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TaxTMI 
TaxTMI 
TaxTMI 
2026 (5) TMI 103
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....assessee failed to establish the lender's creditworthiness and the genuineness of the transaction. 2. That the order of the CIT (A) is erroneous and is not tenable on facts and in law. 3. That the grounds of appeal are without prejudice to each other. 4. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal." 3. The assessee has taken following grounds of appeal: "1. That the order of Ld. CIT (A) is against the law, facts, principles of natural justice and all other principles and rules of law and therefore liable to be set aside. 2. That the order of Ld. CIT(A) is arbitrary and bad in law in so far as it failed to consider that the notice u/s. 153 A of the Income Tax Act 1961 issued by Ld. AO is misconceived and illegal being without jurisdiction, contrary to facts and provision of law. As such the order passed by Hon'ble CIT(A) is liable to be quashed/set aside. 3. That the Ld. CIT(A) has erred in law in confirming the action of Ld AO in holding that search was carried out on appellant which is contrary to facts and provision of la....
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....of appeal: "1. That the Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 49,50,000/- u/s 68 of the Act on account of share capital received from M/s Vagmi Financials Pvt. Ltd. without appreciating that the Ld. Assessing Officer failed to conduct any independent enquiry or verification under Section 142 of the Income Tax Act, 1961, to examine the genuineness of the transaction. The failure to conduct such an independent enquiry renders the assessment order and the additions made therein as unsustainable in law. 2. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs. 49,50,000/-by placing reliance on the statements of Shri Praveen Kumar Agarwal recorded u/s 131 of the Act dated 17.07.2018 and Shri Mahendra Sethia recorded u/s 131 of the Act dated 20.06.2018, which were recorded after the conclusion of the search operations and were recorded under Section 131 and not under Section 132(4) of the Act, and therefore cannot constitute material found 'during the course of search for the purposes of Section 153A of the Act. 3. That the Ld. CIT(A), has erroneously held that the right to cross-examination "....
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....1 of the Act and not u/s 132(4) of the Act, therefore the same cannot constitute material found during the course of search for the purpose of section 153A of the Act. Since these grounds are borne out from the assessment order and requires no verification of the facts and are legal in nature, therefore, by respectfully following the judicial pronouncements relied upon by the assessee of the Hon'ble Supreme Court as stated above, the additional grounds of appeal raised by the assessee are admitted for adjudication 8. In grounds of appeal 1 to 3 assessee has challenged the initiation of proceedings u/s 153A of the Income Tax Act, 1961 and completion of assessment without referring to any incriminating material. 9. Brief facts of the case are that the assessee is a company incorporated under the Companies Act and engaged in the business of Real Estate. The return of income was e-filed on 23.10.2017 declaring total income at Nil. A search and seizure action u/s 132 of the act was carried on 23.03.2018 on Luv Kush Group of cases. The proceedings in the case of the assessee were also initiated u/s 153A of the Act by observing that the assessee was part of the same group and it was....
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....ad admitted engaged in providing accommodation entries by managing and operating various companies and M/s Vagmi Financial Pvt. Ltd is one of them. 12. Before us, Ld. AR for the assessee in support of grounds of appeal No. 1 to 3 drew our attention to page no. 104 of the PB which copy of the panchnama prepared during the search on 24.03.2018. As per item No.1 of the panchnama, search warrant was issued in the name of M/s Seetal Impex Pvt. Ltd. & Ors. And nowhere in panchnama name of the assessee was appearing. The Ld. AR further drew our attention to page 110 of the PB which is letter dated 05.11.2019 filed by the assessee before the AO stating that no search warrant was issued in the name of assessee, therefore, jurisdiction assumed u/s 153A is not correct and thus the proceedings initiated by issue of notice u/s 153A be dropped. Further vide letter dated 20.11.2019, assessee reiterated the same facts and further requested for the supply of the incriminating material, if any, found and seized during the course of search in the case of assessee company. Copy of the said letter is placed at pages 113 and 114 of the PB. As per ld. AR, despite of the repeated objections taken by th....
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....titute incriminating material based on which addition could be made in the hands of assessee towards accommodation entries obtained in the shape of share capital and unsecured loans. She prayed accordingly. 15. Heard both the parties and perused the materials available on record. From the perusal of the assessment order, it is observed that AO at page 1 of the order observed that assessee company was also covered u/s 132 of the Act. At same time when we refer page 104 of PB, which is copy of panchnama prepared at the time of search at 4735/11, 2, Ground Floor, Prakash Deep, Ansari Road, Dariyaganj, New Delhi, i.e. the premises where search was commenced on 23.03.2018 at 3.PM and concluded on 24.03.2018 at 5 P.M. It is further observed that in the panchnama in Item at S. No. 1, in whose name warrant it is mentioned "M/s Seetal Impex Pvt. Ltd. & Ors" and the address mentioned is the same as stated herein above. It is further observed that assessee company is also having the same address. Once search is carried out at the premises which is registered office of the assessee company also, though in Panchnama, the name of the assessee has not specifically mentioned, however, it is obs....
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....ct. He further submits that the loan taken were repaid in the year itself which facts is admitted by ld. CIT(A) while deleting the addition therefore, no addition could be made by holding the credit as unexplained. Ld. AR also stated that the additions have been made solely based on the statement recorded of the third party which were taken under exceptional circumstances and were retracted by the respective persons through affidavits filed before the AO, therefore, such statement deserves no credence. Ld. AR further submits that neither the share capital nor the loans were taken in cash, and it is not the case of the revenue that the cash was deposited in the bank accounts of the lender companies immediately before the funds given to the assessee. Ld. Also stated that the assessee has also established the source of source in the hands of the companies by submitting the assessment particulars and other documents subscriber company. 20. Ld. AR further submits that no opportunity of cross-examine the persons whose statements were relied upon was provided to the assessee more particularly when such statements were used against the assessee. Ld. AR further submits that both the pers....
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....04,00,000/- from M/s Vagmi Financial Pvt. Ltd. out which Rs. 49,50,000/- received towards share capital and Rs. 54,50,000/- were received tas unsecured loan. The AO observed that the company M/s Vagmi Financial Pvt. Ltd. is Shell company managed and controlled by Shri Parveen Agarwal and Mahendra Setia (alleged as entry operator) however, ld. CIT(A) has accepted the loan as genuine. It is surprising that when the creditworthiness of lender company is doubted and allegation has been made with respect to the lender company as Shell company as to what prevent the ld. CIT(A) to hold that the entire funds received were accommodation entry. It is also relevant to state that during the year itself, loan was repaid which fact was ignored by the AO however, ld. CIT(A) appreciated this fact while deleting the addition towards unsecured loan. 24. Before AO, the assessee submitted detailed reply to the show cause notice issued and further filed all the plausible documentary evidences to support that the loans taken were genuine which are placed in the paper book at pages 120-187. At this juncture, we first refer to the provision of section 68 of the Act. Cash credits. 68. ....
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....ee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. 26. Coming to the facts of the present case in the line of the above proposition of law, from the perusal of details filed by the assessee during the course of assessment proceedings as available in Paper Book at page 120 to 187, it is observed that the assessee has filed the following documentary evidences:- (i) Confirmed Copy of account statement; (ii) Bank statement of the lender companies; (iii) Audited financial statement of the lender companies; (iv) Copy of ITR acknowledgement of the lender companies; and (v) Copy of share allotment return filed before the ROC 27. I....
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.... and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S.153A." 31. Hon'ble Supreme Court in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxman.com 399 (SC) has also held that "no addition could be made dehorse the incriminating material". 32. The Assessing Officer has not brought anything on record to establish that the source in the hands of subscriber company is non-genuine. Merely because some person accepted that they managed and controlled the lender / subscriber company which statements were retracted later, the funds received cannot be held to be accommodation entries. It is well-settled position of law that no matter how strong suspicion is, it cannot take place of the evidence. Therefore, in the absence of any evidence showing that in fact, appellant has given cash in lieu of funds received in the shape of share capital and unsecured loan, merely on the basis of suspicion, no addition can be made for which reliance is placed on decision o....
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....t the material placed on record, which was largely bank statements or the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Etd (20092-229-178.268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. 2006) 215 CTR 495 (SC).* 35. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd. etc. in ITA. No.71 of 2015 dated 12th August, 2015 held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low 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 submitt....
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....rming the addition towards share capital received. In case of Andaman Timber Industries Vs. CCE (SC) reported in 281 CTR 241(SC), the hon'ble Apex Court held that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case. 39. Thus, the denial of opportunity to cross examine which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. Thus, the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. 40. In view of the above discussion and further looking to the fact that when all the relevant details and documentary e....