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TMI Blog2022 (7) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. In this case, if we go through the addition made under section 68 of the Act, we find that there is no reference to any incriminating material and thus, we are of the considered opinion that the addition made under section 68 of the Act cannot be sustained and thus, we direct the Assessing Officer to delete the addition made in respect of share capital under section 68 of the Act in the case of Shri Pankaj Agarwal, Smt. Shobha Agarwal and Smt. Rita Agarwal. We find that the sole basis for the Assessing Officer to make the addition under section 68 of the Act is that investigation carried out by the Income Tax Department on certain entry providers and statement recorded from them. Except this, no other evidence was available with the Assessing Officer to prove that share capital received from M/s. Kaner Investments Ltd. is accommodation entry taken to convert unaccounted income of the assessee. On the other hand, the assessee has filed all the evidences including name and address of the creditors, confirmation from the parties, financial statements, etc. to prove the identity of the creditor and also filed necessary bank statement to prove the genuineness of the transaction. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income filed in response to the said notice. Notices under section 143(2) and 142(1) of the Act were also duly served on the assessee. Thereafter, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 153A of the Act dated 31.03.2015 by making addition of ₹.1,25,00,000/- under section 68 of the Act. On appeal, the ld. CIT(A) confirmed the addition made under section 68 of the Act. 3. On being aggrieved, the assessee is in appeal before the Tribunal. By relying upon the grounds of appeal, the ld. Counsel for the assessee has submitted that the action of the Assessing Officer in bringing to tax the unsecured loans despite establishing the identity of the contributor/creditor as well as the genuineness of the transactions was wholly unjustified and unsustainable in law. It was further submission that the ld. CIT(A) went wrong in rejecting the plea of the assessee for cross-examination of Jagdish Prasad Roy and Prasad Lahoti and concluding that the right of cross examination was not absolute. It was also challenged the validity of the search assessment in the absence of any incriminating seized material(s) and prayed for deleting the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of their Investments in Shares etc., details of the same is enclosed herewith along with this reply. There is no question of doubt about their identities and these companies had sufficient capital & funds to extend the Loan to me and the amounts have been received through proper banking channels. Your kind authority have made general statement about entry operators and their modus operandi like - Operation of many bank accounts in the name of companies, firms and proprietary concern and individuals in the-same bank and branch - Hiring of person for operation in the accounts and filing of ITRs. - Collection of Cash - Employing relatives/others with low remuneration to sign cheques, documents, etc. - Obtaining PAN and filing of returns of income - Operations of multiple bank account in the same name and disclosing only one bank Providing entries of share capital/gifts/loans etc. - Statements have been made by the said person admitting above facts However your good office has not provided any evidence to support the points mentioned in above para whereas we have provided all the relevant details/ evidence to state that there was no such transactions as referred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of M/s. Echolac Vinimay Pvt. Ltd., the Assessing Officer has observed that the said company had minimum balance on various dates before using the cheque to any loan debtor, namely the assessee. It received amount equal to cheques to be used, i.e., ₹.1,25,00,000/- and it was deposited into the bank only for the purpose of issuing cheques to the extent of loan to be given, even though these are through Bank entries. Moreover, the time lag between such deposits and issue of cheques is generally a day or two, which proves that the lender did not have the sufficient wherewithal for giving loans. These types of transactions are typically followed by the Jamakharchi/ Shell/Paper Companies. 5.2 After examining the Balance Sheet of M/s. Echolac Vinimay Pvt Ltd., the Assessing Officer has observed that though the total assets of the company during the assessment year was ₹.100.33 crores, the net profit declared by it was only ₹.18,487/-, which shows the low profit viability of such Jama Kharathi/Shell/Paper Companies and is clearly evident that these are only created for providing accommodation entries and not for pursuing any business. The assessee was provided wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s contention that these are genuine transactions received from the lender whose identity is genuine and that it is creditworthy does not hold good as this company's operations have already been investigated by the Investigation Directorate, Kolkata and have been proven well beyond doubt and in the words of the connected persons, is only controlled and managed by the above-referred individual (accommodation entry operator) with a set of employees (name lenders) acting as dummy directors, who sign on the dotted lines for a meager remuneration and are in no way connected to the control and management of the affairs of the company. Hence, to sum up, the following are the facts which emerge from the aforesaid: a. During relevant assessment year the assessee received ₹.1,25,00,000 as loan from various Jama Kharchi/ Shell /paper Companies. b. On basis of information received from Investigation wing that assessee was involved in taking accommodation entries, the assessee was asked to produce the lenders. Even after sufficient time was accorded, the assessee failed to do so. c. The assessee has failed to prove the identity, creditworthiness and genuineness of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tia for AYs 2000-01 to 2003-04 that involve the question of law on the bone of contention with reference to scope of S.153A of the Act in cases of absence of incriminating materials recovered during search proceedings are still pending. (iii) The jurisdictional High Court i.e., Hon'ble High Court of Madras has not yet delivered any judgment on the subject matter as to whether assessment u/s 143A in respect of completed assessments should be made only on the basis of incriminating material or not. (iv) The Hon'ble ITAT Chennai in most cases have ruled in favor of assessee and has decided in favor of the Revenue too as mentioned supra. (v) As discussed earlier, the ratios in the cases of St. Francis Clay Décor Tiles(supra) and E.N. Gopakumar (supra)have not been brought to the kind notice of the Hon'ble High Court of Delhi in the case of Meeta Gutgutia (supra) and hence the Hon'ble High Court of Delhi had no occasion to consider these judgments. (vi) At the same time, the Hon'ble Kerala High Court in the cases of E.N. Gopakumar and St. Francis Clay Decor Tiles have referred to the judgments in the cases of CIT Vs Continental Warehousing Corporation (Nav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against him. Mr. Jai Prakash Roy who is Director of the EcholacVinimay private limited stated that he is a mere dummy director and is on the payroll of the entry operators by the name Beni Prasad Lahoti and Hari Prasad Rathi. He is the one who has signed the financials of the company also. Therefore his statement and the admittance that he is a dummy director is of immense significance. He denies giving any loan to the appellant by implication as he stated the affairs were managed by someone else who in turn has admitted that the bank accounts in the name of the company were used to provide accommodation entry to the beneficiaries and admits that he is merely a dummy director signing at the instance of the entry providers then the onus shifts to the appellant as the said company from which it is getting a loan denies giving it and instead states that it is an accommodation entry against the charging of commission. 6.31. The appellant has claimed that M/s Echolac Vinimay is a part of same management and Mukesh Agarwal and Pankaj Agarwal are the Directors. But Jay Prakash Roy is also Director in the same company. In that case why the appellant is not able to ascertain from Jay Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, meaning thereby that there would be credit entry in the bank account of Echolac Vinimay before the cheque is issued to the beneficiary. The same trend can be seen in the bank account from whom cheques are issued the appellant from DCB, Braubourne Road, Kolkata. 6.34. In the above statement the beneficiaries seen are either the appellant or his other family members. It can be clearly seen that before the issue of cheque to the beneficiary similar amount is credited and then subsequently cheques are issued. Also the address of the company mentioned in the bank is different from the address mentioned in details filed before ROC. 4) Though the appellant claims that Echolac Vinimay is a group company but the financials of the company do not state about any related party transaction. There are no related party loans or investments mentioned. The takeover is also a suspicious transaction as all the beneficiaries appear to be family member of the appellant or his relatives. 5) If the management is same then why he appellant could not produce a rebuttal from Jagdish Prasad Roy who claimed to be only a dummy Director on the payroll of Accommodation entry providers, Nor he could pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee. Thus we uphold/sustain the orders of learned CIT(A) in which we do not find any infirmity, which we confirm/sustain. The assessee fails in this ground. We order accordingly." Thus the claim for cross examination in the case of the appellant is not tenable. 6.35. In view of the above circumstance of the present case the onus that was upon the appellant to explain the amount credited in his books has not been discharged and the assessing officer was left with no other option other than adding back the amounts as unexplained. Accordingly, the action of the assessing officer is upheld. 6.36. In brief the appeal of the appellant is dismissed." 7. On being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.12.2012. Thus, from the above facts, it is very clear that the assessment for the assessment year under consideration is unabated/ concluded as on the date of search. Further, it is well settled principles of law by the decision of various High Courts, including the decision of the Hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein, it has been held that no addition can be made in the assessment framed under section 143(3) r.w.s. 153A of the Act unless, the addition is supported by incriminating material found during the course of search, if such assessment is unabated/concluded as on the date of search. In the case of CIT v. Kabul Chawala reported in 380 ITR 573, the Hon'ble Delhi High Court has held that although section 153A does not say that addition 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 Assessing Officer 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 seized material. The Hon'ble Gujarat High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reference to any incriminating material and thus, we are of the considered opinion that the addition made under section 68 of the Act cannot be sustained and thus, we direct the Assessing Officer to delete the addition made in respect of share capital under section 68 of the Act in the case of Shri Pankaj Agarwal, Smt. Shobha Agarwal and Smt. Rita Agarwal. 12. Now, coming back to the appeal filed by Smt. Bimla Devi. In this appeal, the assessment year involved in question is assessment year 2012-13 and thus, the assessment is abated as on the date of search, because, time limit of issuing notice under section 143(2) of the Act expires by 30.09. 2013. Therefore, this appeal cannot be decided on the basis of abatement/unabatement of assessment. Therefore, we proceed to decide the appeal on the basis of addition made towards share capital. The Assessing Officer made addition towards share capital received amounting to ₹.20,00,000/- from a company on the ground that M/s. Kaner Investments Ltd. is engaged in the business of providing accommodation entry to various beneficiaries and the assessee is one of the beneficiary in entry provided. Therefore, on the basis of informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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