TaxTMI 
TaxTMI 
2025 (12) TMI 420
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that M/s Urch Trader (P) Ltd. has transferred a sum of Rs. 3,43,15,000/- in the account of the assessee. It was also stated that during the course of inquiry by the investigation wing into the financials of Urch Trader (P) Ltd. that the said party was not having any creditworthiness and these transactions were of suspicious nature. The assessee filed the return of income on 26.05.2022 in compliance to notice u/s. 148 of the Act, declaring the same income as shown in the original return. The statutory notices were issued to the assessee along with questionnaire which were duly served on the assessee. The assessee replied the questionnaire vide written submissions dated 22.12.2022. Thereafter, the assessee filed the details/ information before the ld. AO and the ld. AO on the basis of said details/ information and also the information available on the insight portal of the department noted that the assessee was a salaried employee and only declared income of Rs. 9,42,440/- for the instant instant assessment year and thus, doubted the amount advanced by Urch Trader (P) Ltd. of Rs. 3,43,50,000/- to the assessee. Finally, the loan taken was treated as unexplained cash credit/ bogus cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that during the relevant previous year the appellant has received the sum of Rs. 3,43,50,000/- from M/s. Urch Trader Pvt. Ltd. as unsecured loan. On enquiries and investigation carried out by the investigation wing of the department, it is found that loan received from M/s. Urch Trader Pvt. Ltd. is in the nature of accommodation entry. It is further found that the sum of money received by the appellant from M/s. Urch Trader Pvt. Ltd. was routed through two shell companies namely Shree Sai Smelters India Ltd. and Shree Sai Rowling India Ltd. against which the government agencies are carrying out proceedings in respect of financial irregularities. Further M/s. Urch Trader Pvt. Ltd. an NBFC was declared as high risk NBFC on account of violation of PMLA and PML rules by the RBI vide order dated 31.01.2018. It is also noted that the appellant is a salaried person who had declared total income of Rs. 9,42,440/- for the year under consideration and thus is not having sufficient creditworthiness to repay such a huge amount of unsecured loan taken. It is further noted that no security/ asset of whatsoever nature has been mortgaged with M/s. Urch Trader Pvt. Ltd. as security against such a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act for A.Y. 2017-18. The ld. AR submitted that the assessee has explained the said loan as taken for some specific purpose and back-to-back given it for investment in one educational institution AARDA Education, which has used the same to set up a school called DPS School in Basistha Chariali DPS, Kamrup, Assam. The ld. AR also referred to the reply filed by the loan creditor in response to notice u/s. 133(6) of the Act, thereby affirming the transactions with the assessee. The ld. AR submitted that the assessee has discharged its onus cast upon him by filing all the documents and even sought cross-examination of the parties who has made adverse statements, however the same was not allowed. The ld. AR stated that at the time of proceeding u/s. 148A(d) of the Act, no material / evidences as relied on by the ld. AO were provided to the assessee. Therefore, the same could not be used against the assessee to make the additions. In defense of his argument the ld. AR relied on the decision of Hon'ble Apex Court in the case of Kale Khan Mohammad hanif Vs. CIT (1963) 50 ITR 1 (SC) and Roshan-Di-hatti Vs. CIT (1977) 107 ITR 938, Nemi Chand Kothari Vs. CIT (2003) 264 ITR 254, PCIT Vs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment proceedings as well as in the appellate proceedings, the assessee had filed all the documents before the authorities comprising ITR, audited balance sheet, loan confirmation, bank statement and even assessment order u/s. 143(3) of the Act foray 2017-18 in case of the lender. We also note that the ld. AO in order to independently verify the transactions issued notice u/s. 133(6) of the Act to M/s Urch Trading Pvt. Ltd., which was duly replied by the said party by confirming the transactions as is apparent from the records before us. The authorities below have not pointed out any defect or deficiency in the documents furnished by the assessee as well as by the lender by doing any further enquiry. Therefore, we are not in a position to sustain the order passed by the ld. CIT (A). The case of the assessee is squarely supported by the decision of the jurisdictional High Court in the case of Calcutta High Court in the case of PCIT Vs Sreeleathers (2022)448 ITR 332(Cal) wherein in it has been held as under: "4. Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....further to locate those creditors and examine their creditworthiness. It has been further held in A.S. Sivan Pillai v. CIT [1958] 34 ITR 328 (Mad.) that while drawing the inference, it cannot be assumed in the absence of any material that there has been some illegalities in the assessee's transaction. Thus, more importantly, as held by the Hon'ble Supreme Court in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), the onus of proving that the appellant was not the real was on the party who claims it to be so. Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22-12-2017.The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ees and they have declared income to the tune of Rs. 45,00,000/- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. We find that there is no discussion on the explanation offered by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22-12-2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such find....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supra), held as under:- "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 It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which....