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TMI Blog2019 (1) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... me earned by the assessee during the years under consideration, the disallowance made by the AO being 1% of the average investment is not sustainable when there is no specific and identified expenditure or finding by the AO regarding any expenditure incurred by the assessee for earning the exempt income. Assessment u/s 153A - no incriminating material found or seized during the course of search and seizure action - HELD THAT:- As relying on M/S. KOTA DALL MILL case [2019 (1) TMI 344 - ITAT JAIPUR] the addition made by the AO without any material much less the incriminating material is not sustainable in law. Further, the report of the Investigation Wing Kolkata is also not a material or document either found or detected during the search and seizure action in case of the assessee but it pertains to the investigation carried out by the Investigation Wing Kolkata in a separate matter. Therefore, the said report will not partake the character of incriminating material found or seized during the course of search and seizure action in the case of the assessee. Hence the additions made by the AO while framing the assessment under section 153A of the Act are deleted for want of incrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of Share application money by observing that the alleged investor companies M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. are not shell companies without considering the financial statements of these companies. 3. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record. 4. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. despite the fact that the directors or Principal Officers of these companies were never produced before the AO for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either. 5. Whether on the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese companies as unexplained cash credit on the basis of the report of the Investigation Wing Kolkata. The AO treated these companies as Shell company and held that these companies are controlled by Shri Amit Kedia, Shri Alok Harlalka who were found to be bogus entry providers by the Investigation Wing Kolkata. On appeal, the ld. CIT (A) has deleted the addition made by the AO by considering the fact that the AO has made the disallowance merely on the basis of information received from Investigation Wing Kolkata and without any material, even the statement of so called bogus entry provider. The ld. CIT (A) has specifically noted that the AO was not having the statement of the alleged entry provider in his possession and, therefore, when the assessee produced all the relevant documentary evidence in support of the claim, the addition made by the AO was not sustainable. 3. Before us, the ld. CIT D/R has submitted that the AO has received the information from Investigation Directorate, Kolkata regarding involvement of the assessee group in obtaining entries of bogus share capital and share premium etc. detected in the investigation carried out by the DIT Kolkata. Such informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of share capital and premium which has been extensively discussed in the assessment order. During the course of assessment proceedings, the assessee was provided a number of opportunities for producing the alleged investors for verification and failure of the assessee in producing the investors in the light of the evidences was enough to invoke the provisions of section 68 of the IT Act. In support of his contention, he has relied upon the decision of Hon ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd., 226 Taxman 190 (Mag.) and submitted that the SLP filed by the assessee was dismissed by the Hon ble Supreme Court reported in 230 Taxman 268 (SC). Thus it is evident that the assessee has failed to discharge its onus to rebut the evidence unearthed by the Investigation Wing Kolkata which shows that the transactions of share capital and share premium are nothing but bogus accommodation entries wherein the assessee s own undisclosed income has been routed in the garb of share capital and premium etc. As regards cross examination of the witnesses, since the witnesses belong to Kolkata and statements were also recorded at Kolkata by the Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viders who have nowhere stated that cash was given by the assessee. During the course of assessment proceedings, the assessee produced the various documents of share applicants, namely, M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. All the share capital and share premium etc. were received through bank and verifiable from bank statement of the assessee as well as bank statements of the share applicants. The onus under section 68 of the Act is to prove the identity, capacity and genuineness of the transaction which has been discharged by the assessee by producing the documentary evidence as well as the notices issued by the AO were duly responded by the share applicants. The ld. A/R has submitted that the share applicant companies were assessed to tax and there were assessment orders under section 143(3) for the assessment years 2005-06, 06-07, 2007-08, 2012-13, 2013-14 2014-15. He has referred to the copies of the assessment orders in case of M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. for all these assessment years at pages 450 to 469 and 529 to 540 of the paper book respectively. Therefore, once the share applicants are subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, creditworthiness and genuineness of the transaction as well as share applicant. 5. The next objection/contention of the ld. A/R is that the sole basis of addition is the statement of Shri Anand Sharma and others whereas the assessee was not given the opportunity of cross examination despite repeated requests and demands. The AO has violated the principles of natural justice by not providing the copies of material used against the assessee at the assessment stage and further not providing the opportunity of cross examination of the witness during the assessment stage as well as appellate stage. Though the ld. CIT (A) called for a remand report and asked the AO to provide opportunity of cross examination to the assessee, however, after the remand proceedings the AO did not afford an opportunity of cross examination rather the AO has asked the assessee to produce the witness instead of allowing the assessee to cross examine the witness. In support of his contention, the ld. A/R has relied upon the decision of Hon ble Supreme Court in case of Andaman Timber Industries vs. Commissioner of Central Excise (2016) 15 SCC 785 (SC). He has also relied on the decision Hon ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record. For the assessment year 2010-11, the assessee received share capital with premium from two companies details of which are as under :- (1) M/s. Sangam Distributors Pvt. Ltd. ₹ 90,00,000/- (2) M/s. Teac Consultants Pvt. Ltd. ₹ 15,00,000/- There is no dispute that during the course of search and seizure no incriminating material was either found or seized disclosing any undisclosed income or indicating any bogus transaction of receipt of share capital and premium by the assessee from these two companies. Further, the AO has also not referred or relied upon any seized document while making the addition of the amount of ₹ 1,05,00,000/- on account of share capital and premium received from these two companies under section 68 of the IT Act. The sole basis of the addition made by the AO is the information received from the Investigation Wing Kolkata which is also in turn is nothing but the narration of the statements of various persons allegedly operators of bogus entry provider. The AO has referred to the statement of Shri Anand Sharma and other three persons as mentioned in the report of the Invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 Certificate of Incorporation. 473 13 Copy of Certificate of NBFC Registration. 474 14 Copy of Summon no. 1433 dated 13.10.2017 and reminder summon no.-1592 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961 to M/s Teac Consultants Private Limited. 475-478 15 Copy of reply in response to summon issued to the company. 479-481 16 Copy of letter for confirmation of source of funds used for applying the shares along with supporting documents 482-485 M/s Sangam Distributors Pvt. Ltd. S. No. Particulars Paper Book Page No. 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 486-487 2 Copy of Balance sheet of AY 2010-11 along with enclosures 488-489 3 Copy of relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s own money routed through share applicants. Therefore, in the absence of any such finding or any such discrepancy in the bank account statements and financial statements, the AO has not produced any material or record to contradict the documentary evidence filed by the assessee in support of the claim. Further, there is a decision of Hon ble Calcutta High Court in case of M/s. Sangam Distributors Pvt. Ltd. approving the amalgamation of the company. The assessee also produced the confirmation and affidavits of the Directors of the share applicant companies apart from the financial statements to show the sufficiency of fund with the share applicants and regular business activities and flow of funds. Further, the assessee also produced the ROC Master Data of share applicants to show that the status of these companies as per ROC record is Active/Amalgamated . The share applicant companies are also regularly assessed to tax and subject to scrutiny assessment. The assessee produced the assessment orders passed under section 143(3) in respect of the share applicant companies, details of which are as under :- Assessment u/s 143(3) : Name of Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. as mentioned in para 4.4.7 above my findings are as follows:- 5.1 As discussed in para 4.4.7 above, in respect of the investors namely M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited adverse findings along with eloquent evidences in the form of statement on oath of relevant entry operators are not visible in the reports dated 28.11.2017 and 06.12.2017 from Investigation Directorate, Kolkata and therefore it could not be treated as shell company. 5.2 As far as the lender companies namely, M/s Sangam Distributors Pvt. Ltd and M/s Teac Consultants Private Limited is concerned, it is evident from the documents placed on record that Notice was issued by DDIT, Kolkata u/s 131 to these companies which was duly complied with and relevant documents were filed. There is no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed investment in shares of the Appellant and source of providing the said. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions. 5.4 Furthermore, from the perusal of documentary evidences submitted by the Appellant, it is seen that transactions have been done through banking channels and on the date of making of loans, there is balance available in the accounts of the borrowers, which proves the creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of any of the investor at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case of CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB HARYANA), CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that M/s Sangam Distributors Pvt. Ltd and M/s Teac Consultants Private Limited duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 5.5 The AO during assessment proceedings took nega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Appellant. Further, the various case laws relied upon by the AO are distinguishable from the facts of the present case as categorically countered by the Appellant in his written submissions as reproduced in Para No. 4.2 above. 5.9 It is settled judicial precedents that under the income tax law primary burden u/s 68 of the Act is on the Appellant and once this burden is discharged u/s 68 of the Act, no addition u/s 68 of the Act is justifiable in the hands of the Assessee in view of the judgments in case of Shree Barkha Synthetics Ltd. V/s Assistant Commissioner of Incometax (2006) 155 TAXMAN 289 (RAJ.), COMMISSIONER OF INCOME-TAX, JAIPUR -II V. MORANI AUTOMOTIVES (P.) LTD. [2014] 264 CTR 86 (RAJASTHAN-HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel Ramniklal Hirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Income-tax-4 v. G G Pharma India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] In the instance case before me, the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujrat High Court (supra). 5.12 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through Share application and share premium by the Appellant as no evidences as to receipt/p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars PB Page No/AY 2011-12 1 Copy of Ack. of ITR of AY 2011-12 along with computation sheet. 430-432 2 Copy of Balance sheet of AY 2011-12 along with enclosures. 433-450 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 451-454 4 Confirmation of account showing the transaction with Assessee Company, along with ledger account from the books of share applicants 455-456 5 Copy of share allotment advice 457 6 Copy of share application form of equity share along with Form 2 458-468 7 Copy of affidavit of Mrs Babita Kriplani director of company. 469-472 8 Copy of order passed by Calcutta High Court regarding amalgamation of other companies in this company 473-495 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant material on record. During the course of assessment proceedings, the AO noted that the assessee company has shown opening and closing stock of the investment in shares at ₹ 15 lac as on 31.03.2011 and ₹ 1,97,53,750/- as on 31.03.2012. The AO has made a disallowance equivalent to 1% of the average investment on account of expenditure incurred for earning the exempt income. On appeal, the ld. CIT (A) has deleted the addition in para 8.4 for the assessment year 2010-11 as under :- 8.4 In my considered view, the AO has legally erred in directly applying the provision of section 14A of the Act, without recording any satisfaction as to the correctness of the claim made by the Appellant. In the assessment order, there is no satisfaction recorded by the AO as required by section 14A (1) of the Act before proceeding further to make any disallowance u/s 14A of the Act. Further, it is seen that AO has mechanically applied the Rule 8D as amended w.e.f. 02.06.2016, which was not even applicable to relevant assessment year. In my considered view, the law cannot be applied mechanically and that too retrospectively. It is seen that AO has not established any nexus of investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t declaring the assessment order as bad in law and void ab initio. It is contended that the ld. AO passed the assessment order against the doctrine of audi alterm partem , violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore, the assessment order ought to held as bad in law and deserves to be annulled. The findings of ld. CIT (A) in this regard are perverse and erroneous. 3. The appellant craves leave to add, alter, amend, any of the grounds of appeal at or before the time of hearing of appeal. Ground no. 1 of the cross objection is regarding sustainability of the addition made by the AO in the assessment framed under section 153A without any incriminating material found or seized during the course of search and seizure action. This ground is common for both the assessment years. 11. The assessee filed the return of income under section 139(1) for the assessment year 2010-11 on 24.09.2010 and for the assessment year 2011-12 on 06.09.2011. The returns filed by the assessee were not pending as on the date of search on 2nd July, 2015. Therefore, the assessment was completed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of search had attained the finality and, therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for otherwise addition can only be made on the basis of undisclosed income derived from material/documents seized as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of any incriminating material found or seized during the course of search and seizure proceedings, the additions made by the AO during the course of reassessment under section 153A of the Act are without jurisdiction and liable to be deleted. In support of his contention the ld. A/R has relied upon the decision of Hon ble Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The only basis of addition is the statement of third party recorded in the search of the third party that has no connection with the search proceedings of the assessee and, therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act. 13. On the other hand, the ld. D/R submitted that the additions made to the total income of the assessee relate to the unexplained cash credit in the books of account introduced in the garb of share capital and premium which in fact is the re-routing of the assessee s undisclosed income. It is clearly evident from the innumerable evidences which came to the fore in the numerous investigations, enquiries, search and survey actions carried out by the Investigation Wing of the Department that the AO received information from the Investigation Wing Kolkata regarding the involvement of assessee in obtaining entries of bogus share capital, share premium etc. detected in the investigation carried out by the Investigation Wing Kolkata. Such information was received prior to the initiation of proceedings under section 153A and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to the same search and seizure action under section 132 carried on 2nd July, 2015, an identical issue was considered and decided by us in the case of group concern, namely, M/s. Kota Dall Mill in ITA Nos. 997 to 1002/JP/2018 and 1119/JP/2018 and others vide order dated 31st December, 2018 as under :- 6. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessments for the assessment years 2010-11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of these four assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in respect of these four assessment years would be in the nature of reassessment and not in the nature of assessment as in the cases of the remaining two assessment years i.e. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO. Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination. The SLP filed by the revenue against the said decision of Hon ble Delhi High Court was dismissed by the Hon ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under :- 55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment has to be made under this Section only on the basis of seized material. 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: 31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. ' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of ₹ 14.5 crores against declared income of ₹ 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla(supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts maintained by our firms. 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes. 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of ₹ 1.10 crores was only for the year of search and not for the earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003- 04 was without any legal basis as there was no incriminating material qua each of those AYs. The Hon ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon ble Jurisdictional High Court in the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon ble High Court has held that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition shall abate . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. In the case in hand, the transactions of unsecured loans as well as introduction of capital by the partners were duly recorded in the books of account and available with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2010-11 to 13-14. It is appropriate to refer relevant part of the assessment order in para 12 pages 48 to 50, para 19 page 83 and para 22 page 86 as under :- 12. Submissions made on behalf of the assessee firm have been duly considered. However, even the very elaborate and case laws loaded submissions of the assessee are totally off the mark. Against the selfspeaking facts of the very nature of the activities of the so called partner s providing huge partner s capital in the most uninterested manner and providing huge unsecured loans without any collateral or other security, the emphasis of the assessee firm in its submissions has been on seeking protection under various judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances; a. The department has very sound basis to treat, the receipts of unsecured loan and partner s capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not based on any presumption, assumption, guess or bare suspicion. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r respective statements. 19. In view of above facts of the case and in the light of above judicial decision, it is established that genuineness of the transaction has not been proved. Section 68 of the I.T. Act provides for charging to income tax on any sum credited in the books of the assessee maintained for any previous year if the assessee offers no explanation about the nature and source thereof or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. It places no duty upon the Assessing Officer to point to the source from which the money was received by the assessee. Where an assessee fails to prove satisfactorily the source and the nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender s identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner s capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis supplied by me). (The decisive words used in the provisions are to 'assessee or reassess the total income'). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. 3.2.3 The concept of assess or reassess and shall abate as contemplated u/s 153A is under hot judicial debate. I find that legally, this issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions of both the parties for both the assessment years are same, therefore, our finding in the case of Kota Dall Mill on this issue is applicable in this case also. Accordingly, the addition made by the AO without any material much less the incriminating material is not sustainable in law. Further, the report of the Investigation Wing Kolkata is also not a material or document either found or detected during the search and seizure action in case of the assessee but it pertains to the investigation carried out by the Investigation Wing Kolkata in a separate matter. Therefore, the said report will not partake the character of incriminating material found or seized during the course of search and seizure action in the case of the assessee. Hence the additions made by the AO while framing the assessment under section 153A of the Act are deleted for want of incriminating material. Ground No. 2 of the Cross Objection common for both the assessment years is regarding the violation of principles of natural justice for not granting the cross examination of the alleged accommodation entry provider. 15. Before us, the ld. A/R of the assessee submitted that the sole basis of addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the assessee group in obtaining entries of bogus share capital, share premium etc. detected in the investigation carried out by the DIT Kolkata. Such information was received even prior to initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Once the AO has confronted the assessee with the report of the Investigation Wing Kolkata as well as the statement of Shri Anand Sharma and other persons who have admitted to have provided accommodation entries of bogus share capital and premium etc. to the various parties through their companies and concerns and assessee has shown the share capital and premium from those concerns, then onus was shifted on the assessee to establish the genuineness of the transactions of share capital and premium etc. During the course of assessment proceedings, the AO again conducted enquiries through Investigation Wing Kolkata regarding the genuineness of the transaction and the assessee was duly confronted with the results of all these enquiries and information shared by the Investigation Wing Kolkata. In these circumstances and in the interest of natural justice, the assessee was required to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has failed to discharge its onus to rebut the evidence unearthed by the Investigation Wing Kolkata which shows that the transactions of share capital and premium etc. are nothing but bogus accommodation entries wherein the assessee s own undisclosed income has been routed in the garb of share capital and premium etc. As regards cross examination of the witnesses, since the witnesses belong to Kolkata and statements were also recorded at Kolkata by the Investigation Wing, therefore, it was not possible for the AO to issue summon to the witnesses for cross examination at the office of the AO at Kota. The ld. CIT D/R has relied upon the order of the AO. 17. We have considered the rival contentions as well as the relevant material on record. An identical issue has been considered and decided by us in the case of group concern, namely, M/s. Kota Dall Mill in ITA Nos. 997 to 1002/JP/2018 and 1119/JP/2018 and others vide order dated 31st December, 2018 in para 11 and 11.1 as under :- 11. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the assessee has challenged the addition sustained by ld. CIT (A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order. However, the relevant documents including the Ledger a/c showing the transactions with appellant company, Source sheet of funds of transactions made with the Appellant, Copy of bank statement showing the transactions, etc. stand submitted for confirmation of the transaction of loan with the Appellant. 5.3 In my considered view, as the name of M/s Jalsagar Commerce Pvt. Ltd. is clearly mentioned as beneficiary company in the statement of Shri Anand Sharma, and Shri Anand Sharma is mentioned that some of such paper company are sold to beneficiary party, in view of fact that name of M/s Jalsagar Commerce Pvt. Ltd. Is mentioned in the reports as discussed in para 4.4.7 above, a genuine doubt is raised on the identity and genuineness of company. Further, the adverse facts pointed out in the reports as discussed in para 4.4.7 above for established background of all these share holders / depositors being the puppet in the hand of one or other accommodation entry providers, layering the transaction by cheque deposit on the same day or preceding day of share application / deposits, the assertions of the AO for no-creditworthiness or in-adequate creditworthiness of the so-called s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of their savings have been filed. The assessee has never shown his willingness to produce the remaining creditors for examination before the AO. Therefore, the genuineness of the transaction could not have been examined by the AO. The smallness of the bank balance in the bank accounts of the creditors prior to issue of cheques would clearly reveal that they were not having any source and it was the money of the assessee which was routed through the bank accounts of the creditors for the purpose of giving credits to the assessee. These were, therefore, accommodation entries only and as such, could not be considered as genuine transactions. Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. On consideration of the facts of the case in the light of above discussion and decision, there is no justification to interfere with the order of the ld. CIT(A). The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital/share premium, notice under Section 147 read with Section 148 of the Act was issued and served on 25th March, 2009 .. 7. Summons under Section 131 of the Act were sent to the alleged shareholders and they were asked to furnish details on 10th December, 2009. Directors/Principal officers were required to personally come and depose. The summonses, as per the assessment order, were received back unserved. At the same time, the assessee filed details and confirmations of the alleged share capital. Earlier on 8th December, 2009, a detailed show cause notice was issued, fixing the hearing on 14th December, 2009. The assessee was asked to produce the shareholders along with their books of accounts to substantiate its claim of genuineness of the cash credits. In fact on 10th December, 2009, authorized representative had appeared and he was apprised that the summons issued to the shareholders under Section 131 had been received back unserved in five cases and he was requested to provide the present postal address of the parties. Inthemeanwhile, the Assessing Officer managed to get hold of the bank statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e source from which the money was received by the assessee. In A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, this argument advanced by the assessee was rejected by the Supreme Court. Venkatarama Iyer, J., speaking for the court observed as under (@ page 810):- Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of ₹ 80,000 and the other being receipt of ₹ 42,000 from business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve failed to draw the appropriate inference. 16. In the said case, the Division Bench had also examined the decision of the Supreme Court in Lovely Exports P. Ltd. (supra) and other cases in which the assessee had succeeded. It was noticed that in the case of Lovely Exports P. Ltd. affidavits/confirmations of shareholders were filed and income tax record numbers of the shareholders were made available, but the Assessing Officer, who had sufficient time, failed to carry out inquiry and examination. reference was made to the observations in Divine Leasing (supra) to the effect that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue, but when there is preponderance of evidence to show absence of culpability, the assessee should not be harassed by the Revenue. A delicate balance must be maintained between the two interests. In Divine Leasing (supra), the following proposition was elucidated:- In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan a smokescreen conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence ormaterial in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itworthiness of the shareholders. 19. In N.R. Portfolio Pvt. Ltd. (supra), it has been held as under:- 18. In the remand report, the Assessing Officer referred to the provisions of Section 68 of the Actand their applicability. The word identity as defined, it was observed meant the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according to us is the correct and true legal position, as identity, creditworthiness and genuineness have to be established. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y substantially relied upon and quoted the decision of its coordinate bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court vide its judgment in C.I.T vs. MAF Academy P.Ltd [ (2014) 206 DLT 277). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fresh adjudication keeping in view the aforesaid case law. The question of law is, therefore, answered in favour of the Revenue and against the respondent-assessee, but with an order of remit to the tribunal to decide the whole issue afresh. As reported at 2015-TIOL-314-SC-IT, in the above case, the Hon ble Supreme Court observed to effect that merely because the assessee has been able to show that the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an account payee cheque for purchase of shares for a premium of ₹ 100 /- to ₹ 200/- per share and then the sale of shares at a loss clearly establishes that the said transaction was a camouflage transaction. The Assessee has clearly attempted to camouflage the accommodation entries and tried to give it a colour of purchase of share capital and then sale of the same at a loss. Thus the Assessee's capital increased or was enhanced by a substantial figure through these dubious transactions. This should be and has to be checked. 36. Out of ₹ 4.35 crores received as share capital including premium, only ₹ 92 lacs has been received from the directors or their family members and the remaining amount has been received from parties totally unrelated to the Assessee. Notices to some of the investors could not be served and even the Inspector who was deputed to serve the summons stated that none of the addresses could be found. The authorised representative of the Assessee refused to produce the parties who had invested in the share capital on the ground that they were not in a position to produce them. The fact that the Assessee failed to produce the persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transaction and credit-worthiness. Appellant produced confirmation of deposit from directors of the respective company, copies of income tax return filed and copies of bank statement reflecting the above transactions. In order to verify the entire transactions in the Asstt. year 2005-06 light of genuineness and creditworthiness, he issued summons u/s 131 of the Act to all the above 15 persons. They were asked to produce the copies of return for AY. 2005-06 and their ledger accounts from which the source of above share application money could have been verified. All the above summons were returned unserved with the comments from the postal authorities as no such person in the above address . The AO accordingly brought this fact to the notice of the counsel of the assessee vide order sheet entry dated 18.12.2007 and he was given an opportunity to produce the functional directors of the above companies for verification. As mentioned in the assessment order, after certain adjournments, a letter was finally filed from the appellant mentioning that it is no in touch of the above share holders and their present whereabouts are not known to it. The appellant, however, relying upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income tax returns. Interestingly most of these concerns / individuals have obtained PAN from the department and are filing returns as well. What is shown in the returns is not the actual state of affairs. For example with one PAN several bank accounts are simultaneously Asstt. year 2005-06 operated and only one account might be shown for the purpose of audit and filing income tax returns. The entry operators provide entry in the garb of share application money, gifts, loans etc. through these accounts, in lieu of cash, to any person who is having unaccounted money. 2.1.2.1 The AO observed that some of the companies show above by the appellant as its share holders were found to have stated before investigation wing that they were mere name lender for advancing money . To quote some of them, Shri Rajesh Bansal, Director of M/s. Rubicon Associates Pvt. Ltd., Shri Mahesh Garg, Director of M/s. S.J. Hosiery Pvt. Ltd. Etc. have categorically stated before the Investigation wing, in their statement taken on oath, that they used to take the amount in cash and give entries to different concerns as gift, loan or share application money. According to AO, to enquire into this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from making any invitation for allotment of shares. How the premium was fixed is not forth coming. Looking to the balance sheet or past history of assessee, the assessee company has never declared dividend in the past. The company has no business plans which can raise its profitability in the near future. The income declared by the assessee is only by way of short term capital gain and the assessee do not seem to have carried on any business. Asstt. year 2005-06 In such circumstances the share premium is not found to be justified by any of the act on the part of assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before it. There is something more than that meets the eye. As rightly contended by Ld. DR in such situation the observation of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 and in the case of Sumati Dayal Vs. CIT 214 ITR 801 are apt for application. We therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly held that the initial burden lies on the Assessee to establish the identity of the shareholders, the genuineness of the transaction and the creditworthiness of the shareholders. It is only after the initial burden is discharged that the onus shifts to the Revenue. This Court in Kamdhenu (supra) referred to CIT v. Sophia Finance, 205 ITR 98 which had held to the same effect. The Divine leasing (supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 is well settled. ............................................................................................................................... 43. The transactions in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand report the appellant is absolutely silient on crossexamination and by such conduct he has forgone his right to cross-examine. Therefore, the principles of natural justice have been followed. As discussed in preceding paras, under the facts and circumstance of the case, it could not be said that AO did not followed the binding decision of the Hon ble Supreme Court and the Hon ble jurisdiction Court. Therefore, in view of above facts discussed in Para 4.1 4.4.7, 5.1 to 5.3 and legal position apprised in Para 5.5 to 5.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to ₹ 12,36,49,999/- from M/s Jalsagar Commerce Pvt. Ltd. sustainable and the same is confirmed. Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata. We find that the report of the DDIT (Inv.) Kolkata is also based on the statements of various persons recorded during their investigation and the statement of Shri Anand Sharma was also sent along with the report of the AO. The ld. CIT (A) has confirmed the addition because of the reason that the statement of Shri Anand Sharma was very much in the possession of the AO who has admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Commerce Pvt. Ltd. there was no suspicious transaction of receiving any entry or any deposit of an equal amount prior to giving the loan to the assessee. The assessee has paid interest to the creditor, which was duly accepted by the AO as business expenditure. Undisputedly, the assessee has produced the income-tax record of the loan creditor, bank statement, financial statements including Balance Sheet, copy of ROC master data showing the status of loan creditor company as active , confirmation of loan given to the assessee. Further, the AO issued summons and also got the summons served through DDIT Kolkata under section 131 of the IT Act which were duly responded by the loan creditor. Except the statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata, the AO has not brought on record any other material to controvert or disprove the documentary evidence produced by the assessee. It is pertinent to note that the loan creditor was assessed to tax and the AO completed the assessment under section 143 (3) for various assessment years which are relevant for the assessment year under consideration. The AO in case of loan creditor has not disturbed the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le material disclosing the nongenuineness of the transactions. The AO has not disputed the transactions routed through banking channel having sufficient funds which is also supported by the financial statements and further the assessments of the loan creditor were completed under section 143(3). The details of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and repayment of loan amount as well as closing balance are as under :- Name of Company AY Opening Balance Loan taken during the year Interest credited in loan a/c during the year Interest credited in interest Paid/payable a/c Loan repayment/ TDS/transfer in partner capital during the year Closing balance Jalsagar Commerce Private Ltd 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Jalsagar Commerce Private Ltd 11-12 51,05,000 77,18,70,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded in the books of accounts and also subjected to assessment under section 143(3) for some of the assessment years. Therefore, even as per the evidence produced by the assessee, the alleged suspicion of the AO was got dispelled and in the absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them . 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose oflevy of excise duty. Whether the goods were, in fact, sold to the said dealers.witnesses at the price which is men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice. However, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11-2008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is crossexamination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. Thus the Hon ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity to cross examine was considered by the Hon ble High Court 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. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- 2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to ₹ 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, regarding cross examination, the AO stated that the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns. The AO further relied upon the decision of Hon ble Supreme Court in the case of C. Vasantlal Co. Vs. CIT 45 ITR 206(SC) and Hon ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Co. Vs. CIT 45 ITR 206 (SC) has held that the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard. The Hon ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that whether there was any material evidence to justify the findings of the Tribunal that the amount of ₹ 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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