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2021 (4) TMI 220 - AT - Income TaxAddition u/s 68 - assessee having received 0% OFCDs from various parties - onus cast upon the assessee to prove - unexplained cash credit holding that the investment made by different corporate concerns in OFCDs (Optionally Fully Convertible Debentures) issued by the assessee company have not been satisfactorily explained - addition based on non production of Directors - HELD THAT - The assessee company was in existence for about only one and a half months during the relevant period and not much business was conducted, however, as per the memorandum of association the assessee company was formed to carry on the business as service provider/operators, agents, lenders, hirer and distributors of cable television network in the line of telecom and communication and also to act as business consultant. Admittedly the company had meager receipts from advisory services and some interest income. On the issue of receiving of OFCDs from various the Assessing Officer has required the assessee to furnish the relevant evidences and documents to establish the identity and creditworthiness of the investor companies and also the genuineness of the transaction. Nowhere these evidences or documents have been rebutted by Assessing Officer or any specific material has been brought on record to allay the veracity of these documents. In so far as the Assessing Officer s allegation that the assessee was non cooperative, already it has been explained by the assessee before the ld. CIT (A) as well as before us that, in the first notice u/s. 142(1) issued on 15.10.2013 seeking preliminary details, the assessee had filed their requisite details, which were, income tax return, balance-sheet, computation and details of Directors of shareholders. Thereafter, 2nd notice was issued almost after 15 months from the date of first notice, wherein 63 points were listed, which too was complied with by the assessee on 16.02.2015. It was for the first time that at the fag end of the limitation of passing of the order that the Assessing Officer issued summons u/s.131 on 20.03.2015 to produce the Directors of the subscriber companies on 24.3.2015 and said summons was served on the late evening of 21st March, 2015 which was a Saturday and in response assessee has replied on 24.03.2015 that time allowed was too short. The Assessing Officer immediately thereafter issued a final show cause notice on 25.03.2015 which again was responded on 27.03.2015. Under these admitted facts, which have been duly noted by the ld. CIT (A) which is also evident from the records, there cannot be any allegation of non cooperation by the assessee or failure to produce the Directors. If the Assessing Officer was really desired to examine the Directors, then he would have given sufficient time to the assessee specifically when most of the Directors are based out station. Now in so far as Income Tax Inspector s report that address of KOA Investment was a small Halwai shop, it has already been clarified that the Income Tax Inspector has gone on the wrong address, and therefore, this report of the Income Tax Inspector cannot be taken into cognizance. Another point raised by the ld. counsel is that the Income Tax Inspector s report was never confronted to the assessee and if there was any such adverse report regarding wrong address or parties not available, at least assessee should have been confronted to clarify or to provide the correct address. When ld. CIT (A) in the remand proceedings asked the Assessing Officer to carry out necessary inquiry, then also, Assessing Officer did not ask the assessee to produce the Directors, albeit has sent notices u/s. 133(6) to these companies who had duly responded to and had given all the necessary details and confirmation along with documentary evidences substantiating the case of the assessee. In such remand report also no adverse inference has been drawn which fact has already been noted by the ld. CIT (A) and has dealt with same while deleting the addition in the case of each and every subscriber/investor company. Hence, non production of Directors on the facts and circumstances of the case cannot be adversely viewed and cannot be the sole reason for sustaining the addition. Coming to the Assessing Officer s observation regarding statement of Shri Tarun Goyal and the investigation carried out in his case in the year 2008 factum of investigation report in the case of Shri Tarun Goyal which relates for much earlier years cannot be conclusive material to hold that either Shri Tarun Goyal was still continuing with his nefarious business of accommodation entry or assessee was beneficiary of any accommodation entry in this year. Statement of Shri Jagdish Prasad Purohit dated 21.01.2015, wherein he has admitted that he is controlling few companies which were engaged in providing accommodation entry - The reliance placed by the Assessing Officer in his statement to draw the adverse inference is not correct, because Assessing Officer has just jumped to the conclusion that, since these companies are controlled by Shri Jagidsh Prasad Purohit, therefore, it has to be sham transaction or bogus. At least there should have been some reference that the assessee company was one of the beneficiaries of the accommodation transaction or was figuring in the list of the companies through which he has been provided accommodation entries. Without any such material information from his statement or investigation report qua the assessee, all the reference made by the Assessing Officer has no legs to stand so as to warrant any adverse inference while examining the credit entries in the case of the assessee company. Assessing Officer has also referred the investigation of bank transaction with various parties at the time of repayment of OFCD holders and came to the conclusion that the amount of repayment finally vested with the subscribers. If the fund obtained through OFCD have been refunded back which is an admitted fact and did not remain in the possession of the assessee company and then how the refunded amount has been utilised by the subscriber companies is none of burden of the assessee, unless these parties have confirmed otherwise and from where the funds have originated. How the assessee can be held to beneficiary of accommodation entry until and unless there is some information or statement or material that for the period the assessee had taken OFCDs was through unaccounted money which was introduced in the books and later on it has repaid back which is also duly reflected in the books of account and has received a cash back from these entities. If the assessee could not produce the Directors during the assessment proceedings in response to the summons issued by the Assessing Officer due to lack of time, then what prevented the Assessing Officer to ask the assessee to produce the Directors during the course of remand report when ample opportunity was given by the CIT (A) to him. - Thus onus cast upon the assessee was duly discharged - Decided in favour of assessee.
Issues Involved:
1. Addition under Section 68 of the Income Tax Act for unexplained cash credits. 2. Assessment of the identity, creditworthiness, and genuineness of transactions involving OFCDs (Optionally Fully Convertible Debentures). 3. The role of statements from alleged entry operators and their impact on the assessment. 4. The adequacy of the time provided for the assessee to produce evidence and witnesses. 5. The relevance and admissibility of additional evidence at the appellate stage. Detailed Analysis: 1. Addition under Section 68 of the Income Tax Act: The primary issue was whether the addition of ?151,95,00,000/- (in the case of M/s. Arizona Global Services Pvt. Ltd.) and ?53,55,00,000/- (in the case of M/s. Arizona Ventures Pvt. Ltd.) under Section 68 for unexplained cash credits was justified. The Assessing Officer (AO) made these additions on the grounds that the investments in OFCDs were not satisfactorily explained, citing the involvement of alleged entry operators and the non-cooperation of the assessee during the assessment proceedings. 2. Assessment of Identity, Creditworthiness, and Genuineness: The assessee provided extensive documentation to substantiate the identity and creditworthiness of the investors and the genuineness of the transactions, including: - Names, addresses, and PANs of the subscribers. - Copies of ITR acknowledgments. - Written confirmations and bank statements. - Confirmations of repayment of the loans. The AO's adverse inference was based on the non-production of directors and the alleged involvement of entry operators. However, the CIT (A) found that the assessee had discharged its onus by providing credible evidence, and the AO’s reliance on old statements and reports without current corroborative evidence was not sufficient to sustain the additions. 3. Role of Statements from Alleged Entry Operators: The AO relied heavily on statements from Shri Tarun Goyal and Shri Jagdish Prasad Purohit, who were identified as entry operators in past investigations. However, these statements were from several years prior and did not specifically implicate the assessee in the transactions under scrutiny. The CIT (A) noted that these statements had limited relevance and that the AO failed to establish a direct link between the assessee and any alleged accommodation entries. 4. Adequacy of Time for Producing Evidence: The AO issued a summons on 20.03.2015, requiring the production of directors by 24.03.2015, which the CIT (A) and the Tribunal found to be an unreasonably short period. The CIT (A) observed that effective hearings began only in January 2015, and the final show-cause notice was issued just days before the assessment order was finalized. This short timeframe was deemed insufficient for the assessee to gather and present the required evidence. 5. Admissibility of Additional Evidence: The CIT (A) admitted additional evidence under Rule 46A, considering the short time provided by the AO and the genuine difficulties faced by the assessee in collecting evidence from outstation parties. The additional evidence included balance confirmations, bank statements, and ITR acknowledgments from the investor companies, which were verified and confirmed during the remand proceedings. Conclusion: The Tribunal upheld the CIT (A)’s decision to delete the additions made under Section 68, concluding that the assessee had satisfactorily discharged its burden of proof regarding the identity, creditworthiness, and genuineness of the transactions. The AO’s reliance on outdated statements and reports, without current corroborative evidence, was insufficient to justify the additions. The appeals of the Revenue were dismissed, confirming the deletion of the additions.
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