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TMI Blog2021 (4) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... involve connected issues. Hence, all the captioned appeals are disposed off by this common order. 3. To begin with, we shall take up Revenue appeal in ITA No.2295/Ahd/2018 for adjudication purposes. 4. Grounds of appeal raised by the Revenue in ITA No. 2295/Ahd/2018 read as under: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,00,00, 000/- on account of Unexplained Credit u/ s 68 of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition made by the AO ignoring the overwhelming and strong evidences discussed by the AO in the assessment order relating to the impugned unexplained transaction of Rs. 4,00,00,000/- entered into by the assessee." 5. Grounds of appeal raised by the assessee in its cross appeal in ITA No. 2200/Ahd/2018 whereby the jurisdiction assumed by AO under s.147 of the Act was raised, read as under: "1. The Ld. CIT (A) has grossly erred in law and on facts in allowing the appeal partly. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Crystal Arcade', C G Road, Ahmedabad. The building, 'Terrace of Crystal Arcade' was constructed by M/s. Sunderdeep Builders (Prop.-Rajesh Sunderdas Vaswani) during F.Y. 2003-04. After a detailed discussion, the AO broadly observed that the documents were seized and on their co-relation with books of accounts/bank statement of Venus Group, it was found (by the AO of Venus Group) that unaccounted cash transactions of Venus Group were first recorded on cash vouchers and then on the basis of such recording, the entries were recorded on a "day cash book". As also observed, it was noted by the AO of the Venus Group that the cash entries in seized documents pertains to the beneficiary, Ganesh Plantation Ltd. (assessee) for F.Y. 2010-11 (A.Y. 2011-12). On receipt of such information, the AO of the assessee herein called for and verified the cash records of the assessee for relevant year vis-à- vis information so received. After such verification, reasons were recorded under s.148(2) of the Act and approval thereon was taken under s.151 of the Act to reopen the completed assessment. 6.2 In the course of reassessment proceedings, the assessee objected to the action taken under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such credit in books is unsatisfactory. Accordingly, an amount of Rs. 4Crore was added to the income previously assessed and brought within the ambit of taxation in the reopened proceedings under challenge. 7. Aggrieved by the aforesaid addition made under s.68 of the Act by the AO, the assessee preferred appeal before the CIT(A). 7.1 Before the CIT(A), the assessee made two fold challenges (i) wrongful assumption of jurisdiction under s.147 of the Act and (ii) unjustified additions on factual matrix. 7.2 For challenge on jurisdiction, the CIT(A) took note of the reasons recorded as well as the legal objections. However, the CIT(A) found scarce merit in the legal challenge for invocation of jurisdiction under s.147 of the Act. 7.2.1 The reasons recorded by the AO forming the basis for reopening the completed assessment are reproduced hereunder for ready reference: * "An information was received from ACIT, CC- 1 (1), Ahmedabad on 18.01.2017. 1. A search u/s 132 of the Income Tax Act, 1961 was conducted in the case of Venus. Group of Ahmedabad on I0.03.2015. On the Terrace of Crystal Arcade, C G Road, Ahmedabad, which was also covered u/ s 132 of the Income Tax Act, documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash books/ cash vouchers/day books with the sale deeds of land transactions, it has been noticed that there is huge transaction of unaccounted cash in these land dealings. Such cash transaction are recorded in the name of different entities in the seized cash vouchers. The amount which is legally paid for the purchase/ sale of the land has been paid vide cheque through bank accounts. This figure is shown as the total consideration of deals in the registered sales/purchase deed of the lands. Also, the amount paid through cheque and which is the total consideration of land dealing as shown in sales/purchase deeds, is entered with a noting as " Against EC" in the seized papers. 4. 'Against EC' transactions: The 'Against EC' transactions in the unaccounted day cash book have their relation with the receipt and payment of equivalent amount of RTGS in the bank account. For e.g., if there is cash- receipt against EC, it indicates that equivalent amount of RTGS has been paid to the other party through banking channel. 5. These are independently correlated and verified from various seized documents. It has been found that these transactions are related to cash transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 Sapphire Complex, C. G. Road Ahmedabad and correlate with evidences seized from Terrace of Crystal Arcade C.G. Road Ahmedabad. (iii) It has been found that the names mentioned on these pages are also mentioned on the other seized evidences like cash voucher, summary sheet of Against EC transactions (page number 2 to 9 of Annexure A-129, seized from the Terrace of Crystal Arcade) and cash book related to ' Against EC' transactions (iv) It has been found that ' Against EC' entries are the cash receipt and cash payment to various parties who are in the need of RTGS/ cash. The Venus Group through; its Concerns l ike Sunderdeep Builders (SDB), Sanjeet Motor Finance Private Limited (SMFPL) and Greenstone Agro- Products & Infrastructure Private Limited is involved in the business of providing accommodation entries. 8. Correlation of 'Against EC' entries with bank accounts of Venus Group: Every transaction- of nature ' Against EC' was first recorded on some voucher in the similar pattern as for the other cash transactions like green colour voucher for cash receipt and red colour voucher for cash payment. It has been found from the correlation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors Jayesh Kotak & Pravin Kotak operated the bank account of J P Fincorp Services Pvt Ltd., which is a final beneficiary company of J P Iscon Group for accommodation entries taken by the Group from bogus concerns run by Shrish Chandrakant Shah, Mumbai- based known accommodation entry provider. The cases of JP Isocn Group- related to search? operation are also assessed by this office. Hence, considering the above facts and evidences, I believe that assessee has paid unaccounted cash Rs. 4,00,00. 000/- to Venus group and taken accommodation entry from Venus group. The relation of the Venus Group and J P Iscon group is very well established from above given facts which again leads to believe that Assessee has facilitated accommodation entry of Rs. 4,00,00,000/- further to JP Iscon Group. 12. In view of the above, I have reasons to believe that income, in the form of unaccounted cash, of Rs. 4, 00, 00,000/- has escaped assessment for F.Y. 20-10 -11 i.e. A.Y. 2011-12 in the hands of assessee by reason of the failure on part of assessee to disclose fully & truly all the material facts necessary for its' assessment in this AY 2011 -12. Accordingly, it is a fit case for reopening u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ 2011] 16 taxmann.com 373 (Amritsar) iii) Rajat Shubra Chatterji v. ACIT (ITA No. 2430/ Del/ 2015 dated 20.05. 2016) ITAT Delhi iv) State Bank of India v. Dy CIT [ 2013] 22 ITR (Trib.) 609 v) Jindal Stainless Ltd. v. Assistant Commissioner of Income-tax, Central Circle 6, New Delhi [ 2009] 120 ITD 301 (Delhi) During the course of appeal hearing, the Authorized Representative relied upon the decision of the Hon'ble Jurisdictional Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) vs. Joint Commissioner of Income-tax [ 2008] 307 ITR 1 (Guj) wherein, it has been held that" when one considers the entire scheme relating to the procedure for reassessment as laid down in the group of sections from sections 147 to section 153 of the Income-tax Act, 1961 and compares it with the special procedure for assessment of other persons as per section 153C r.w. s 153A of the Act, no jurisdiction to reopening an assessment while relying on the seized material found and seized in the case of third party in the case of appellant is permissible as per provisions of the Income-tax Act, 1961 while issuing the notice u/ s. 148 r.w. s. 147 of the Act. Therefore, there is a lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payable on the 1st day of F.Y. 2010-11 relevant to A.Y. 2011 -12 in the books of accounts of M/ s. Sunderdeep Builders. The AO in the assessment order has not identified any of the statement of main persons of Venus Group namely Shri Ashok Vaswani, Shri Deepak Vaswani and Shri Rajesh Vaswani, Proprietor Sunderdeep Builders about their admission that the Venus Group is indulged into any accommodation entry transaction and nothing has been brought on record against the appellant company even from the submissions made by the Venus Group search case assesses in their search case assessment proceedings in respect of seized loose paper pages relied upon by the AO against the appellant company in the reason recorded for reopening of the case and in the reassessment proceedings. There is no statement of Shri Rajesh Vaswani, Ashok Vaswani and Shri Deepak Vaswani recorded u/ s. 132(4) of the Act and u/ s. 131 of the Act in respect of scanned copies of the seized loose paper pages reproduced by the AO in the assessment order. From perusal of the synopsis of arguments submitted by the appellant company and supporting documents and evidences compiled in the paper book, I have verified the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer of the Venus Group cases. The appellant company has submitted that the AO has taken a contradictory stand in the assessment order by making an observation about the alleged cash of Rs. 4 crore by the appellant company in lieu of cheque payment and subsequently of making allegation of cash received " Against EC" from Jayesh Kotak for Ganesh Plantation Ltd. The appellant company has stated that Shri Jayesh Kotak is neither a director of Ganesh Plantations Ltd or a shareholder or an employee of appellant company Ganesh Plantations Ltd. I have also verified the seized scanned copy of loose paper pages reproduced by the AO on page 32 of the assessment order, wherein, nothing has been found to be noted as the word " cash " and there is no signature or name of any director of appellant company Ganesh Plantations Ltd or any employee of Ganesh Plantations Ltd and the name written is Jayesh Kotak and the AO has not brought on record any evidence that Shri Jayesh Kotak is a director of Ganesh Plantations Ltd or shareholder of Ganesh Plantations Ltd. The facts of appellant company' s case is squarely covered by the decision of the Hon'ble C.B.I. Vs. V.C. SHUKLA & Others (cited supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon'ble Supreme Court further observed :- 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made In a book, that book is a bonk of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as/ relevant evidence, still, the statement mode therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed. 27. With respect to evidentiary value of regular account book, the Hon' ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. 26 ITR 775 by the Hon'ble Supreme Court has been relied upon wherein the Hon'ble Supreme Court has held " even though Income Tax Authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all". Considering the discussion made herein above and following the decisions of the Hon' ble Supreme Court, jurisdictional Gujarat High Court and Hon' ble ITAT, Ahmedabad, (cited supra), I hold that the addition made by the AO as unexplained cash credit u/ s 68 of the Act for an amount of Rs. 4,00, 00,000/- is not justified and the same is hereby deleted. This ground of appeal is allowed." 8. Aggrieved by the reversal of additions made by the AO under s.68 of the Act on merits, the Revenue is in appeal before the Tribunal in ITA No.2295/Ahd/2018. 9. The assessee is also in cross appeal in ITA No.2200/Ahd/2018 whereby the validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine by AO as a result of underhand cash dealing. The nature and source of credit of Rs. 4 Crores shown to be received by assessee from Sunderdeep Builders was thus rightly found unsatisfactory by the AO. It was contended that the CIT(A) has adjudicated the issue on merits against Revenue on irrelevant and flimsy considerations. The learned DR accordingly urged for reversal of the action of the CIT(A) and restoration of the order of the AO on merits. 12. In support of its cross appeal in ITA No. 2200/Ahd/2018 and in rebuttal to the stand taken on behalf of the Revenue on the point of validity of jurisdiction assumed under s. 147 of the Act, the learned counsel for the Assessee Ms. Shah adverted to the reasons recorded and contended that the action of the AO suffers from the vice of change of opinion on the existing issue which tantamounts to review of the existing action in the garb of Section 147 of the Act which is not permissible in law. A reference was made to the notice issued under s.142(1) of the Act dated 03.12.2013 issued in the course of original assessment proceedings under s.143(3) of the Act. Question nos. 8 & 9 thereof were adverted in this regard wherein specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old; (i) the jurisdiction to the AO would lie under s.153C of the Act, if any and invocation of jurisdiction under s.147 of the Act in the case of assessee, arising from search in Venus Group, is contrary to scheme of the Act and thus devoid of legitimacy; (ii) the satisfaction of the AO on the reasons cited suffers from the vice of non-application of mind and a mere borrowed satisfaction; & (iii) the action taken under s.147 of the Act is actuated by re-visiting an opinion already formed on the subject matter of dispute at the time of original assessment and thus vitiated on the grounds of change of opinion / review of assessment. 14.1 We do not see any substance in the line of arguments raised on behalf of the Assessee in these objections for assumption of jurisdiction. Prior to amendment carried out in S. 153C applicable from 1st June, 2015, the jurisdiction under Section 153C of the Act would come into play in the case of person other than searched person only where seized documents in the hands of person searched/ covered under s.132/132A of the Act 'belong to' such other person (the assessee herein) and the AO of the searched person forms a requisite satisfaction towards se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous unaccounted cash transactions between the assessee and the searched person. The AO has clearly indicated that the seized documents were duly analyzed by him. Furthermore, from para 10 of the reasons recorded, it is noticed that on receipt of the information from the AO of the searched person, a pre-verification exercise of records of the assessee was also carried out to ascertain the facts indicated in the seized material. It is only after verification of the seized documents qua the records of the assessee, the action was initiated under s.147/ s. 148 of the Act. Thus, these facts clearly suggest that the AO exerted himself on the information received from the AO of searched person and formed his own and independent prima facie belief on purported escapement of income. It is noticed that the AO has set out the facts in great length in the reasons recorded which overtly indicate the requisite application of mind reasonably expected from AO at the stage of commencement on proceedings under s.147 of the Act. In the circumstances, when seen holistically, the belief of the AO is clearly an independent belief and cannot be labeled as a borrowed satisfaction or a satisfaction without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is authentic and evokes certain disquiet. Certain element of subjectivity involved in formation of belief thus cannot overstretched at the threshold stage. Hence, the plea of the assessee that the finality of assessment earlier made under s.143(3) of the Act cannot be disturbed is totally misplaced in the wake of new facts coming to the light of the AO at the time of invoking jurisdiction. 14.4 Hence, the objection of the assessee canvassed on point of jurisdiction fails on all counts. Thus, we see no error in the action of the CIT(A) in upholding the jurisdiction. Consequently, the cross appeal of the assessee in ITA No.2200/Ahd/2018 challenging the validity of assumption of jurisdiction under s.147 of the Act is dismissed. 15. We shall now move to address the challenge to the additions towards alleged unexplained cash credit under s.68 of the Act on merits. As narrated earlier, the AO has made additions of Rs. 4 Crore to the total income of the Assessee herein taking shelter of s.68 of the Act having regard to the seized material found from the possession of the searched person(Venus Group cases). It was observed that certain incriminating material were found and seized from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 to 07.03.2015. The cash book was also written in coded forms for names, amounts, dates and vouchers and were claimed to be headlined as 'estimates'. The Revenue has contended that such coding was done to alibi and camouflage the real value of unaccounted cash transactions with the assessee and to take a suitable defense in the case of discovery by the Revenue authorities. As further claimed, the transactions were decoded by the Revenue authorities and it was found that a sum of Rs. 4 Crore in aggregate was paid in cash by assessee to Venus Group in lieu of corresponding receipt of equivalent amount of payment through banking channel and thus such payment received through banking channel is nothing but an accommodation entry, which was recorded in the books of the assessee on 24.01.2011. In short, on the basis of loose papers/ cash book seized from venus group, the AO has alleged that aforesaid receipt of Rs. 4 Crore from M/s. Sunderdeep Builders is a sham transaction and an accommodation entry against payment of unaccounted income. 15.3 In the backdrop of facts set out by AO, we notice that the allegation of alleged accommodation entry of receipt/repayment of existing loans r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee somewhere. The AO has conveniently implicated the assessee without any cogent premise on the basis of some aimless examinations. 15.4 No doubt, the documents found possessed from the custody of a searched person may possibly operate as an estoppel against that searched person, if the circumstances so warrant, but it is unconceivable to bind a third party for such entries/diary without demonstrating cogent nexus. The whole action is in the realm of conjectures and surmises mainly on the basis of some scanty and sketchy statement yielded from the accountant of the searched person. The revenue has alleged underhand cash transactions. Hence, the primary onus in the instant case, squarely lied upon the Revenue and that to justify it with direct or circumstantial evidences. The onus rested upon the revenue has not been discharged at all and thus did not shift on to assessee. Consequently, in the absence of any credible proof of receipt of cash from assessee, the apparent has to be taken as real i.e. Sunderdeep Builders have repaid Rs. 4 Crore through banking channel in discharge of its existing outstanding liability as a matter of course. The CIT(A) has correctly appreciated the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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