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TMI Blog2023 (1) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by stating that the loan given to assessee was a genuine loan and no cash was ever given by the assessee in lieu of the said loan. Thereafter, he stated in reply to question Nos. 30 and 31 that loan was in fact given by M/s. Fair Plan Vincom Pvt. Ltd. to M/s. Super Iron Foundry. Considering these facts, we are of the considered view that the addition made on the basis of said statement cannot be sustained. Further, we note that assessee was not allowed cross examination of Shri Sharma despite specific request from the assessee and the AO stated that on the date fixed for cross examination the said person did not turn up and the said cross examination could not happen but this in our opinion is not the excuse for not allowing the cross examination. Therefore, the addition made on the basis of statement of a person which was retracted subsequently without allowing cross examination is bad in law. We note that the assessee has furnished all the evidences before the authorities below but no defect or deficiencies pointed out except the statement of lender which was also withdrawn and retracted as stated above. Thus as assessee has furnished all the evidences proving identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of Rs. 5,23,50,000/- in the form of unsecured loan to M/s. Super Iron foundry for the assessee and charged commission @ 2.5%. Accordingly, the assessee was given a show cause vide letter dated 14.12.2016 by the AO as to why the said unsecured loan should not be added u/s. 68 of the Act as unexplained cash credit along with interest of Rs. 21,87,350/- which was replied by the assessee vide letter dated 20.12.2016. Finally, the AO rejected the contentions of the assessee and added Rs. 5,23,50,000/- u/s. 68 of the Act along with interest expenses of Rs. 21,27,350/- to the income of the assessee in the assessment framed u/s. 143(3) of the Act vide order dated 27.12.2016. 4. In the appellate proceeding the Ld. CIT(A) partly allowed the appeal of the assessee after taking into consideration the contentions of the assessee by observing and holding as under: It is fruitful and not out of place to mention here that:- 1. In this case appellant Firm or its director or its Ld. A/R did not co-operate with the Ld. AO in the assessment proceedings to arrive at the 'TRUTH' 2. In this case one Shri Ishwar Dayal Sharma, director of the claimed lender company during F.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h cheques worth Rs. 47,00,000 were not cleared. Thus, the appellant had received loan of Rs. 4,76,50,000 (5,23,50,000 minus 47,00,000). The lender had made the payment by account payee cheque/RTGS in the Federal Bank account No. 11030200067316 during the year. In light of above facts circumstances and in law, the addition of Rs. 47,00,000 out of 5,23,50,000 is not sustainable and therefore, AO is directed to restrict the impugned addition to Rs. 4,76,50,000 after verification of cheques which were not cleared during the year under consideration. Therefore, ground No. 2 of appeal is partly allowed. 5. The Ld. AR vehemently submitted before the Bench that the order passed by the first appellate authority is wrong and against the principle of natural justice. The Ld. AR submitted that the assessee has filed all the details/information before the AO as well as before the Ld. CIT(A) evidencing the receipt of money from the loan creditor. The Ld. AR submitted that assessee has filed name, PAN no., bank statement, confirmation from the loan creditor including copy of ITR and NBFC certificate, loan agreement, loan confirmation of repayments as the loan was fully repaid till 30.09.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M/s. Sreeleathers ITAT/18/2022 (IA No. GA/02/2022) dated 14.07.2022 (Cal) iv) CIT(E) Vs. Sanskriti Sagar, ITAT/46/2018 (GA No. 631 of 2018 dated 26.04.2022 (Cal). v) Pr. CIT Vs. M/s. Samapran Synthetics Pvt. Ltd. D.B. IITA No. 137/2018 dated 10.08.2018 (Raj. H.C.) vi) M/s. Lalbaba Seamless Tubes Pvt. Ltd. Vs. DCIT, ITA No. 2641/Kol/2019 dated 21.10.2022 (ITAT, Kol). vii) DCIT Vs. M/s. Diamond Bottling Plant Company ITA No. 894/Kol/2019 dated 31.12.2019 (ITAT, Kol). 6. The Ld. AR submitted that in all the aforesaid decisions it has been clearly laid that no addition can be made on the basis of statement which is retracted by the lender/investor and also no addition can be made where no cross examination was allowed to the assessee. Finally the Ld. AR prayed that the addition as sustained by the Ld. CIT(A) may kindly be deleted by allowing the appeal of the assessee. 7. The Ld. DR on the other hand, relied on the orders of the authorities below. 8. We have heard rival submissions and gone through the material available on record. It is undisputed that assessee has raised unsecured loan of Rs. 5,23,50,000/- from Fairplan Vincom Pvt. Ltd. on which intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be sustained. Further, we note that assessee was not allowed cross examination of Shri Sharma despite specific request from the assessee and the AO stated that on the date fixed for cross examination the said person did not turn up and the said cross examination could not happen but this in our opinion is not the excuse for not allowing the cross examination. Therefore, the addition made on the basis of statement of a person which was retracted subsequently without allowing cross examination is bad in law. We note that the assessee has furnished all the evidences before the authorities below but no defect or deficiencies pointed out except the statement of lender which was also withdrawn and retracted as stated above. The case of the assessee finds support from several decisions as discussed below: a)i) In the case of Andaman Timber Industries Vs. CIT (Supra) the Hon'ble Apex Court has been held as under: 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pus fund and had applied the same by advance money to the land and building which was shown in the balance-sheet as at 31.3.2011 which was placed before the learned tribunal in the form of a paper book. The learned tribunal also found that the application of the said fund was admittedly for a charitable purpose in tune with the objects of the assessee society. Furthermore, the tribunal noted that the revenue did not dispute the fact that the donations received by the respondent were not applied for charitable purposes. Thus, on the grounds mentioned in the order the tribunal came to the conclusion that the activities of the assessee society cannot be terminated to be ingenuine or it cannot be held that the their activities are not in accordance with the objects of the assessee trust. Mr. Kundalia, learned counsel for the appellant/revenue placed reliance on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax (Exemptions) Kolkata Vs. Batanagar Education and Research Trust, reported in (2021) 9 SCC 439. On going through the said decision we find that the same is factually distinguishable as in the said case the Hon'ble Supreme Court brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the ITAT 18 OF 2022 explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Srilekha Banerjee Ors. Vs. CIT 4, it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Vs. Mohanakala (P) 5]. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Vs. CIT 6 and Anil Kumar Singh Vs. CIT 7). 5. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich needs to be ITAT 18 OF 2022 ignored. Much reliance was placed on the statement of Shri Ashish Kumar Agarwal, which statement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration in this appeal. 7. Accordingly, the appeal fails and is dismissed. No costs. iv) In the case of CIT(E) Vs. Sanskriti Sagar, the coordinate bench has been held as under: 2. We have heard Mr. Vipul Kundalia, Learned Senior Standing Counsel for the appellant assisted by Mr. Anurag Roy, Learned Advocate and Mr. Ashim Chowdhury and Mr. Soham Sen, Learned Advocates for the respondent. 3. The respondent assessee is a society registered under Section 12A of the Act, such registration having been granted on 20.02.1989. Survey ITAT No. 46 of 2018 operation under Section 133A of the Act was conducted on M/s. Herbicure Health Care Bio-Herbal Research Foundation (Herbicure) and during the course of survey, it came to light that Herbicure was engaged in money laundering and providing accommodation entries to different individuals and organizations, by way of accepting donations and returning the same to the donors through web of financial transactions after retaining the commission and by accepting money by cash or through web of financial transaction and giving donations after retaining the commission. A sworn statement was recorded from the founder Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore exceeded its jurisdiction. Further the CIT ignored the fact that there is no iota of evidence that the activities of the assessees are not genuine and the cancellation of the registration based upon a non-verified statement of the third party is illegal. Retrospective cancellation of the registration with effect from 01.04.2010 is not provided under the provisions of the Act. The tribunal considered the contentions raised by the assessee, examined the entire facts, took note of the statement recorded from the Director of Herbicure, kept in mind the parameters to be fulfilled under Section 12AA (3) of the Act and found that the donations received by the assessee from ITAT No. 46 of 2018 Herbicure for a sum of Rs. 85,000/- was duly accounted for in the profit and loss account as Corpus Donation and there was no evidence on record to show that cash was paid by the assessee which in turn reached the hands of the Herbicure which was returned in the form of donation to the assessee after retaining the commission. The tribunal also analysed the answers given by the Director of Herbicure to various questions which were posed to him when the statement was recorded from him and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to see as to whether any finding of fact has been recorded by the CIT(E) on these two aspects which are primordial for the exercise of power under Section 12AA(3) of the Act. As noted above, the show-cause notice proposing cancellation was solely based upon a statement recorded from the Director of Herbicure. The CIT(E) in its order has quoted the various questions posed to the said Director and the answers given by him. Thereafter, the CIT(E) proceeds to state that the assessee has received Rs. 85,000/- as donation from Herbicure and Herbicure was involved in money laundering and therefore, the assessee was directed to show cause as to (2021) 9 SCC 439 ITAT No. 46 of 2018 why their registration should not be cancelled as they were also engaged in money laundering. The assessee submitted his reply denying the allegations and stating as to how the donation was received by cheque and was credited in the bank account of the assessee and the donation was applied for the objects of the assessee. Further, the assessee categorically stated that their activities are in accordance with the objects of the Trust and are genuine. In spite of such reply having been given by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Batanagar Trust. It was held that the Trust therein misused the status enjoyed by them by virtue of registration under Section 12AA(3) of the Act. Further, there was material to indicate that the assessee therein received donation by way of cheques out of which certain money was brought back or returned to the donors in cash and on facts it was established by the revenue that they were all bogus donations. As pointed out above, there is no iota of evidence brought on record by the CIT(E) to connect the assessee with the money laundering activities of Herbicure. Furthermore, there is no specific reference to the assessee in the answers given by the Director of Herbicure to the various questions posed to him during the course of the survey operations. Precisely, for such reason the Tribunal has recorded that there ITAT No. 46 of 2018 is no evidence to conclude that the assessee was also engaged in money laundering activities. A bare perusal of the order passed by the CIT(E) dated 06.01.2017 will clearly show that the cancellation is solely based upon the money laundering activities of Herbicure. The CIT(E) did not consider the explanation offered by the assessee as to how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find no reason to interfere in the impugned order. Dismissed accordingly. vi) In the case of M/s. Lalbaba Seamless Tubes Pvt. Ltd. Vs. DCIT (Supra) the coordinate bench has been held as under: 7. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised share capital from seven investors by issuing equity shares at premium the details whereof are given at page 2 in para 3 of assessment order. We note that during the course of assessment proceedings the AO called for various details/documents from the assessee in respect of investments and the investors which were duly supplied to the AO. Besides the AO issued notice u/s. 133(6) to these companies calling for certain information/evidences which were duly furnished by all the investors and are available on record. We note that AO has not issued summons u/s. 131 of the Act to the directors of the investor companies however made an addition on the basis that directors were not brought or produced by the assessee. We note that the assessee has furnished all the evidences during the assessment proceedings which are available at page 1 to 631 of PB-2 which comprised of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used to make addition in the hands of the assessee unless the assessee was allowed to cross-examine the person who gave statement which was used against the assessee to make the addition. The case of the assessee finds support from the decision of Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra) and Hon'ble Allahabad High Court in the case of CCE vs. Shyam Traders (supra). We note that the assessee has proved the source and source of source of all these investors even though the same is not required to be proved in the instant assessment year as the amendment is applicable prospectively as has been held by the Hon'ble Bombay High Court in the case of Gangadeep Infrastructure (supra). 9. Finally we note that both the authorities have reached and based their conclusions to make addition on the fact that the directors of the subscribing companies were not produced before the AO which in no way could not be the basis for making addition as the assessee has filed all the necessary documents before the authorities below proving the identities, creditworthiness of the investors and genuineness of the transactions. The case of the assessee is squarely cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial facts and record its findings on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed. The case of is also covered by the decision of the coordinate bench by ITO Vs. M/s. Cygnus Developers India Pvt. Ltd. (supra) the operative part whereof is extracted below: 8. We have heard the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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