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2021 (5) TMI 293 - AT - Income TaxUnexplained cash credit u/s. 68 - assessee group was subjected to search action as triggered on the basis of pre-search enquiries conducted by the department that the assessee received accommodation entries from various concerns being run /operated by Shri Pravin Kumar Jain Group and Shri Mukesh Choksi Group - HELD THAT - The key person of the assessee agreed to offer the said amount in various years to tax. However, the said statement was retracted immediately upon receipt of copies of statement from the department - Upon filing of retraction, another statement on oath u/s 131 has been recorded by Ld. AO from Shri Kishore P. Agarwal on 27/01/2016 wherein it has been reiterated that earlier confessional statement was given under force and in a state of confusion. AO has termed the retraction made after approx. 18 months as mere afterthought and therefore, chose to disregard the same overlooking the fact that despite repeated reminders, copies of statement was provided to the assessee only on 12/12/2015 and the retraction was made immediately after receipt of statement by the assessee. In such a case, the confession made by the assessee, in our opinion, would lose considerable credibility unless the confession was supported by some incriminating material as unearthed by the department during the course of search action on assessee. Another pertinent accepted fact is that cash allegedly used by the assessee to procure accommodation entries to have been sourced partly out of on-money received in real estate business of assessee s sister concern namely M/s Sahakar Infracon Projects Private Limited. This cash has also been treated as assessee s unexplained money despite concurrence of Ld. AO of the fact that accommodation entries were sourced partly out of cash generated by M/s Sahakar Infracon Projects Private Limited. No addition is shown to have been made in the hands of M/s Sahakar Infracon Projects Private Limited. These two entities, in our opinion, are separate legal entities and the one entities unaccounted money could not be added to the income of the other entity s income. Entities not belonging to tainted group with no incriminating material - The fact of huge share premium could not be held against the assessee in the absence of any incriminating material. In the light of retraction, Ld. AO was duty bound to make water-tight case against the assessee by making necessary enquires and by bringing cogent evidences on record to prove otherwise. It was obligatory on the part of Ld. AO to collect more evidences against the assessee during the course of assessment proceedings to disprove the documentary evidences filed by the assessee. The failure to do so would make the addition unsustainable in the eyes of law since it could be said that the assessee had discharged the primary onus of proving these transactions in terms of requirement of Section 68. Similar is the position before us. No new material could be placed before us. Therefore, in our considered opinion, no infirmity could be found in the impugned order with respect to these entities. We order so. Resultantly, the grounds raised by the revenue, in this regard, stand dismissed. Entities belonging to tainted group where cash was exchanged - The second set of entities comprises-off of 3 entities belonging to Shri Mukesh Chokshi Group. From the factual matrix, it is quite evident that cash was given to these entities out of cash-in-hand held by the assessee in its books of accounts. The cash was generated out of cash intensive toll business carried out by the assessee. In such a case, the same could not be treated as unexplained money of the assessee since the cash would be generated only out of toll receipts credited by the assessee in its books of accounts. In other words, it could not be said that the entries were sourced from cash generated out of the books and therefore, the entries to that extent could not be said to be unexplained money of the assessee. This is further fortified by the undisputed fact that the entries of ₹ 9 Crores have subsequently been reversed by the assessee, in its books of accounts, in financial year 2013-14. Therefore, on the facts and circumstances, the Ld. CIT(A), in our considered opinion, has rightly estimated commission income against these entries. Therefore, no interference is called for in the impugned order, in this regard also. The grounds thus raised in the cross-appeals stand dismissed. Remaining entities belonging to tainted group - Upon perusal of facts, it is noted that the additions have primarily been made on the basis of statement of Shri Pravin Kumar Jain and in view of the allegations that there was buy back of shares in subsequent years. Further, the notices u/s 133(6) remained un-responded. However, we find that the opportunity to cross-examine Shri Pravin Kumar Jain was never provided to the assessee. Nor the copies of statements were furnished / confronted to the assessee. The failure to do so would make the additions unsustainable in the eyes of law in view of settled legal position as enumerated by us in para 6.5. Further, we find that all these entities have duly furnished replies to Ld. AO which are placed on Page nos. 34 to 64 of the paper book wherein the transactions have been confirmed by these entities along with sufficient documentary evidences in the shape of Income Tax Returns, bank statements, financial statements, source of investments, copies of Memorandum Articles of Association, details of directors, basis of investment, details of purchase of shares, allotment letter etc. They have confirmed that there was no buy back of shares. These entities are not listed as entities to whom the cash is stated to have been paid by the assessee in exchange of accommodation entries. Therefore, the allegations of lower authorities would have no legs to stand. Consequently, the addition in AY 2009-10 stand deleted. The assessee s appeal for AY 2009-10 stands allowed.
Issues Involved:
1. Addition of ?3,50,00,000 as unexplained cash credit under Section 68. 2. Deletion of remaining addition of ?13,00,00,000 by CIT(A). 3. Confirmation of addition of ?3,50,000 as unexplained cash credit on estimation basis. 4. Deletion of addition of ?3,46,50,000 by CIT(A). 5. Assessment validity and evidentiary value of retracted statements. 6. Compliance with principles of natural justice and cross-examination rights. 7. Justification of share premium received by the assessee. Issue-wise Analysis: 1. Addition of ?3,50,00,000 as Unexplained Cash Credit under Section 68: The assessee contested the CIT(A)'s decision to confirm the addition of ?3,50,00,000 as unexplained cash credit received as share capital and premium from certain companies. The CIT(A) upheld this addition based on the statements of Pravin Kumar Jain and Mukesh Choksi, who admitted providing accommodation entries. The assessee argued that these statements were retracted and unsupported by corroborative evidence. The Tribunal found that the statements were retracted promptly and lacked credibility without corroborative material. 2. Deletion of Remaining Addition of ?13,00,00,000: The CIT(A) deleted the addition of ?13,00,00,000 received from twelve entities, which were not linked to the tainted groups of Pravin Kumar Jain or Mukesh Choksi. These entities responded to notices under Section 133(6) and provided sufficient documentary evidence to support their investments. The Tribunal upheld the deletion, noting that the assessee discharged its burden of proof and the AO failed to provide contrary evidence. 3. Confirmation of Addition of ?3,50,000 on Estimation Basis: The CIT(A) estimated that the assessee must have paid a commission of 1% for securing accommodation entries, amounting to ?3,50,000, and upheld this addition. The Tribunal agreed with this estimation, considering it reasonable based on the facts and circumstances. 4. Deletion of Addition of ?3,46,50,000: The CIT(A) deleted the addition of ?3,46,50,000, noting that the cash used for obtaining accommodation entries was already accounted for in the assessee's books. The Tribunal concurred, emphasizing that the cash was sourced from the assessee's toll business and not unexplained. 5. Assessment Validity and Evidentiary Value of Retracted Statements: The Tribunal observed that the retraction of statements by the assessee was immediate and supported by an affidavit. The AO's reliance on the original statements, without providing the assessee an opportunity for cross-examination, violated principles of natural justice. The Tribunal held that the retracted statements lacked evidentiary value without corroborative evidence. 6. Compliance with Principles of Natural Justice and Cross-examination Rights: The Tribunal emphasized that the AO's failure to provide the assessee with an opportunity to cross-examine the witnesses whose statements were used against it constituted a serious breach of natural justice. This failure rendered the additions unsustainable. 7. Justification of Share Premium Received by the Assessee: The Tribunal noted that the share premium received by the assessee was supported by a valuation report and the company's financial growth. The AO did not provide evidence to counter the valuation or the genuineness of the transactions. Hence, the share premium could not be held against the assessee. Conclusion: The Tribunal allowed the assessee's appeals for AY 2009-10 and partly allowed the appeals for AYs 2010-11, 2011-12, and 2012-13. The revenue's appeal for AY 2011-12 was partly allowed, while the appeals for AYs 2010-11 and 2012-13 were dismissed. Order pronounced on 26th March, 2021.
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