2019 (8) TMI 725 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 made alleging accommodation entries based on Inv. Wing report - absence of any incriminating documents found during the course of search in case of the assessee company - HELD THAT - On perusal of the assessment order itself, we are of the view that the assessee deserves to succeed in the matter. The reason for the same is evident from the Office note which forms part of the assessment order and which has been submitted by the Revenue before the Bench as part of the appeal documentation. Assessing Officer has given a finding that on verification of documents submitted by the assessee and called from the investor companies, it is found that the amount of investment agrees with the balance reflected in the books of the assessee as well as investors companies. We therefore find that the assessee company has duly discharged the initial onus cast on it u/s 68 and once initial onus has been satisfied by the assessee company to the satisfaction of the AO and once the AO is satisfied with the documentation so submitted by the assessee company and which has also been confirmed by him directly from the investor companies, we failed to understand as to why in the body of the assessment order, he has merely proceeded basis the information received from the Investigation Wing, Mumbai in respect of search and seizure operation in case of Sh. Praveen Kumar Jain Group and has kept silent on the documentation and verification so carried out by him in respect of direct evidences so submitted by the assessee company. In the instant case, we find that the assessee has originally filed its return of income on 10.10.2007 and time limit for issuance of notice u/s 143(2) has expired on 30.09.2008 before the date of search which was carried out on 26.09.2012. Therefore, on the date of search, the assessment for the impugned assessment year was not pending/abated and already stood completed. Further, on perusal of the assessment order, we find that there is no discussion or finding by the Assessing Officer that any incriminating document was found during the course of search relating to the investment made by any of these companies in the assessee company, rather the whole basis of assessment is the information received from the Investigation Wing, Mumbai during the course of assessment proceedings. Therefore, in absence of any incriminating documents found during the course of search in case of the assessee company, the law is well settled that no addition may be made in the hands of the assesse company. The decision of the Hon ble Delhi High Court in case of Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT , the Hon ble Gujarat High Court in case of Saumya Construction (P.) Ltd 2016 (7) TMI 911 - GUJARAT HIGH COURT and Jai Steel (India) ACIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT support the case of the assessee company. - Decided against revenue

Issues Involved:
1. Deletion of addition of ?1,03,50,000/- on account of accommodation entries.
2. Non-provision of statement and cross-examination opportunity of Shri Praveen Kumar Jain and others.
3. Absence of incriminating material found during the search.
4. Reliance on third-party statements without corroborative evidence.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?1,03,50,000/- on Account of Accommodation Entries
The Revenue challenged the CIT(A)'s decision to delete the addition of ?1,03,50,000/- made by the Assessing Officer (AO) based on the alleged accommodation entries provided by companies controlled by Shri Praveen Kumar Jain. The AO relied on the statement of Shri Praveen Kumar Jain and other associates, which were recorded during a search operation, to conclude that these companies were not conducting genuine business and were providing accommodation entries.

2. Non-provision of Statement and Cross-examination Opportunity
The assessee contended that the AO did not provide the statement of Shri Praveen Kumar Jain and other associates, nor did he allow the assessee to cross-examine them. The CIT(A) noted that the AO's reliance on these statements without providing an opportunity for cross-examination was incorrect. The CIT(A) emphasized that the context and complete statement of Shri Praveen Kumar Jain were necessary for drawing any inference, and without cross-examination, these statements could not be used against the assessee.

3. Absence of Incriminating Material Found During the Search
The assessee argued that no incriminating material was found during the search at their premises, which could establish any undisclosed income. The CIT(A) agreed, stating that the AO did not find any such material during the search. The AO's addition was based solely on the information received from the Investigation Wing, Mumbai, and not on any direct evidence found during the search at the assessee's premises.

4. Reliance on Third-party Statements Without Corroborative Evidence
The assessee submitted various documents to prove the genuineness of the transactions, including affidavits, confirmations, bank statements, share application forms, and PAN details of the investor companies. The AO, however, disregarded these documents and relied solely on the statements of Shri Praveen Kumar Jain and others. The CIT(A) found that the assessee had discharged its burden under Section 68 of the Act by providing sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions. The AO failed to negate these evidences or provide any corroborative evidence to support the addition.

Judgment:
The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's reliance on third-party statements without providing an opportunity for cross-examination was not justified. The Tribunal also noted that the assessee had provided adequate documentary evidence to support the genuineness of the transactions, which the AO failed to disprove. Additionally, since no incriminating material was found during the search at the assessee's premises, the addition made by the AO was not sustainable. The appeal of the Revenue was dismissed, and the order of the CIT(A) was confirmed.

Conclusion:
The Tribunal concluded that the AO's addition of ?1,03,50,000/- was not justified due to the lack of incriminating material found during the search and the failure to provide an opportunity for cross-examination of third-party statements. The assessee had sufficiently demonstrated the genuineness of the transactions through documentary evidence. The Revenue's appeal was dismissed.

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