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TMI Blog2004 (3) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... t monies have been paid in cash on behalf of the assessee-company with respect to the impugned loan is not supported by any material or evidence and hence lacks factual support. Thus, we are of the considered view that the Revenue does not have enough material to justify the conclusion drawn to the effect that the impugned transaction was a sham transaction. In particular, there is no evidence or cogent material brought out by either of the lower authorities which suggests that the assessee had made any payment to the creditor company or to Shri Parveen Khurana outside the books of account. Hence, on account of lack of evidence and factual support, we do not sustain the conclusions drawn that the impugned transaction was a sham. Hence, on the first issue, we hold the issue in favour of assessee. Discharge of onus cast in terms of s. 68 - Admittedly, the impugned amount has been received from M/s Sumit Polymers Ltd. as is discernible from its balance sheet, a copy of which is placed at pp. 17-18 of the paper book filed by the assessee. The said balance sheet evidently reflects adequate sources for advancing of the impugned amount to the assessee. It is also an admitted position that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO can be understood in the following lines. There was a search and seizure action under s. 132 on the assessee and its allied concerns. Sh. Parveen Kumar is a director of the assessee-company. Similarly, a search action under s. 132(1) was also carried out at the premises of one Shri Praveen Khurana who is a director of M/s Sumit Polymers Ltd., the loan creditor. The aforesaid two searches took place on the same date, i.e., 19th Oct., 2001. The AO noticed that the investigations carried out by the investigation wing revealed that Shri Praveen Kumar was having unaccounted cash which was desired to be brought into the account books without attracting tax. That one Shri Praveen Khurana was in need of cash because he wanted to take over certain concern by name of M/s Krishna Steel Industries Bombay (whose name later changed to Golden Falcon). In this regard, the AO referred to the statement of Shri Praveen Khurana recorded on19th Oct., 2001, the relevant extract is reproduced hereinafter for proper appreciation: On 19th Oct., 2001, during the search operation under s. 132(1) statement of Shri Parveen Khurana was recorded by the authorised officer. Relevant extracts from his statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td.) on the other side. The former two companies, according to the AO, are controlled by the assessee and the latter two are in control of Shri Parveen Khurana. It was noticed by the AO from the perusal of the bank accounts of the aforesaid entities that the assessee-company liquidated the impugned loan by making an initial payment to M/s Sumit Polymers Ltd. of a small amount. The said particular sum was later remitted by M/s Sumit Polymers Ltd. to M/s Blue Star who in turn remitted it to M/s XILON. The said XILON in turn, remitted the said sum back to the assessee-company as loan. The said circuitous route was carried out on more than one occasion. The result was that each such rotation resulted in the reduction of the credit balance of M/s Sumit Polymers Ltd. in the assessee s books and yet the said money came back to the assessee-company. The AO concluded that the aforesaid circuitous route carried out to repay the impugned loan also depicted that the impugned loan transaction was a mere sham and was carried out for extraneous considerations. Further it was noticed that each such rotation of funds was carried out on a single day as the above entities were maintaining accounts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er stand taken before the lower authorities. It is further submitted by the counsel that the reply will establish rule of audi alteram partem has been violated in so much as that the impugned addition has been made by placing reliance on statement of a third party without confronting the same to the assessee during any stage of the assessment proceedings. It is vehemently argued on the basis of the paper book filed, which records the chronological events during assessment proceedings, to demonstrate that the assessee had filed the necessary details as called for by the AO and that at no stage the alleged adverse material available with the AO was ever confronted to the assessee. In fact, according to him, the AO also recorded the statement of the director of the assessee-company Mr. Parveen Kumar, a copy of which is placed in the paper book filed before us. Even at that stage, the assessee was not confronted. It was submitted that the only question asked in relation to the impugned transaction was satisfactorily explained. According to him, the impugned addition was clearly in violation of the law laid down in the apex Court in the case of Kishin Chand Chellaram vs. CIT (1980) 19 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same we proceed to dispose of the impugned issue in the following lines. In our view, the impugned appeals throw up the two issues for adjudication. Firstly, as to whether the impugned transaction of loan could be said to be a sham transaction. Secondly, whether the assessee has been able to discharge the onus cast under s. 68 to explain the nature and source of the impugned credits. The aforesaid issues are intertwined. 10. The factual matrix that is pertinently clear from the material before us can be detailed as under. That the assessee has received the impugned amounts during the two years under consideration through banking channels. That the impugned loans have also been returned or repaid to the creditor M/s Sumit Polymers Ltd. through banking channels. That during the course of search in the premises of Mr. Praveen Khurana, the director of M/s Sumit Polymers Ltd. a statement was made to the effect that the impugned loan was an accommodation entry made against cash received. It is from here that the dispute starts. The Revenue contends on the strength of the above that it is a sham transaction by way of which the assessee has introduced its own unaccounted money into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of the source of loans. It is a moot point to consider as to whether all these conclusions could be brought to nought by a mere statement made by the third party, that also, at the back of the assessee. In fact the averment in the statement of Shri Parveen Khurana that monies have been paid in cash on behalf of the assessee-company with respect to the impugned loan is not supported by any material or evidence and hence lacks factual support. 13. In view of the aforesaid discussion, we are of the considered view that the Revenue does not have enough material to justify the conclusion drawn to the effect that the impugned transaction was a sham transaction. In particular, there is no evidence or cogent material brought out by either of the lower authorities which suggests that the assessee had made any payment to the creditor company or to Shri Parveen Khurana outside the books of account. Hence, on account of lack of evidence and factual support, we do not sustain the conclusions drawn that the impugned transaction was a sham. Hence, on the first issue, we hold the issue in favour of assessee. 14. The second issue is in relation to the discharge of onus cast in terms of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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