TaxTMI 
TaxTMI 
2025 (8) TMI 906
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) is justified in ignoring the fact that the assessee was involved in taking the accommodation entries amounting to Rs. 80,00,124/- in the nature of bogus unsecured loan or in other forms during the FY 2018-19 relevant to AY 2019-20 connected with the Everstrong Enclave Private Limited and Megapix Vintrade Private Limited, which are proved as shell companies during the Search Proceedings in the case of Banka Group. 3. The appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 3. Succinctly, the fact as culled out from the records is that the assessee is an individual and filed her return of income for AY 2019-20. As there was specific information which was flagged as per Risk Management Strategy formulated by the CBDT through ITBA software insight portal which was received from the DDIT Unit-1(3), Kolkata that the assessee Ms. Pooja Kedia, PAN: CDWPK4248P had taken accommodation entries in form of bogus unsecured loan amounting to Rs. 80,00,124/- during the financial year 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reply stated that they has not taken any accommodation entries or unsecured loan from Everstrong Enclave Private Limited and Megapix Vintrade Private Limited. The assessee had sold equity shares of the BPIP Infra Private Limited to Everstrong Enclave Private Limited and Megapix Vintrade Private Limited for a consideration of Rs. 40 lac to each company. These shares were sold at face value, there is no premium or discount element was involved in this transaction. The response provided by the assessee was considered by the ld. AO but he noted that same was not acceptable to him because in case of the assessee, the information received from DDIT (Inv.). Unit-1(3), Kolkata on 26.02.2019. On perusal of information, it was found that a search & seizure/survey action in the case of Banka Group was conducted on 21.05.2018. Based on the findings gathered and subsequently brought on records, it is found that Shri Mukesh Banka is the key person controlling person who looks after day-to-day financial affairs and accommodation entry business of Banka Group. During the course of post search verification of seized/impounded materials, various paper/shell companies controlled and managed by Sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thenticated from the statements of Shri Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banka Group clearly established the fact the withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. Ld. AO also noticed that the assessee Pooja Kedia is a one of the beneficiaries and the assessee is involved in the taking accommodation entries amounting to Rs. 80,00,124/-in the nature of bogus unsecured loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019-20 connected with the Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. shell companies of Banka Group date of transactions 16.05.2018 totaling of Rs 80,00,124/-. The assessee has routed unaccounted money of Rs. 80,00,124/- in its bank account through these companies which remained unexplained. During the searches & as per the information received, it is found that various syndicates have arranged accommodation entry in the form of unsecured loans and in other forms. The modus operandi found is that the beneficiaries routed it's on money layering through various....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Vintrade Pvt. Ltd, which are bogus entities u/s. 68 of the Act. 4. Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reiterated here in below: 5. DECISION: -I have carefully gone through the records and facts of the case and also the grounds of appeal raised. The brief facts of the case are that the appellant had filed the return of income on 15.07.2019 for A.Y 2019-20 declaring total income of Rs. 40,45,600/- The assessment was completed by accepting the returned income at Rs. 40,45,600/-. However, on the basis of information received from DDIT Investigation Unit 1(3), Kolkata, the assessment was reopened on account of accommodation entries in the form of bogus unsecured loan, availed by the appellant from two companies viz. M/s. Everstrong Enclave Private Limited & M/s Megapix Vintrade Private Limited. On further inquiry during the course of reassessment proceedings, the assessee replied that they had not taken any unsecured loan from the above referred two parties. The assessee stated that on the contrary they had sold equit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Other Income which show that these companies have no actual business activities and only getting interest income. The directors of these companies are dummy directors of Shri Mukesh Banka as per the statement of Shri Mukesh Banka recorded u/s 132(4) of the Income tax Act, 1961 on 30.05.2018 and 19.07.2018. These companies were found to be nonexistent as per enquiry made by the department. iv) Further, during the course of analysis and examination of the bank statements of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of paper/shell companies of Shri Mukesh Banka was clearly established and substantiated. v) As per information available with the AO, the assessee Pooja Kedia is one of the beneficiaries and the assessee is involved in the taking accommodation entries amounting to Rs. 80,00,124/-in the nature of bogus unsecured loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019-20 connected with the Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. shell companies of Banka Group; date of transactions 16.05.2018; totaling to Rs. 80,00,124/-. The assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y dated: 04.07.2024 the ledger accounts of both the companies, Audited Statement of Accounts, Bank Statements, ITR Acknowledgement and Sale Bills. The appellant has relied upon the following case laws in support of the contention that returned income cannot be held to be the test of creditworthiness: (a) ITAT Delhi - Prabhatam Investment P. Ltd. vs. ACIT, New Delhi on 17.04.2017 - ITA No.2525/Del/2015 (b) HC Delhi - ITA 71/2015, ITA 72/2015 & ITA 84/2015-CIT-9 Erstwhile CIT-VI vs. Vrindavan Farms P. Ltd. v) The appellant claims that from Master data in record of MCA Website, it is clear that the said company had filed its Balance Sheet in MCA Website and has complied with legal requirements under the companies Act. vi) The appellant claims that from Assessment orders of M/s. Ever Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited, which clearly indicates that they are filing their Income Tax Returns and Assessment were made by the department. vii) The appellant claims that the statements taken during the course of survey/search proceedings from Mr. Mukesh Banka has retracted. Hence no evidentiary value of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rements of conducting independent inquiries has not been duly followed. 7.2 it is also seen that the show cause notice issued by the AO was not accompanied with material/information/ copies of statements of Shri Mukesh Banka copies of bank statements of paper / shell companies and other relevant information forming the basis of show cause notice. It is against natural justice not to provide all such information to the assessee which have bearing on the assessment. The conclusion arrived at by the AO at Para no 3.8 of the Assessment Order is nonspeaking in as much as the AO has not given any basis as to why the detailed submissions of the Appellant were not acceptable to him and how various case laws cited by the appellant were not commensurate with the facts of Appellant's case. 7.3 lt is seen that the opportunity for cross examination of Sh. Mukesh Banka nor copy of statements and other documents strongly relied upon by AO were provided to the appellant. The AO has not brought on record anything, except the statement of Shri. Banka to demolish the documents submitted by the assessee. The sole basis for the AO to make additions is statement of Shri Mukesh Bank....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d party or loose papers seized from a third party. In all such cases, it is imperative to afford an opportunity to the assessee to cross-examine the said third party." Similarly in CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103, the Hon'ble Calcutta High court held that "Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness. The Hon'ble Supreme Court in case of Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 set aside the order of the Tribunal as well as order in revision of the High Court on the ground that the statements of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations The Hon'ble Delhi High Court also in case CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi) held that where addition was sought to be made in rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted." 4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. 5. In these circumstances, the Review Petitions are dismissed." ACIT vs. H.K Pujara Builders in (2019) 55 CCH 0504 MUM '8 It is not in dispute that the entire addition has been made disbelieving the entire documentary evidences submitted by the assessee by placing predominant reliance on the statement recorded from Shri Jagdish Prasad Purohit on 19/10/2011 by Investigation Wing of Income Tax department, Pune in connection with search and seizure operati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... documentary evidences submitted by the assessee before the AO which admittedly included copy of PAN, ITR acknowledgement, audited financial statements, computation of income, confirmation from lender, bank statements evidencing the immediate source of credit of the lender etc. All these documents clearly prove the identity, creditworthiness of the lender and genuineness of the transaction in the peculiar facts of the instant case. Hence, it could be safely concluded that assessee'jhad indeed complied with all the three necessary ingredients of Section 68 of the Act. 8.3. In view of the aforesaid findings in the peculiar facts and circumstances of the case, we hold that the Ld. CIT(A) had rightly deleted the addition made u/s. 68 of the Act and disallowance of interest on loans, which in our considered opinion, does not call for any interference. Accordingly, the grounds raised by the revenue are dismissed." M/s. Pabal Housing Private Limited vs. DCIT, ITA NO. 2692, 2693 & 2694/Mum/2018 Date of Order-03-05-2019 13 The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his issue was examined in detail, and on similar facts following the above judgements. Radheshyam Agarwal, Kolkata vs Department of Income Tax/ ITA No. 254 (Kol) of 2011 A.Y. 2006-07 the facts were that the addition was made on the basis of statement of one Radheshyam Khemka who had retracted from his statement. In their order dated 06-09-2011 Honorable ITAT held thus- 7 ........After perusing the assessment order, we observe that the impugned addition u/s. 68 of the Act of Rs. 10 lakhs was made by the A.O. mainly relying on the statement of Shri Khemka recorded on 9/12/2006 u/s. 132(4) of the Act and letter of M/s. Globe Stocks & Securities Ltd. dated 16/1/2007 in which they had claimed to have admitted that the assessee was provided accommodation entries by them in lieu of cash receipt. Except these statements of Sri Khemka and M/s. Globe Stocks & Securities Ltd., no other corroborative or specific evidence could be brought on record by the A.O. to justify the depth of authenticity of such statements and subsequent action thereupon as per law, which were subsequently retracted by those persons by filing Affidavit stating therein that the searching team recorded the state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nto consideration the retracted statements corroborated by the evidences referred to above 7.1 We further observe that the Id. CIT(A) finding that there was omission on the part of the A.O. to examine Sri Khemka personally and as there was no evidence except the statement of Sri Khemka recorded u/s. 132(4) of the Act and letter of M/s. Globe Stocks & Securities Ltd. filed before the ADIT (Inv.) to justify the addition and the A.O. could not bring on record any evidence to link the alleged cash paid by the assessee and its receipt in the form of unsecured loan. 7.2 In the above background of the case, now let us examine whether addition of Rs. 10 lakhs is warranted in the hands of the assessee. Provisions of Sec. 68 of the Act have been judicially considered by several courts of law, as per which an addition u/s. 68 can be made where an assessee fails to prove identity of the creditor, his creditworthiness and genuineness of the transaction. In the present case it was necessary for A.O. to prove that on all 3 ingredients the assessee had failed and, therefore, addition was warranted. Therefore, in such circumstances. the genuineness of the transaction could not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....channels and the appellant has submitted audited statement of accounts, sale bill, ledger copy Acknowledgement of ITR, Bank Statement. The appellant has also submitted that from the Master data in record of MCA Website, both the companies are active and it has been filing its balance sheet in MCA Website and complying with legal requirements under the companies Act. The appellant has also enclosed copy of Assessment orders whereby the department has accepted the accounts of those companies. The transaction is sale of shares and is on face value and there is no component of discount or premium attached. 8.1 Under Section 68 of the Income Tax Act, any sum credited in the books of accounts of a taxpayer that cannot be explained by the taxpayer's income or other sources is deemed to be the taxpayer's income for that year. The burden of proof lies with the taxpayer to prove that the cash credit is genuine and not an undisclosed Income. The appellant has provided identity of both the companies by giving their complete Address, PAN, Copy of Acknowledgement for filing of I.T. Retum for the A.Y. 2019-20, copy of Assessment Orders, Bank Statement and Audited Statement of Acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act, the AO needs to examine three ingredients i.e, identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided u/s 68 of the Act, then the onus shifts to the AO to prove otherwise. Once the appellant has filed documents as above in support of the genuineness of loan and identity of creditors the onus shifts on the AO. The AO has not brought on record, except the statement of Sh. Banka to demolish the documents, submitted by the assessee. The sole basis for the AO to make additions is statement of Shri Mukesh Banka where he admitted that he is involved in providing bogus unsecured loans entries to various beneficiaries. The statement given by Shri Mukesh Banka was retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the AO to go only on the basis of statement of Shri Mukesh Banka so as to treat the share transaction as accommodation entry. 9. Reliance is also placed upon the decision in the case of CIT Vs Sunita Dhadda reported in [2018] 100 taxmann.com 526 (SC). In this case the Hon'ble Supreme Court dismissed SLP against order of High Court hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce money to the assessee, was not a matter which could be required of the assessee to be established, as that would amount to calling upon him to establish source of the source. In that view of the matter, since this part of the judgment runs contrary to the judgment of the Hon'ble Supreme Court, in Daulat Ram's case (supra), while this Court in a subsequent judgment in Mangilal's case (supra) relying upon Daulat Ram's case(supra), has taken a contrary view, we stand better advised to follow the view, which has been taken in Mangilal's case (supra)." 13. The Hon'ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd.159 ITR 78(SC) held as follows: "13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been established." 16. The Guwahati High Court in the case of Nemi Chand Kothari Vs CIT [136Taxman 213) observed that the assessee had obtained loans though account payee cheques and ha had also furnished the name & address of the creditor. In light of the aforesaid observations, they further held as follows: "Once the assessed had established that he had received the said amounts from 'N' and 'P' by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub creditors had creditworthiness" to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee's income mom the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or ware owned by, the assessee." 17. The Hon'ble Jurisdictional Rajasthan High Court in the case of CIT vs Pooja Agrawal in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n further appeal by the department to the Hon'ble Rajasthan High Court, the Hon'ble High Court by referring to the decision of CIT vs. Pooja Agarwal in DB IT Appeal No. 385/2011 dated 11.09.2017 (Raj) (HC) held that no substantial question of law arise in this case. 6.4. Thus in view of the above discussion and taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon'ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal (supra) as well as in case of PCIT vs. Pramod Jain & Others (supra), we allow the claim of exemption under section10(38) of the Act and accordingly delete the addition made by the AO. The order of Id. CIT (A) is set aside." 1. In the case of Shree Barkha Synthetics Ltd. Vs. Asstt CIT, 2006, 55 taxman289, Raj, it has been held as under: "The principle relating to burden of proof concerning the assessee is that where the matter concerns money receipts by way of share application from investors through banking channel, he has to prove the existence of the person in whose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Jurisdictional High Court and Tribunal, I am of the considered view that that the addition of Rs 80,00,124/- made by the AO u/s 68 of the Act is not sustainable and is directed to be deleted. The appeal on Ground Nos 1, 2 &3 are thus allowed. 21. Ground No 4: In this ground the appellant has requested to add/amend/alter any ground of appeal during the pendency of appeal. However, no such option was exercised by the appellant and, as such, this ground is treated as dismissed. 22. In the result, the appeal is partly allowed. 5. Feeling dissatisfied with the above finding of the ld. CIT(A) the revenue preferred the present appeal before this tribunal challenging the finding of the ld. CIT(A) on the ground as reiterated here in above in para 2. Ld. DR vehemently argued that the ld. AO has in detailed discussion while making the addition and the ld. CIT(A) has deleted the same. Ld. DR also filed a report of the ld. AO in the matter which reads as under : Kindly refer to the above mentioned subject. The Report is submitted as under- 1. Facts of the Case in Brief:- The assessee Smt. Pooja Kedia (PAN: CDWPK4248P) is an individual and has filed her....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lement was involved in this transaction. The response provided by the assessee is considered is not found to be acceptable. 5. In the case of the assessee, the information received from DDIT (Inv.), Unit-1(3). Kolkata, vide letter no. DDIT(Inv.), Unit-1(3), Kolkata/Banka/Information/8071, dated 26.02.2019. On perusal of information, it is found that a search & seizure/survey action in the case of Banka Group was conducted on 21.05.2018. Based on the findings gathered and subsequently brought on records, it is found that Shri Mukesh Banka is the key person controlling person who looks after day-to-day financial affairs and accommodation entry business of Banka Group. During the course of post search verification of seized/impounded materials, various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All companies were categorically accepted by Shri Mukesh Banka as paper shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statements of Shri Mukesh Banka and the materials seized during the course of sea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this office it is notice that the assessee Pooja Kedia is a one of the beneficiaries and the assessee is involved in the taking accommodation entries amounting to Rs. 80,00,124/-in the nature of bogus unsecured loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019-20 connected with the Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. shell companies of Banka Group date of transactions 16.05.2018 totaling of Rs. 80,00,124/-. The assessee has routed unaccounted money of Rs. 80,00,124/- in its bank account through these companies which is remained unexplained. During the searches & as per the information received, it is found that various syndicates have arranged accommodation entry in the form of unsecured loans and in other forms. The modus operandi found is that the beneficiaries routed it's on money layering through various bank accounts to these operators and they provided back the money so received to the beneficiaries. These facts were confirmed by the stake holders viz. operators/syndicate members, which were providing accommodation entries in statements recorded during action u/s 131/132(4) of the I.T. Act. It has been manifestly accepted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019-20 connected with the Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd., which are proved as shell companies during the Search Proceedings in the case of Banka Group. Hence, the transaction of Rs. 80,00,124/- remained Unexplained. Hence, a show cause notice was issued to the assessee as to why the said amount of Rs. 80,00,124/- should not be treated as Unexplained Investment in the hands of the assessee and is to be added u/s 68 as per provisions of section 115BBE of the Act. 11. In response to the show cause noticed, the assessee has provided her response dated 17/02/2024. The assessee has also requested for Video Conference. The assessee reply dated 17/02/2024 is duly considered and analysed. The assessee's request for Video Conference is also accepted and the video Conference is scheduled on 04/03/2024. During the Video conference. the assessee stated that they have transaction with Ever strong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. But the assessee has denied the fact that these entities are shell companies. In his response as well, the assessee is denied the fact tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... AR of the assessee supported the order of the ld. CIT(A) and while doing so also filed the following written submission; 1. The assessee is an individual and regularly filing its Income-tax return. The assessee filed its original return of Income for the A.Y. 2019-2020 on 15.07.2019 declaring total income of Rs. 40,45,600/-. 2. The Show-cause notice issued by the ld. Assessing officer on 09.03.2023 with the reason recorded as follows: In this connection, it is stated that information received from DDIT, Unit-1(3), Kolkata through Insight Portal for F. Y. 2018-19 relevant to A. Y. 2019-20. A search action u/s 132 of Income Tax Act, 1961 was conducted by this office to the Banka Group on 21.05.2018. Based on the finding gathered and subsequently brough on records, it is found that Shri Mukesh Banka is the key person/controlling person who looks after day to day financial affairs and accommodation entry business of Banka Group. During the search proceedings it is found that the assessee is one of the beneficiaries who have taken accommodation entries during the year amounting to Rs. 80,00,124/- in form of bogus unsecured loan. On going through ret....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is one of the beneficiaries who have taken accommodation entries during the year amounting to Rs. 80,00,124/- in form of bogus unsecured loan." In support of your SCN, on our written request made on 20,03.2023, your goodself has supplied the following information; 1. Copy of communication bearing No. DDIT/ (Inv)/Unit-1(3) /Kol/ Banka/ Information/ 2018-19/8071 dated 26.02.2019 issued by office of the Deputy Director of Income Tax (Inv), Unit 1(3) Kolkata - received by ITO 4(3) on 06.03.2019. 2. Verification details uploaded by your goodself on 24.01.2023. My brief reply/objections on the proceeding initiated is as under: Sir, after getting the details documents and information from your end, keeping my all the rights to file my objections / reply reserved, my humble submission is as under: Sir, in this regard our humble submission is as under: With due respect to finding of the department, in this regard it is humbly submitted that your goodself has either not conducted proper inquiry or not providing us the relevant information resulting from your inquiry. Sir, first of all I would like to refer the requireme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 147 of the Act, requires the Assessing Officer to form a bona fide and independent belief based on tangible material that income chargeable to tax has escaped assessment. This belief must be recorded in the reasons to believe, as stipulated under section 148 of the Act. However, in the present case, it is evident that the ld. Assessing Officer has acted solely on borrowed satisfaction from the investigation wing and failed to exercise independent application of mind, as required under law. 6. The impugned assessment order is fundamentally flawed and unsustainable in law due to two critical and interconnected reasons: (1) deviation from the reasons recorded for reopening the assessment, resulting in an impermissible addition and (2) lack of independent application of mind by the AO 7. It is settled law that in case of divergence between the basis on which the assessment was reopened and the actual addition made in the final order, the same is impermissible. The reasons recorded for issuing the notice under section 148 categorically mention alleged escapement of income due to bogus unsecured loans whereas, the assessee respondent sold the sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Book :- Copy of ITR along with the Computation of Income and Profit and loss A/c and Balance Sheet. 67 73 Copy of the Bank Statement for the year under consideration. 74 84 Copy of Ledger account of M/s. Ever Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited. 85 86 Copy of Documents related to M/s. Ever Strong Enclave Private Limited: • Ledger Copy of your appellant appearing in the books of Ever Strong Enclave Private Limited. 87 87 • Copy of Bank Statement of relevant period highlighting the transaction 88 88 • Copy of ITR Acknowledgement for the A. Y. 2019-20 89 89 • Copy of Audited Statement of Accounts for the Year ended 31.03.2019 along with details of Non-Current Investment highlighting the transaction. 90 101 • Copy of Invoice of Sale of Shares. 102 102 Copy of Documents related to M/s. Megapix Vintrade Private Limited: • > Ledger Copy of your appellant appearing in the books of Megapix Vintrade Private Limited. 103 103 • Copy of Bank Statement of relevan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtment. vii) The appellant claims that the statements taken during the course of survey/search proceedings from Mr. Mukesh Banka has retracted. Hence no evidentiary value of those statement. viii) The appellant had asked for an opportunity of cross examine the parties which was not given by the AO. On this issue of cross examination and natural justice the following decisions were relied upon by the appellant: a. Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (SC). b. JHR. Mehta v. Asstt. CIT [2016] 72 taxmann.com 110(Bom.), c. C. Vasantial& Co. v. CIT 11962) 45 ITR 206 (SC). Kishinchand Chellaram v. CIT [1980] 4 Taxman 29/125 ITR 713 (SC), CIT v. Ashish International IT Appeal No. 4299 of 2009, dated 22-2-2011]. d. CIT v. Ashwani Gupta [2010] 191 Taxman 51/322 ITR 396 (Bom.), State of M.P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623 ix) On this issue the appellant has raised the legal issue of denial of natural justice to it, since the AO did not grant opportunity to the appellant to explain the credit entries before making the additions. The appellant has relied upon several decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has not brought on record anything, except the statement of Shri. Banka to demolish the documents submitted by the assessee. The sole basis for the AO to make additions is statement of Shri Mukesh Banka where he admitted that he is involved in providing bogus entries to various beneficiaries. The statement given by Shri Mukesh Banka was retracted by himself by filing affidavits before the income tax authorities. The alleged statement of Sri Mukesh Banka was recorded neither in the presence of the appellant nor their representative, nor was any opportunity afforded to cross- examine. Addition cannot be made u/s 68 simply on the basis of statement of third party, when evidences filed by Appellant clearly proves the fact that these transactions were genuine. If AO intends to rely on the statement of the third party as a witness, then he has to summon such witness, record his statement, offer that witness to the appellant for cross examination. In this regard, it may be noted that it is the AO who is duty bound to provide opportunity of cross- examination of the witness, if he relies on the statement of such witness to decide against the appellant, particularly when it is demanded by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had not been tested by cross examinations The Hon'ble Delhi High Court also in case CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi) held that where addition was sought to be made in reassessment proceedings only on the basis of statement, it was held that it was mandatory for the revenue to produce the proprietor for cross-examination by the assessee on its specific demand in that regard. Therefore, the reopening of assessment based on deposition of the third party was not justified. Not affording opportunity to cross-examine a witness upon whose statement AO sought to rely for making addition is illegality leading to vitiating the assessment. Hon'ble Apex Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC), observed as under- "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority, though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected." From the above ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rasad Purohit on 19/10/2011 by Investigation Wing of Income Tax department, Pune in connection with search and seizure operations of Pride Group at Pune. It is not in dispute that M/s. Grafton Merchant Pvt, Ltd., is one of the companies controlled and managed by Shri Jagdish Prasad Purohit. It Is found that Shri Jagdish Prasad Purohit had also filed an affidavit retracting the original statement recorded on oath from him u/s. 131 of the Act by the Pune Investigation Wing. Since, this retraction statement was filed after a gap of 29 months from the date of original statement, the Ld. AO In the course 'of proceedings of the assessee before us decided to Ignore the same and proceeded to make the addition based on the original statement recorded from him. 81 ............................Though this statement from Shri Jagdish Prasad Purohit was recorded by the Pune Investigation Wing In connection with the search and seizure proceedings of Pride Group, Pune, the AO, in order to place reliance on the said statement, for the purpose of framing assessments in the case of certain assessees at Mumbai, should have recorded yet another statement from Shri Jagdish Prasad Purohit to....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., held that :- 7.5 In summary, considering the facts of the case in light of the provisions of the Act, as elaborated by various courts as discussed in previous paras, including the Jurisdictional Tribunal, I hereby note that there is clear violation of principles of natural justice on the facts of the present case. 14. That department has not challenged the afore-said finding and observation of the ld. CIT(A) which shows that the revenue department admit the illegality of the assessment proceeding. 15. That further ld. CIT(A) after considering the issue on merits of the appeal and after considering the submission and documents submit during the appellate proceeding, the ld. CIT(A) held that:- Page 70 CIT(A) 8. With regard to the merits of the case, I find that the appellant had sold equity shares of BPIP Infra Private Limited to M/s. Everstrong Enclave Private Limited and M/s. Megapix Vintrade Private Limited. It is evident that each transaction was made through banking channels and the appellant has submitted audited statement of accounts, sale bill, ledger copy Acknowledgement of ITR, Bank Statement. The appellant has also submitted that from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Investigation wing. The appellant filed evidences demonstrating that all the two companies are "Active" on MCA website and were filing regularly income-tax returns. Therefore, such companies can by no stretch of imagination be called paper / shell companies. Hon'ble ITAT Ahmedabad in the case of Adarsh Capital Finstock Ltd [(TS-1193- ITAT-2021(Ahd)] has held that a company which was having "Active" status on MCA records cannot be considered to be a shell company. 8.4 The provisions of section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xamine persons whose statements were recorded during investigation. Thus, the impugned additions made on basis of such investigation and statement which was not privy to assessee were directed to be deleted by the ITAT and affirmed by the High Court and was affirmed by the Apex Court. 11. The Hon'ble ITAT Delhi in the case of KMG International Ltd Vs ACIT in ITA No.5591/Del/2010 Date of Judgement /Order: 21/07/2023 Related Assessment Year: 2007-08 has held that addition under section 88 towards unsecured loan amount unjustified as identity and creditworthiness of creditors and genuineness of transaction duly proved by way of documentary evidences. 12 The Hon'ble Jurisdictional Rajasthan High Court in the case of Labh Chand Bohra Vs ITO (2010) 189 TAXMAN 141 held as under: "So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon'ble Supreme Court, in Daulat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established, as that would amount to calling upon him to establish source of the source.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produced below: "In our opinion, in such circumstances, the Assessing officer of the assesses cannot take the burden of assessing the profit and loss account of the creditor when admitted the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into than return of the creditor and brand the same as unworthy of credence. So long It is not established that the return submitted by the creditors has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." 16. The Guwahati High Court in the case of Nemi Chand Kothari Vs CIT [136Taxman 213) observed that the assessee had obtained loans though account payee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alt with by ITAT Jaipur Bench in the case of Pramod Jain & Others(supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 100 DTR 0198 (Raj.) deleted the addition by observing as under :- "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any 30 ITA No. 312/JP/2021 Shri Manohar Lal Chugh, Jaipur. cogent material to show that the assessee has brought back his unaccounted income in the shape of long-term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/ merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly, we delete the addition made by the AO on this account "On further appeal by the department to the Hon'ble Rajasthan High Court, the Hon'ble High Court by referring to the decision of CIT vs. Pooja Agarwal in DB IT Appeal No. 385/2011 da....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 15.10 crores offered by the assessee, we do not find any reason to question the genuineness of the said loan. We, therefore, reverse the finding of the Id. CIT(Appeals) and delete the addition of Rs. 25,00,000/- under section 68 of the Act and allow Ground No. 2 raised by the assessee." 19. Finally on similar facts in the Mukesh Banka group, the Hon'ble ITAT, Ahmedabad bench in the case of ITO vs. Aashna Developers Pvt. Ltd. (ITA No. 417/AHD/2022) has deleted the addition u/s 68 of the Act holding that the assessee has been able to prove the identity. genuineness and creditworthiness of the transaction and the AO no where in the order has conducted any independent inquiry whatsoever to disprove the evidence produced by the assessee. The case of the appellant is squarely covered by the above decision of the Hon'ble Tribunal. 20. In view of the above facts and discussion, and the various judicial decisions as discussed above including the Hon'ble Supreme Court and the Jurisdictional High Court and Tribunal, I am of the considered view that that the addition of Rs 80,00,124/- made by the AD u/s 68 of the Act is not sustainable and is directed to be del....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lief. Mere suspicion cannot be a ground for issuance of notice. In the present case as we have discussed above that there is nothing in the record brought by the AO to establish any connection of the assessee with Mukesh Banka, there is no transaction made by and with Mukesh Banka as the statement of bank account details reveals. Keeping in view the above facts also the case of the assessee is succeeded that issuance of notice is also bad in law. Accordingly, the grounds raised by the assessee are allowed. Assessee appeal allowed. * ITO v. Aashna Developers Pvt. Ltd. 2024 (2) TMI 274 dated 10.01.2024 (ITAT Ahmedabad): Addition of unsecured loan taken from shell/paper companies - assessee company during the year has accepted unsecured loans from certain parties - material collected during the search at third party premises - as alleged by the AO that the parties from whom unsecured loans were accepted by the assessee are paper/shell companies and managed by the entry provider - as argued search materials and statement relied upon by the AO for making addition against the assessee were neither supplied to the assessee - CIT(A) deleted the additions. HELD TH....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ra ledger from the parties and confirmation, ITRs, bank statements and annual report of parties along with their affidavit. The AO in assessment order has nowhere referred to any independent inquiry of whatsoever made to disprove the primary evidence provided by the assessee and not pointed out any infirmity in those evidence. As such, the AO merely on the basis statement of entry provider which has been retracted subsequently held the unsecured loans as unexplained cash credit. Thus approach taken by the AO is not justified. As such the AO failed to appreciate the facts, evidence provided, and case laws relied upon by the assessee company. Assessee company has taken loan through banking channel and repaid the same in the next year along with interest through banking channel and deducted TDS on the interest. It is also important to note that the interest has been allowed by the AO during the assessment which has direct nexus on the loan in dispute. As such the AO has taken a contrary stand. Thus, the loan amount of cannot be made subject to addition under the provisions of section 68 - Appeal of the Revenue is hereby dismissed. * Narmada Concast Pvt. Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which was passed on by office of the Director General of Income tax (investigation, 3rd floor, Scindia House, Ballard Pier, Mumbai vide its office letter No DGIT (Inv)/ Information/PJ2014-15 dated 03.07.2014 and received form the Income tax Officer (Inv)(Hqrs) O/s the Director General of Income Tax (Inv), Rajasthan, Jaipur the assessee has taken the accommodation entries as unsecured loans form the following companies which are managed and controlled by Shri Praveen Kumar Jain Group, Mumbai: SNo. Name of the entry provider PAN No. Financial Year Amount 1 M/s Falak Trading Co. Pvt AABCF5837A 2012-13 1,00,00,000/- 2 M/s Pragati Gems Pvt. Ltd AAFCP5566J 2012-13 50,00,000/- As is known from the statement of Shri Praveen Jain that the assessee is one of the beneficiaries for taking the accommodation entries as unsecured loans from the above companies. As these companies were managed and controlled by Shri Praveen Kumar Jain through his relatives, agents and his accountants as known from the search & seizure operation conducted by Investigation Wing, Income Tax Department, Mumbai in the case of Shri Praveen Kumar Jain Group. Therefore....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Thus, as is evident that except statement of Shri Praveen Jain there was no corroborative evidence was placed on record and therefore, we do not find any reasons to sustain that addition and direct ld. AO to delete the addition of Rs. 1,50,00,000/- made in the hands of the assessee. 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: PAPER BOOK-I S.No. Particular Page No. From To 1. Copy of Written Submission dated 03.07.2024 filed before Ld. CIT(A). 01 66 2. Copy of ITR along with the Computation of Income and Profit and loss A/c and Balance Sheet. 67 73 3. Copy of the Bank Statement for the year under consideration. 74 84 4. Copy of Ledger account of M/s. Ever Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited. 85 86 5. Copy of Documents related to M/s. Ever Strong Enclave Private Limited: • Ledger Copy of your appellant appearing in the books of Ever Strong Enclave Private Limited. 87 87 • Copy of Bank Statement of relevant period highlightin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 148A(d) of the Act. 11 20 5. Copy of Notice issued u/s 148 of the Act dated 30.03.2023. 21 21 6. Copy of notice dated 23.11.2023 issued u/s 142(1) of the Act. 22 26 7. Copy of Reply dated 20.01.2024 in response to notice dated 23.11.2023 issued u/s 142(1) of the Act. 27 32 8. Copy of notice dated 25.01.2024 issued u/s 142(1) of the Act. 33 35 9. Copy of Reply dated 27.01.2024 in response to notice dated 25.01.2024 issued u/s 142(1) of the Act. 36 40 10. Copy of Show-cause notice dated 14.02.2024. 41 48 11. Copy of reply to the Show casue notice dated 14.02.2024 filed on 17.02.2024 49 63 12. Multimetals Limited Vs. DCIT in DBCivil write petition no 9007/2022 64 76 13. Shri Veer Teja Real Estate and Developes P. Ltd. Vs. ITO and others 77 80 14. PCIT Vs. Sunlight Tour and Travels P. Ltd. 81 88 8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the very basis of the re-opening of the case was wrong alleging that there was unsecured loans obtained whereas the same is not the case. While replying to the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct dated 27.07.2022 being based on wrong facts cannot be sustained and it is a case where assessee has been harassed by the Income Tax Department, hence, we deem it proper to allow the civil writ petition. 8. Civil Writ Petition is accordingly, allowed. The impugned order dated 27.07.2022 passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act dated 27.07.2022 are set aside and quashed. He also submitted that both the company was alive and the bills were placed on record. The statement upon which the reliance was made has retracted from his statement and therefore, the same is not binding. Thus, the money received by the company was not unsecured loan but the proceeds of the sales of shares and thereby he relied upon the order of the ld. CIT(A). 9. We have heard the rival contentions and perused the material placed on record. In the present appeal vide ground no 1 & 2 the revenue challenges the finding of the ld. CIT(A) ordering to delete the addition of Rs. 80,00,124/- made on account of unexplained cash credits u/s 68 of the Act. Revenue also challenge the finding that the ld. CIT(A) ignored the fact that the assessee was involved....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the considered view that authorities have acted de hors the Act and provisions contained under section 148 of the Act. The authorities have proceeded on wrong footing and have conducted inquiry with regard to sale of land whereas, actually it was purchase of land. The impugned order dated 27.07.2022 passed under section 148A(d) of the Act and the notice under section 148 of the Act dated 27.07.2022 being passed on wrong facts cannot be sustained and it is a case where assessee has been harassed by the Income Tax Department, hence we deem it proper to allow the civil write petition." The bench also noted that the assessee while proceeding before the lower authorities have made all the compliance of the notices so issued and submitted the details of the sale of shares which were not doubted. That the assessee submitted Audited Statement of Accounts, Bank Statements, Ledger Copy of Accounts and ITR Acknowledgement for the A.Y. 2019-2020, Copy of Invoices of sale of shares of both the companies i.e. M/s. Everstrong Enclave Private Limited and M/s. Megapix Vintrade Private Limited. The assessee also tabulated the details of the transaction [ extracted here in below] along with the su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....than)] holding that ; 11. Now it is a matter of record that Shirish Chandrakant Shah had retracted his statements given before the Assessing Officer. Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition. Therefore, the substantial questions of law framed by the appellant pertained to an open issue which stands concluded by the decision of the Hon'ble Supreme Court; one such decision was rendered in "M/s Pullangode Rubber Produce Co. Ltd. v. State of Kerala And Another" [1973] 19 ITR 18. Respectfully following the above binding precedent cited and discussed herein above we do not find any infirmity in the detailed finding given by the ld. CIT(A) and thereby the ground no. 1 & 2 raised by the revenue stands dismissed. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 07/08/2025. ============= Document 1 showing the financials of the said companies. SI. No. Name of The Company Investible Funds Available as Per Audited Fi....