9911796707
TMI Blog2019 (2) TMI 1848X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Addition u/s 68 in respect of the share capital received - HELD THAT:- Once the assessee has produced the relevant documentary evidence in support of the claim as well as repayment of the loan including the payment of interest, which were not disallowed or disturbed by the A.O. in any of the years then in absence of any contrary material brought by the A.O. to controvert or dispute the correctness of the evidence filed by the assessee, the addition made by the A.O. and confirmed by the ld. CIT(A) are not sustainable. Further the statement relied upon by the A.O. no where states that he has provided any accommodation entry to the assessee but reference in the statement is only to the extent that he has provided accommodation entries through another company. Further the A.O. has not pointed out any discrepancy in the record to show that the assessee s own money has been routed back in the garb of unsecured loans. Accordingly we delete the addition made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments. The ld. CIT(A) did not accept these objections raised by the assessee, however, on merits of the addition, the ld. CIT(A) has deleted the major part of the addition for which the A.O. was not having any material in his possession but confirmed the addition in respect of which the statement of the alleged entry provider was with the A.O.. Thus, both the assessee as well as the revenue are aggrieved by the impugned orders of the ld. CIT(A) and filed the cross appeals as well as the cross objections for the respective assessment years. 4. First we take up the assessee s appeal for the A.Y. 2010-11 wherein the assessee has raised following grounds: 1. On the facts and in the circumstances of the case and in law the order passed u/s 153 A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The Id. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Name of the company from whom loan received Amount Name of alleged entry operator whose statement were relied Jalsagar Commerce Pvt. Ltd 5,00,000 Shri Anand Sharma 6. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds. 7. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. 5. Ground No.1 of the appeal is regarding the addition made by the A.O. without incriminating material and the assessment was completed and not pending on the date of order. 6. We have heard the ld AR of the assessee as well as the ld. CIT-DR and considered the relevant material on record. This issue is common in all the group concerns of M/s Kota Dall Mill. An identical issue was considered by this Tribunal in the case of M/s Kota Dall Mill Vs DCIT in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee are identical and based on similar facts and circumstances as in the case of M/s Kola Dall Mill pursuant to the same search and seizure action carried out on 02/7/2015. This Tribunal in the case of Kota Dall Mill Vs DCIT vide order dated 31/12/2018 in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018 has considered and decided this issue in para 6 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search takes place. The AO has the power to assess and reassess the 'total income' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the search to justify initiation of proceedings under Section 153A of the Act. 2. The 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 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 sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the findings of the search and any other material existing or brought on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years prior to the search or requisition stands abated and the total income of 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 connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 each of the AYs in which additions were sought to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, 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. As already noticed, the books of accounts maintained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceed 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 absence of any material which was subsequently unearthed dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 assessment years, in which both the disclosed and the undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, but in case where the assessment or reassessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 requisition and which would also necessarily support the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 Kolkata. It is pertinent to note that the said information w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Where the nature and source of a receipt, whether it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circumstances, I am left with no option than to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equisition 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 Logistics as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation received from the Investigation Wing, Kolkata and statement of Shri Anand Sharma and Shri Ankit Bagri in respect of the different transactions of unsecured loan/special deposits for issuing special preferential equity shares. The ld. CIT(A) though has not disputed the legal proposition on this issue, however, the ground raised by the assessee was dismissed merely on the reason that the SLP filed by the revenue in the case of CIT Vs. Kabul Chawla (Supra) and M/s All Cargo Global Logistics Ltd. (supra) have been admitted for decision by the Hon'ble Supreme Court. The relevant findings of ld. CIT(A) in the case of Kota Dall Mill has been reproduced by the Tribunal in the order cited (supra) and we find that an identical finding has been given by the ld. CIT(A) in the case of assessee. Therefore, neither in the assessment order, the Assessing Officer has referred or relied upon any incriminating material found during the course of search and seizure action in the case of assessee nor the ld. CIT(A) has disputed this fact that the Assessing Officer was not having any incriminating material in his possession found and seized during the course of search and seizure action i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss examination, the ld. CIT(A) has finally rejected the objection raised by the Assessing Officer. An identical issue has been considered by us in the case of Kota Dall Mill (supra) vide order dated 31/12/2018 in para 11.1 as under: 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) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee for cross examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 cross-examination 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 crossexamination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subjectmat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cellaneous 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 cross-examination 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 person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 neither 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 granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 impugned 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 of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Tribunal has considered this issue in para 18 as under: 18. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made the additions in respect of the unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. as well as M/s Teac Consultants Pvt. Ltd. by treating the same as accommodation entries. The Assessing Officer for the A.Y. 2010-11 has relied upon the statement of Shri Anand Shama which was recorded by the Kolkata Investigation Wing and then forwarded to the Assessing Officer. On appeal, the ld. CIT(A) deleted the addition in respect of M/s Teac Consultants Pvt. Ltd. by noting the fact that the Assessing Officer was not even having any statement of alleged entry operator controlling M/s Teac Consultants Pvt. Ltd.. The ld. CIT(A) confirmed the addition of unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. because the Assessing Officer was having the statement of Shri Anand Sharma and accepted that M/s Jalsagar Commerce Pvt. Ltd. is beneficiary of accommodation entries. At the outset we note that that the identical issue of unsecured loan taken from the M/s Jalsagar Commerce Pvt. Ltd. was considered by us in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned AO or by the DDIT (Inv.) Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions. The assessee has, however, failed to prove the creditworthiness of the creditors who were having only meager income. No details 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). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 2002, which was processed under Section 143(1) of the Act. Subsequently, on the basis of a report submitted by the Investigation Wing that the assessee was a recipient of accommodation entries in form of share application money/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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/bank account; and mere 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 sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the 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 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also fell into the same error. If such material had been kept in view, the Tribunal could not have 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 maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also establishes the link between self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the 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 pre-meditated 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness 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 Act and 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e them. 20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced the order of the Commissioner of Income Tax (Appeals) and upheld the deletion of the addition. In fact, they 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares to the four Promoters/Directors of the company at ₹ 35 /- per share by different parties also happened during a short span of few days. The modus operandi and the manner in which cash is deposited in a bank and then utilized by way of 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 addresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed fresh share capital to the tune of ₹ 15,00,000/- at a share premium of ₹ 1,35,00,000/-......... 2.1 The AO asked the appellant to furnish details of such share holders mentioning their identity, genuineness of 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 ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Some of the entry operators have also roped in their own relatives for operation of entry accounts and filing the 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 categorica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium 9 times its face value. The assessee is a private limited company. It has not issued prospectus for issue of shares nor under the Companies Act 1956, it can invite the public to apply for and allot the shares. The company is prohibited 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of fraud and this is not discharged by the Assessee tendering an incredible and fantastic explanation. The Court also held that every explanation given by the Assessee need not be accepted. 27. In Kamdhenu (supra), this Court categorically 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 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for cross-examination of same accommodation entry providers. Any way in the rejoinder submission to remand report the appellant is absolutely silent on cross-examination and by such conduct he has forgone his right to crossexamine. 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 invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, if any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan creditor M/s. Jalsagar 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and not on any tangible material disclosing the non-genuineness 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Apart from these facts, the assessee has also made the payment of interest which was also subjected to TDS. This shows the genuineness of the transactions and all these transactions have taken place prior to the date of search and duly recorded 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. Thus, the Tribunal has considered the fact that the assessee produced all the relevant documentary evidence in support of the claim to establish the identity, creditworthiness and genuineness of unsecured loan. We further note that in support of its claim, the assessee produced following documents: S. No. Particulars of Documents 1 Copy of Ack. of ITR of AY 2010-11 2 Copy of balance sheet and annexure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary material brought by the A.O. to controvert or dispute the correctness of the evidence filed by the assessee, the addition made by the A.O. and confirmed by the ld. CIT(A) are not sustainable. Further the statement relied upon by the A.O. of Shri Anand Sharma, no where states that he has provided any accommodation entry to the assessee but reference of M/s Jalsagar Commerce Pvt. Ltd. in the statement is only to the extent that he has provided accommodation entries to M/s Jalsagar Commerce Pvt. Ltd. through another company namely Royal Crystal Dealer Pvt. Ltd. Further the A.O. has not pointed out any discrepancy in the record to show that the assessee s own money has been routed back in the garb of unsecured loans. Accordingly, in view of the earlier orders of this Tribunal, we delete the addition made by the A.O. in respect of unsecured loan taken from M/s Jalsagar Commerce Pvt. Ltd. Following the earlier orders of this Tribunal, this issue is decided in favour of the assessee and against the revenue. 10. Ground No. 6 of the assessee s appeal is regarding denial of benefit of telescoping, recycling and rotation of funds by rejecting the peak credit theory. 11. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions. 6. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon ble Supreme Court in Navodaya Castles (p) Ltd Vs CIT(2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of ₹ 1,14,996/-made by the AO by invoking the provisions of section 14A of the IT Act. The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 13. Grounds No. 1 to 6 of the appeal ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso not disputed that the AO was not even having the alleged statement of Shri Amit Kedia and Shri Alok Harlalka but only a reference was made in the report of the Investigation Wing. Therefore, except the report of the Investigation Wing Kolkata, the AO was not having any other material in his possession to support his decision of treating the share capital and premium received from these two companies as bogus transaction and addition under section 68 of the Act. On the contrary, the assessee has produced the following documentary evidence in support of the claim :- M/s Teac Consultants Pvt. Ltd S. No. Particulars Paper Book Page No. 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 426-427 2 Copy of Balance sheet of AY 2010-11 along with enclosures 428-433 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 434 4 Confirmation of account showing the transaction with asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Copy of share application form of equity share 492-493 6 Copy of affidavit of Mrs Neelam Gautam director of M/s Birla Arts Pvt Ltd. On behalf of amalgamated company M/s Sangam Distributors Pvt Ltd. 494-497 7 Copy of order dated 19.07.2014 passed by Calcutta High Court regarding amalgamation of other companies in this company 498-524 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 525-528 9 Copy of assessment order passed in the case of above named company for AY 2006-07, AY 2007- 08 and 2013-14. 529-540 10 Copy of ROC master data. 541-542 11 Copy of PAN card. 543 12 Certificate of Incorporation. 544 Thus it is manifest from the details of the documentary evidence produced by the assessee that the assessee established i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51-453 M/s Teac Consultants Pvt. Ltd 2006-07 45,395 454-455 M/s Teac Consultants Pvt. Ltd 2012-13 49,91,290 459-462 M/s Teac Consultants Pvt. Ltd 2014-15 10,14,150 466/ M/s Sangam Distributors Pvt.Ltd 2006-07 Nil 530-531 M/s Sangam Distributors Pvt.Ltd 2007-08 9,600 534-535 M/s Sangam Distributors Pvt.Ltd 2013-14 6,79,400 538 M/s ISIS Mercantile Pvt. Ltd. 2006-07 6,936/- 500-501 M/s ISIS Mercantile Pvt. Ltd 2013-14 21,81,459/- 502-505 M/s ISIS Mercantile Pvt. Ltd 2014-15 Nil (Amalgamated with M/s Magnate Capital Market Pvt. Ltd.) 509-510 Thus it is clear that both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of investor companies, which are available at Page no. 292 to 389 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower. In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to these companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of Share application and Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal and appellant are separate legal entity. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant or its total income, this basis of addition adopted by the AO is farfetched cannot be concurred. 5.6 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in the account statement of investor, there is corresponding credit entry of equal amount, however, this observation of the AO is itself not sufficient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making investment, funds are required to be arranged by the investor, therefore reflection of such entries in bank statement doesn t lead to draw any adverse inference against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this question of law. 5.10 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income tax authorities only and therefore, in view of the judgment CIT v/s Victor Electrodes Ltd. [2010] 329 ITR 271, the Appellant cannot be fastened upon the burden to produce the investors before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of investor companies and some directors/officer were also produced before the AO. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of Share application Share premium u/s 68 of the Act is legally untenable and unjustified. 5.13 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of Share Application and Share premium received from M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited totalling to ₹ 1,05,00,000/- is not sustainable and hence the same stands deleted. In view of above the ground No. 2, 13 to 18 and 20 of appeal is allowed to the extent mentioned above. Accordingly, in view of the above discussion as well as facts and circumstances of the case the AO has made the addition based on the report of the Investigation Wing Kolkata whereas the assessee has produced all the relevant documentary evidence to establish the identity, creditworthiness and genuineness of the transactions. Hence in the absence of any discrepancy or otherwise any material or record to show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2006-07, AY 2013-14 and 2014-15. 500-513 11 Copy of ROC master data. 514-515 12 Copy of PAN card. 516 13 Certificate of Incorporation. 517 14 Copy of summon no. 1444 dated 13.10.2017 and reminder summon No. 1584 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961 to M/s ISIS Mercantiles Pvt. Ltd. 518-521 15 Copy of reply in response to such summon along with dispatch proof. 522-524 Further, the assessee also produced the master data of ROC showing the status of the said company as Amalgamated . The amalgamation was duly approved by the Hon ble High Court. The financial status and capacity to invest in the shares of the assessee was also proved by showing the share capital of the said company raised in the financial year 2005-06 of ₹ 15.42 crores, in the financial year 2010-11 of ₹ 2.5 crores and in the financial year 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 investment with borrowed funds, rather availability of sufficient interest free funds justifies the case of the Appellant that disallowance u/s 14A of the Act is unwarranted. Further, it is seen that AO has neither pointed out nor given any specific findings in the assessment order that any exempt income was earned during the relevant assessment year. Therefore, in view of the non-fulfillment of such statutory requirement as laid down in various judicial precedents and Circulars as relied upon by the A/R in his submission, in my considered view, the disallowance u/s 14A of the Act of ₹ 1,14,996/- is unwarranted. Accordingly, the same is deleted. In view of the above, addition of ₹ 1,14,996/- is deleted and these grounds of appeals are allowed. The fact recorded by the ld. CIT(A) that the assessee has not earned any exempt income during the year under consideration has not been disputed by the department and therefore, in view of the settled proposition of law on this point and particularly the decision of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon ble Supreme Court in Navodaya Castles (p) Ltd Vs CIT(2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of ₹ 35,248/- made by the AO by invoking the provisions of section 14A of the IT Act. The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 18. Grounds No. 1 to 6 of the appeal are regarding the additions made by the A.O. in respect of unexplained share application money was deleted by the ld. CIT(A) on the ground that the A.O. was not having any material in support of the decision as the statement of the alleged entry operator was not in the possession of the A.O. at the time of assessment. 19. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The addition made by the A.O. in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
