company as NBFC, copy of annual report and acknowledgment of return of income with computation of income of the lender company placed at page no.680 to 717 of paper book. iii. In case of M/s Zyka Merchandise Pvt. Ltd. the assessee has produced a copy of ledger account in the books of the lender company, copy of confirmation of account, copy of bank statement, copy of ledger account in the books of the assessee company, copy of affidavit of Shri Sharad Darak, copy of acknowledgment of return and copy of annual report for A.Y.201213 placed at page no.718 to 735 of the paper book. iv. In case of M/s Purvi Finvest Ltd. the assessee has produced copy of ledger account in the books of the M/s Purvi Finvest Ltd., copy of bank statement, copy of acknowledgment of return along with computation of income for A.Y.....
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.... bank statements of the investor-companies; (iii) share application forms, etc. In fact, at one place the AO has made a heighted remark also "The type of documents furnished by assessee are self-serving and can be made by anyone". This shows that the assessee has filed document to AO. Being so, we do not find any merit in the contention of Ld. DR that the assessee has not filed any evidence to AO. 10. Having said so, we now go to the vital findings made by Ld. CIT (A) wherein he has dealt with the findings of AO as under: (i) Ld. CIT (A) has observed that in the course of assessmentproceeding, the assessee produced books of account, filed copies of audited accounts, filed full details of the investors who had subscribed to the share capital. The AO has not raised any dispute or question on the receipt of money from those investors. (Para 9.7 of CIT(A)'s order). (ii) Ld. CIT (A) observed that the AO has not disputed the fact that the money is received from investor-companies but has raised question as to whether it is a loan or not. (Para 9.8 of CIT(A)'s order). (iii) Ld. CIT (A) observed that the share applicants are registered under the Companies Act, 1956 and are in t....
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....that the assessee has discharged the burden cast upon it u/s 68. The Ld. DR could not show us any reason to interfere with these findings. Therefore, we are inclined to hold that in such a situation, the Ld. CIT (A) has rightly reversed the action of AO and deleted the addition. We subscribe to his view and uphold the deletion. The revenue fails in this appeal." 4.3 That was a case of share application money received by the assessee from these companies where the Ld. CIT (A) deleted the addition made by the AO u/s 68 of the Act. On further appeal this Tribunal after considering the documentary evidences and the finding of the Ld. CIT (A) has reached to the conclusion that the Ld. CIT (A) has rightly deleted the addition based on the documentary evidences. Similarly in case of ACIT vs. Pramod Kumar Sethi in ITANo.382-383/Ind/2014 dated 06.11.2018 has considered the transactions between the assessee and inter alia M/s. Purvi Finvest Pvt. Ltd. and M/s East West Finvest India Ltd. in para 16 & 17 as under: "16. Examining the fact of instant appeal for Assessment Year 200607 and 2007-08 in the light of the above judgment of the Co-ordinate Bench in the case of ACIT V/S Shri Girish K....
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....e addition for undisclosed expenditure of Rs. 5,25,000/- and Rs. 6,25,000/-. We accordingly dismiss Revenue's Ground No. 1, 2 &3 for Assessment Year 2006-07 and 2007-08 respectively. 4.4 Thus, the tribunal has taken as consistent view based on the documentary evidences showing that these companies are having financial capacity to advance amounts or invest the money which are genuine transactions as the transactions are carried out through banking channel and there is no material brought on record to show that the assesse's on money has routed back through these companies in the garb of these transactions. In case of ACIT vs. Radheshwari Developers Pvt. Ltd. in ITANo.493/Ind/2018 the Tribunal has again considered this issue vide order dated 28th July 2021 in para 43 as under: "43. Even one of the alleged cash creditor namely M/s. Jayant Securities & Finance Ltd. which Ld. Pr. CIT has referred as an accommodation entry provider, it is revealed that this company is regularly assessed to tax for last many years and scrutiny proceeding u/s 143(3) of the Act were completed in case of this company. Observation of the Ld. Pr. CIT about letter issued to M/s. Jayant Se....
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....on could have been made without having recourse to any incriminating material found during the course of the search. But, even on merits, we find no substance in the additions so made by the AO in respect of all the above named six loan creditors. 4.6 This issue has been repeatedly considered by this Tribunal in a series of decisions and in case of Shri Sanjay Shukla vs. ACIT in ITANo.33/Ind/2020 order dated 15.03.2022 has considered this issue in para 12.3 to 12.6 as under: "12.3 We have heard rival contentions, perused the records placed before us. Through ground No. 1 revenue has challenged the finding of Ld. CIT (A) deleting the addition of Rs. 3,86,23,218/- made for unexplained unsecured loan and interest paid thereon taken from following parties: S. No. Name of Party Loan Received during the year Interest paid on the loan amount 1 Jayant Securities and Finance Ltd. Vadodara Rs.1,25,00,000 Rs.8,79,041/- 2 Jay Jyoti India Pvt. Ltd. Mumbai Rs.1,25,00,000 Rs.8,69,794/- 3 Manas Realtors Pvt. Ltd. New Delhi Rs.50,00,000 Rs.3,41,507/- 4 Shri Sushil Kumar Ratan Lal Khowal, Akola Rs.50,00,000 Rs.3,32,876/- 5 Chandumal Govindram, Indore ....
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....urce certificate are placed on record which in totality are sufficient to prove identity of this company, genuineness of the transaction and creditworthiness of this company It is further proved with the fact that it had merely advanced 0.75% of the funds which it was capable of i.e. it had financial capacity of advancing 133 times more than the loan given to the assessee company. Thus, Ld. CIT (A) has rightly appreciated these facts for deleting addition for made u/s 68 of the Act as well as the interest disallowance." 12.7 xxxxxxx 12.8 xxxxxxx 12.9. We also find merit in the finding of Ld. CIT (A) referring to various decisions including decision of this Tribunal in the case of Sumati Kumar KasliwaL & OTHERS ITANo.181, 472/Ind/2017 and others. Judgment of Hon'ble jurisdictional High Court in the case of Pr. CIT vs. M/s Chain House International (P) Ltd. ITANo.111/2018 dated 07.08.2018 and also decision of this Tribunal in the case of M/s Tirupati Consturction (supra) and M/s K.K. Patel Finance Ltd. (supra) wherein similar issue and almost identical facts has been examined and decided in favour of the assessee and additions made u/s 68 of the Act were deleted. We, the....
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....he ld.CIT(A) is quite capable of granting loans. The adverse inference drawn from the financial statement of lending companies is only a surmise by the assessing officer without making any enquiry. In this regard, we note that honorable jurisdictional High Court in the case of Pr.CIT vs Veedhata Tower Pvt.Ltd, order dated 21.04.2018 has held that when all the necessary details of the fund provider was available with the assessing officer, he was free to make the necessary enquiry and addition under section 68 in the hands of the recipient were unjustified. Furthermore, assessee has also paid interest to the lenders. It has also deducted tax at source. Loan have been duly repaid, some part has been repaid even in the present assessment year. In these circumstances, in our considered opinion assessee has discharged the onus. The assessing officer has not brought on record any cogent material to make the addition as unproved cash credit. Hence, the addition made by the assessing officer is not sustainable. 10 Shalimar Housing &Finance Ltd. 18. The case laws relied upon by the Ld. Departmental Representative are not at all applicable on the facts of the present case. In the case o....
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....ded that the above unsecured loans had been received from the Companies controlled by Shri Sharad Darak who is a well known accommodation entry provider of Indore. The Ld. AO on the basis of findings of past actions of the various officers held that Shri Sharad Darak runs dummy companies through which he provides entries to needy persons. The Ld. AO has also relied upon various judgments. On perusal of assessment order, it has been found that the Ld. AO has not made any independent enquiry to disprove the identity, creditworthiness, genuineness of transaction. The Ld. AO has also not enquired into the nature and source of unsecured loans. The Ld. AO has only given emphasis on some enquiries conducted in the past and given a general findings and made additions. No specific finding about the companies proving them bogus has been given in the assessment order. The Ld. AO has also relied upon the statement of Shri Navin Jain which is not based upon any incriminating material. This statement cannot be sole reason for the addition in the total income of the appellant. The appellant has filed ample information and documents to discharge its onus as envisaged in section 68 of the Act. It h....
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.... filed bank statement reflecting the transactions. In my opinion, nothing in form of cogent evidences has been brought on record by the ld. AO in support of his findings. The ld. A.O should have acted on the details furnished by the appellant, but he did not do so. Hon'ble Delhi High Court in the case of Oasis Hospitalities P. Ltd. reported in 333 ITR 119(2011) has held as under: "11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove : (a) Identity of shareholder; (b) Genuineness of transaction; and (c) Creditworthiness of shareholders. 12. In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc. can be furnished. 13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from....
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....rged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the AO is duty bound to investigate the creditworthiness of the creditor/ subscriber, the genuineness of the transaction and the veracity of the repudiation. (ii). CIT v. Kamdhenu Steel & Alloys Limited and Other (2014) 361 ITR 220(Delhi) wherein it is held that : "38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But, it is unfortunate that all this exercise if going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the case 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." (iii). Following the decision in the case of Oasis Hospitalities P. Ltd. (supra) and the decisio....
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.... Further, the appellant has brought on record the decision of Hon'ble ITAT Indore in the case of Shri Pramod Kumar Sethi (ITA NO. 382 and 383/Ind/2014, dated 06.11.2018) wherein various companies of Sharad Darak Group held as genuine companies which also includes Purvi Finvest Ltd. from whom the appellant has taken unsecured loan of Rs. 5,50,00,000/-. In another decision in the case of M/s. Radhishwari Developers Pvt. Ltd. (ITA No. 493/Ind/2018 dated 20.07.2021) Hon'ble ITAT Indore has held that M/s. Jayant Securities and Finance Ltd. is regularly assessed to tax for last many years and scrutiny proceedings u/s. 143(3) of the Act were completed in this company. This company is regularly filing appeal before the judicial forums which show that this company is not a dummy company. Considering the above findings of the Hon'ble ITAT, above companies cannot be declared as dummy company. 3.3.3 In view of the above discussion, it is not justified to held the lender companies as dummy entities and the loans given to the appellant by these companies are non-genuine. Therefore, the additions made by the ld. AO are not sustainable. 3.3.4 In view of discussion made in para 3.2 ....
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....ly in these circumstances we do not find any error or illegality in the impugned order of the Ld. CIT (A) qua this issue of addition made by the AO u/s 68 of the Act on account of unsecured loan. 5. Ground No. 6 is regarding the disallowance of interest paid by the assessee on these loans which was deleted by the Ld. CIT(A). 5.1 We further note that all the transactions of interest payment are duly reflected in the books of account of assessee as well as lender companies and are subjected to TDS. These transactions are also reflected in the bank account of the assessee as well as lender companies, therefore, there is no reason to doubt the payment of the interest by the assessee after deducting TDS through banking channel and duly recorded in the books of account. Ld. CIT (A) has deleted this addition in para 3.4 as under: "3.4 Ground No. 6 of AY. 2011-12 to 2014-15, Ground No 4 for AY 2015-16, Ground No 8 for AY 2016-17 and Ground No 4 & 5 for AY 2017-18:- Through these grounds appeal, the appellant has challenged the addition made on account of interest paid on unsecured loans of Rs. 23,00,000/- in AY 2011-12 Rs. 5,00,00,000/- in AY 201213 Rs. 1,00,00....
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....e and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,60,00,000/- made by the AO under section 68 r.w.s 115BBE of the Income Tax Act on account of bogus and secured loans. 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs 60,96,018/-made by the AO under section 69C r.w.s. 115BBE of Income Tax Act 1961 on account of interest expenses on bogus unsecured loans." 7. Ground no.1 to 3 are regarding non-consideration of remand report and accepting retraction made by Shri Naveen Jain. These are common and identical grounds as raised for A.Y.2012-13. We have already considered and decided the issue involved in ground nos.1 to 3 for A.Y.2012-13. Accordingly in view of our finding on ground no. 1 to 3 for A.Y.2012-13 these grounds stand dismissed. 8. Ground no.4 is regarding the addition deleted by Ld. CIT (A) for want of incriminating material. This issue has also been considered and decided by us in ground no.4 of the assessment year 2012-13. Hence in view of our finding on this issue for the assessment year 2012-12 this ground of appeal of revenue stands dismissed. 9. Ground no.....
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....ready been discussed by us and need not to be repeated. In view of our finding on this issue in the preceding paras of this order this ground of the revenue's appeal stands dismissed. 10. Ground no.6 is addition made by the AO on account of interest payment which is consequential. This ground is common and identical for all assessment year before us. and therefore, in view of our finding on this issue while deciding the appeal of the Revenue for A.Y.2012-13 this ground of revenue's appeal stand dismissed. For Assessment Year 2016-17 11. The revenue has raised following grounds of appeal: "1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A) has erred in accepting additional evidence u/s 46A in complete disregard to the remand report submitted by AO which was received in the 0/0 CIT (A) on 18.09.2020. The CIT (A) has not discussed the issues raised in remand report In his order. 2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A) has erred in accepting additional evidence u/s 46A even through conditions mentioned in clauses (a) - (d) of 46ACD were not satisfied. 3. Whether on the facts and in the circumstan....
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....ry evidence filed by the assessee which was neither examined by the AO nor found to be incorrect or defective. 13.1 We have already considered this issue while deciding the appeal for A.Y.2012-13 in forgoing part of this order. Even all the loan creditors companies including M/s Purvi Finvest Ltd. was subject matter of the consideration and examination of this Tribunal in a series of decisions as referred in forgoing part of this order wherein the Tribunal found that the transactions with these lending companies supported by the documentary evidences in the shape of financial statement/auditor report, return of income, confirmation are genuine transactions in the absence of any contrary material to disprove the documentary evidences. Accordingly in view of our finding while deciding this issue in the appeal for A.Y.2012-13 this ground of revenue's appeal stands dismissed. 14. Ground No. 5 is regarding the addition made by the AO u/s 69 of the Act on account of unexplained investment. The AO noted that unsecured loan of Rs. 1,99,95,750/- has been shown in the books of M/s. A & A Shelters (partnership firm of the assessee) in the name of M/s Purvi Finvest Ltd, during F.Y.....
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....es of the sum advanced to the partnership firm. All these documents are placed at page no.919 to 925 of the paper book. 14.3 Ld. Counsel for the assessee has further submitted that once Shri Naveen Jain has retracted his statement giving due explanation of incorrect statement made during the course of search and seizure proceedings then the addition made by the AO solely on the basis of statement is not sustainable and Ld. CIT (A) has rightly deleted the same. Reference is made by the AO to the statement of third person without supplying copy to the assessee and without giving an opportunity of cross examination therefore, the order of the AO is not sustainable. He has relied upon judgment of Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE 62 taxmann.com 3 (SC). He has also relied upon the judgment of Hon'ble Delhi High Court in case of CIT vs. Rakam Money Matters (P) Ltd. in ITA No. 778/2015 dated 13.10.2015. 14.4 We have considered the rival submissions as well as relevant material on record. The assessing officer has made this addition in para 8.11 as under: "8.11. The unsecured loan of Rs. 1,99,95,000/- taken in the books of A & A Shellers (part....
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.... the garb of unsecured loan from M/s Purvi Finvest Limited the addition made by the AO is not sustainable. The AO has even not conducted any inquiry on this issue and simply made addition based on the statement which does not disclosed any fact leading to the conclusion that the transaction as found recorded in the books of M/s A & A Shelters is in fact unaccounted income of the assesse. Accordingly in the facts and circumstances of the case and in view of the supporting documents filed by the assessee as placed in the paper book at page no.362,746 to 805, 919 to 925 we do not find any error or illegality in the impugned order of the Ld. CIT(A). This ground of revenue's appeal is dismissed. 15. Ground no.6 regarding addition made by the AO on account of interest payment on unsecured loan. This ground is common and identical to the ground no.6 for A.Y.2012-13. Even this ground is consequential to the addition made by the AO on account of unsecured loan in the preceding years. In view of our finding on this issue for A.Y.2012-13 this ground of revenue's appeal stands dismissed. For Assessment Year 2016-17 16. The Assessee has raised following grounds of appeal: "1. That having ....
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.... per law. 8. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 17. Ground No. 1 to 4 are regarding the addition made by the AO and confirmed by the ld. CIT (A) on account of on money received for booking of plots. The AO noted that as per the seized material (diary) containing various entries of receipt of amounts against sale of plots in Shri Krishna Enclave project the assessee received record consideration in cash but not shown in the books of account. One Shri Hemendra Nabeda who is a relative of the directors of the assessee company in his statement explained the coded noting in the diary seized from his residential premises. Thus the AO concluded that the amounts recorded in the diary is the payment received against sale of plots which is not recorded in the books of account of the assessee and consequently an addition of Rs. 63,45,500/- was made as advance towards booking of plots not recorded in the books of account. The AO however, made the addition u/s 68 of the Act r.w. section 115BBE. On appeal the Ld. CIT (A) has confirmed....
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.... Jain, Shri Naveen Bhandari, Shri Sandeep Chaudhary and Shri Ranjeet Chakravarthy. This is evident from perusal of page 34 of the assessment order wherein Ld. AO has assumed that since the plots are in the same project where Shri Nabeda made investment therefore, the same rate is considered. Further, Ld. AO has himself assumed that these parties must have paid 3 installments for the alleged purchase of plots whereas nothing can be derived from the seized material as is evident from perusal of page no. 860-882 of paper book. Such arbitrary and vague additions without support of any corroborative evidence is bad in law and has no legal legs to stand and may please be directed to be deleted. Next contention of Ld. Counsel of the assessee is that the addition has been made solely on the basis of alleged statement recorded of Shri Hemendra Singh Nabeda (PB 421-434). It is a matter of common knowledge as has been explained above and which has been taken into judicial notice also and several decision including in the case of IT v. Naresh Kumar Agarwal, (2014) 369 ITR 171, High Court of Andhra Pradesh (supra) and Dy. Commissioner Of Income Tax vs Pramukh Builders, (2008) 112 ITD 179, that ....
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....8 has been booked by shri Ankush s/o R.C. Chourasia against payment of Rs. 50,000/- vide Cheque drawn on SBIs the particulars of the cheques were also produced before the AO along with copy of ledger account shown the transaction. It was further explained that all the remaining plots as mentioned in the alleged seized material are still owned by the assessee and part of the inventory of the assessee company which could have been verified from the books of account of the assesse. However, the AO has not verified from record the correct status about the transactions allegedly recorded in the seized material from the possession of one Shri Hemandra Singh Nabeda who has explained as his investment. However, we find from the record and particularly from the sale deed for sale of plot no.650 and 700 as well as booking amounts in respect of the plot no.868 that all these transaction are duly recorded in the ledger account placed before the AO. Therefore, when the plots are finally sold to the buyers through sale deeds then entries recorded in the alleged seized documents cannot be considered as reflecting the true state of affairs. The assessee has unambiguously explained and stated ....
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.... hand Ld. AO has made the addition u/s. 68 of the Act which can be done only when the entries are found in the books of account and the assessee failed to explain the source of the credit recorded in the books of account. The Ld. CIT (A) has confirmed this addition made u/s 68 of the Act as under: "In view of the above, mentioning of section 68 of the Act by the Id AO in the assessment order is not bad in law. Basically, the additions should have been made as undisclosed income from sale of plots by the Id AO. Considering the above discussion, addition amounting to Rs. 1,89,000/- in AY 2013-14 and Rs. 63,45,500/- in AY 2016-17, being undisclosed income from sale of plots are confirmed. Therefore, appeal on these grounds is dismissed." 17.8 Thus, the Ld. CIT (A) has confirmed the addition without looking into bare facts and application of mind. Therefore, the impugned order of the Ld. CIT (A) is not sustainable in law. 18. Ground No. 5 & 6 are regarding addition of Rs. 2,77,350/- made u/s 68 of the Act on account of cash received against sale of plots not recorded in the books of account. The assessing officer has noted that register marked as BS-2 seized du....
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.... in cash Date of payment 1. Mohanand Thakur 17,85,600/- 2,77,350/- 05.03.2016 18.4 Thus, the seized material clearly shows the transactions of sale to Shri Mohanand Thakur and sale consideration was received to the extent of Rs. 17,85,600/- in Cheque and a sum of Rs. 2,77,350/- in cash. The assessee has not disputed the sale transaction to Shri Mohanand Thakur as well as sale consideration of Rs. 17,85,600/- received in Cheque. Therefore, the seized material showing other details of cash received by the assessee cannot be denied. The seized documents cannot be accepted as admissible evidence in part. Hence to the extent of addition made by the AO towards the cash receipt of Rs. 2,77,350/- is duly based on the seized material. Since the said transaction of cash is not found recorded in the books of account therefore, applying the provisions of section 68 of the Act is not justified. Hence we restrict the addition of the said amount of Rs. 2,77,350/- as unaccounted business income of the assessee and not u/s 68 of the Act. The orders of the authorities below are modified accordingly. 18.5 Ground No. 7 is regarding validity of assessment order for....
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....nd decided the issue involved in ground nos.1 to 3 for A.Y.2012-13. Accordingly in view of our finding on ground no. 1 to 3 for A.Y.2012-13 these grounds of revenue's appeal stand dismissed. 21 Ground no.4 is regarding the addition made by the AO on account of interest expenses which was deleted by the Ld. CIT(A). This issue is consequential to the disallowance of unsecured loan taken by the assessee in the preceding assessment years. In view of our finding on the issue of addition on account of unsecured loan in the preceding year the disallowance made by the AO on account of interest expenditure which is consequential to the addition of unsecured loan would not survive. Accordingly ground no.4 of the revenue's appeal is dismissed. CO NO. 1/Ind/2023 For A.Y.2017-18 22. The assessee has raised following grounds of appeal: "1. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 11,02,955/- u/s 68 r.w.s. 115BBE on account of alleged unaccounted income and that too by recording incorrect facts and findings and in violation of principles of natural justice. 2.....