TaxTMI 
TaxTMI 
2026 (1) TMI 191
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....n Wing, Kolkata, AO has initiated reassessment proceedings u/s 147 of the Act and notice u/s 148 was issued on 30.09.2019. In response, the assessee filed return of income on 24.04.2029 declaring the same income as was declared in the return filed u/s 139(1) of the Act. Assessee then, requested for the supply of the reasons recorded before initiating reh proceedings u/s 147 of the Act which were supplied and assessee filed objections against reopening the assessment. The same were disposed-off on the very same date when the reassessment order was passed by the AO and the income of the assessee was assessed at Rs. 90,50,000/- by making additions u/s 68 of the Act by treating the loan received from M/s Oven Commercial Pvt. Ltd. as unexplained credit and from undisclosed sources. Against the said order, the assessee preferred an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee. 3. Aggrieved by the said order of Ld. CIT(A), the assessee preferred present appeal before the Tribunal by taking following grounds of appeal: 1.0 That on the facts and in the circumstances of the case, the disallowance, imposition of tax and interest with reference thereto, the....
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....re carried by the Investigation Wing, Kolktta and further observed that the company M/s Oven Commercial Pvt. Ltd. from whom the assessee has received the loan was managed and controlled by one Shri Subhash Chandra Bhartia, who was an entry operator and used various companies to provide accommodation entries to the beneficiaries in the shape of unsecured loans. The Ld. AR submits that from the perusal of the reasons so recorded as available at PB pages 15 to 19, it is clear that they were recorded solely on the basis of the information supplied by Investigation Wing and no independent application of mind by the AO. He further submits that the despite of repeated request neither the statements of Shri Subhash Chandra Bhartia, were supplied nor an opportunity to cross examination of Shri Subhash Chandra Bhartia was provided. The Ld. AR thus, submits that the reopening of assessment is invalid and consequent order deserves to be quashed. He also filed written submissions which reads as under: "Argument no.1: Approval u/s 151 of the Act is mechanical in nature and provided without application of mind. The Ld. PCIT has granted approval u/s 151 of the Act is mechanical i....
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.... Thereafter, the appellant vide letter dated 23-12-2019 has again requested the Ld. AO to provide the copy of statement recorded and to cross-examine the person, on the basis of which such addition is sought to be made. (Kindly refer page no. 95 to 120 and 151 to 167 of PB). Despite of persistent request by the appellant to provide the statement of Sh. Subhash Chandra Bhartia and to provide an opportunity to cross examine the person on the basis of whom the re-opening is done, the Ld. AO neither provide the copy of statement recorded nor produce the person on the basis of which re-opening was done. Subsequently, the Ld. AO vide order dated 24-12-2019 (the same day of passing the reassessment order) disposed the objections raised by the appellant. The Ld. AO in the aforesaid order disposing off the objections at Para no. 2 clearly stating that the assessee objected to reopening of assessment u/s 147 of the Act primarily stating that the re-opening was made u/s 147 on the basis of report received from investigation wing. The appellant has never raised any such contention in the objection letter. In the aforesaid order, the Ld. AO has not mentioned anything ....
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....s one of the beneficiary of the accommodation entries provided for in the shape of unsecured loans. Similar objections were raised by the assessee before the AO challenging the initiation of reassessment proceedings, however, such objections were disposed of by the AO vide order dated 24.12.2019 wherein all such arguments were considered and find no error in the action of the AO in reopening the assessment which is based on the examination of the materials available on record. Therefore, in our considered opinion there is no error in reopening the assessment and accordingly, grounds of appeal No.2 to 2.2 of the assessee are dismissed. 8. Now coming to the grounds of appeal No.3,4 & 5 challenging the addition of Rs. 90,50,000/- made by the AO on merits. Before us, ld. AR for the assessee submits that assessee has received Rs. 60,50,000/- on 13.01.2012 and Rs. 28,00,000/- on 25.02.2012 which stood credited to its bank account on the respective dates. He further submits that sum was repaid along with interest in the month of May, 2015 i.e. much prior to the action of reopening the taken by the Assessing Officer and even much before the search action taken in the case of Shri Subhas....
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....o was established as entry provider and utilized these companies for providing accommodation entries, all the loans provided by the companies managed and controlled by him are accommodation entries. He further submits that the AO has been able to establish that the lender company is a paper company and funds available in its bank account are controlled and managed by Sh. Subhash Chandra Bhartia and, therefore, loan given to the assessee is mere accommodation entries and, therefore, he requests for the confirmation of the orders of the lower authorities. 12. Heard both the parties and perused the materials available on record. In the instant case, assessee has received unsecured loan of Rs. 90,50,000/- from M/s Oven Commercial Pvt. Ltd. and filed all the necessary documents in order to establish the identity of lender, genuineness of transactions and its creditworthiness. The lower authorities alleged that one Sh. Subhash Chandra Bhartia has admitted in the course of search in its case that he was managing and controlling various companies including the lender company to provide accommodation entries of unsecured loans to various beneficiaries. However, it is seen that neither th....
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....eiterated his objection to the reopening of the case which was not warranted as the same was already disposed off through a speaking order as mentioned earlier. He also objected to the name of the assessee and amount appearing in the statement of SK Gupta. It is an accepted fact that recording of reason is only the preliminary stage of initiating the assessment or re-assessment. What is relevant and to be taken here is the income and also any other income chargeable to tax which has escaped assessment and which comes to the notice of the AO subsequently in the course of the proceedings u/s 147. The assessee's request for cross-examination is also not acceptable and there is no need for it because there is no other statement of Sh. S.K. "Gupta which retracts from his earlier statement given on 20.11.2007. The original sworn statement of Sh. S.K. Gupta holds good till today which itself stands as the corroborating evidence of the escapement of income of this assessee. In reply to Q.No. 16, Sh. S.K. Gupta acknowledged that he himself maintained the bank accounts of the companies mentioned in the question out of which Dhamaka Trading & Construction (P) Ltd, ChanderPrabhu Financial ....
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....non-service of notices/summons to alleged share subscribers. It appears that the so-called confirmations were got arranged and sent by the assessee himself. The papers arranged by the assessee and filed by its Counsel are nothing but paper trails which have no evidentiary value." 13. From the above, it is clear that despite the request of the assessee for cross-examination of Shri S.K. Gupta, whose statement is the basis of addition made by the AO, the AO has not provided the opportunity of cross-examination to the assessee. 14. We find, identical issue had come up before the coordinate Bench of the Tribunal in the case of TRN Impex Pvt. Ltd. (supra) where the Tribunal deleted the addition on the ground that the AO did not grant the opportunity of cross-examination despite being asked for by the assessee. The relevant observation of the Tribunal from para 6 onwards reads as under:- 6. We have considered the rival submissions and perused the material on record. It is not in dispute that reopening of the assessment was made on the basis of the search conducted in the cases of Shri Deepak Agarwal and Shri Mukesh Kumar. Their statements were also recorded whi....
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....e case. Thus, there is no material left on record with the Department to justify the addition of Rs. 10 lakhs against the assessee. It may also be noted here that assessee has produced the above documentary evidences noted above which clearly shows that the Investor company has made investment in assessee company which is confirmed by the Investor in their confirmation and affidavit of the Director. The balance-sheet of the Investor shows that they have made investment in assessee company and they have sufficient balance to make the investment in assessee company which was made through banking channel. No cash was found to have been deposited in the account of the Investor before making investment in assessee company and actual shares were also allotted to the Investor by the assessee company. Thus, documentary evidences on record have not been rebutted by the A.O. through any evidence or material on record. No independent enquiry has been made against these documentary evidences. Therefore, such documentary evidences clearly supports the explanation of assessee that genuine investment have been made in the assessee company. We rely upon Judgments of Hon'ble Delhi High Court in....
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....of Shri S.K. Gupta to the assessee, therefore, respectfully following the decisions cited supra, we hold that the addition made by the AO and sustained by the CIT(A) is not in accordance with the law. We, therefore, delete the addition." 14. Further in the case of Veena Gupta (supra), the Co-ordinate Bench by placing reliance on the judgements of the Hon'ble Supreme Court in the case of Andman Timber Industries (supra) has held that not providing the opportunities of cross examining the prime witness of the Revenue, no addition could be made. The relevant observations as contained in para 11 to 15 are as under: "11. We have perused submissions advanced by both sides in light of records placed before. We also refer to all judicial precedents relied upon by both sides. 12. It is observed that both Assessing Officer as well as Ld. CIT(A) is relying upon statement recorded by Investigation Department of Sh. Amit Dalmia and Sh. Narendra Kumar Jain. It is based upon their statements, that test of human probabilities has been applied to facts of present case by authorities below. Further, it cannot be ignored that assessee was not granted opportunity to cross examine ....
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....s sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority." 15. We, accordingly, respectfully following decision of Hon'ble Supreme Court in the case of Andaman Timber Industries versus CCE (supra) allow appeal of assessee on legal ground raised in Ground 2(c), and quash and set-aside the assessment order so passed." 15. On the issue of discharging the onus, the Hon'ble Delhi High court in the case of Mod. Creations (P.) Ltd. v. ITO reported in [2013] 354 ITR 282, held as under: "It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions ex....
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....w income as reflected in their return of income. lt was observed by the ITAT that the Assessing Officer had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High court." 17. The Hon'ble Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd reported in [2022]134 Taxmann.com 256 (Delhi) while allowing the appeal in favour of the assessee towards the additions made u/s 68 of the Act has held as under : Section 68 of the Income-tax Act, 1961 - Cash credits (Share capital money) - Assessment years 2012-13 to 2017-18 - Assessee-company received share capital and share premium money from several investors - Assessing Officer made addition in respect of same on account of unaccounted income under section 68 on basis of recorded statement of managing director of assessee-company - Whether since assessee placed sufficient documentary evidence to establish that money which assessee had paid to investors was routed back to it in form of share capital/share premium and identity, creditworthiness and genuineness of investors was proved, there was no justification to make addi....