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TMI Blog2011 (11) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... tification mark ML-1 to ML-5. The assessee is in the business of manufacturing of Ferro Alloys. As facts are identical, Ld. CIT DR before us, for the purpose of discussion, has taken assessment year 2002-03 in ITA No.269/Kol/2011. 3. The first issue is against the deletion of addition of Rs.1,16,00,000/- on account of alleged bogus loan on the basis of retraction of statement recorded under section 132(4) of Income Tax Act.. Ld. CIT DR submitted that the statements were retracted after a gap of two years and the statements were not retracted before the authorities below before whom originally 132 statements were made. Originally 132 statements were recorded in the course of search. Therefore, it has more evidentiary value. Search revealed that unaccounted black money with Maithan Group has ploughed back to the business of the assessee by way of bogus share capital and unsecured loans and also in various group concerns. Huge entries have been taken from the jama kharchi companies in the form of share application money, preference share capital and unsecured loans. According to Department some of the seized documents found and seized during the course of search operation reveals the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh 8,31,452 116 lakh 8,42,499" This statement was confronted to the assessee. It was submitted that Shri Arun Kumar Khemka was not Director of such creditor companies. He had no control over the creditors companies. Hence, no weightage should be given on his statement. It is also explained before the Assessing Officer that Shri Arun Kumar Khemka & Shri Subhas Chandra Agarwalla both have filed retraction Affidavit before the Assessing Officer on 07.12.2007. By this retraction Affidavit, Shri Subhas Chandra Agarwalla, Director of the Company retracting the 132(4) statement given at the time of search proceedings wherein he clearly stated that statements were recorded by the search party under duress and coercion and that he was simply asked to sign on the dotted line without being given any opportunity to verify the contents of the statement. The statements were rightly retracted and the opportunity to cross examine Shri Arun Kumar Khemka, who also retracted original statement, was also not given to the assessee as the Assessing Officer felt that the claim of cross examination is not required. Assessing Officer thus added this bogus loan as undisclosed income of the assessee. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed before income tax department. Similarly while recording statements during course of search and seizures and survey operations, no attempt should he made to obtain confession as to undisclosed income. Any action on the contrary will be viewed adversely." Ld. CIT(A) was of the view that there is no such material and merely believing the statement of Shri Arun Khemka Assessing Officer came to the conclusion that unaccounted black money earned by Maithan Group has ploughed back as bogus share capital and as unsecured loan. The Ld. CIT(A) given opportunity to the Assessing Officer vide letter dated 30.04.2010 whereby Assessing Officer was asked Assessing Officer to specify the details of the seized documents, revealing the modus operandi discussed in the order. He, therefore, was requested to furnish the details of such seized documents. The evidences found during the course of search and the evidences gathered post search enquiry were also called for. Further clarification was also asked whether Shri Arun Khemka from whom 132(4) statement was recorded, "then stated to have been retracted" has been cross examined during the course of assessment proceedings in relation to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors were explained satisfactorily. Hence, loan confirmation, ledger accounts of loan creditors and the loan creditor company assessed to income-tax and all these explanatory evidences found accepted to the Ld. CIT(A). Under the above facts and circumstances, Ld. CIT(A) pleased to delete the disallowance. While doing so, he has deleted the consequential interest on the alleged loans and the commission disallowance was also deleted. Aggrieved on this Department is in appeal before us. 8. We have heard the rival submissions and perused the material available on record including the precedents. 9. Ld. Departmental Representative heavily relied on the order of the Assessing Officer and 132(4) statement and the grounds of appeal before us. Ld. Departmental Representative further submitted that retraction is not a valid one as that is only an after thought after sufficient lapse of time. The modus operandi of the assessee has been explained as per the argument of the Ld. CIT DR. Ld. CIT DR argued that assessee's own money ploughed back to the business of the assessee. Under the accommodation entry cash admitted in the statement of Shri Arun Khemka together with admission made by Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us search conducted on 08.12.2006 at the Office premises of M/s. Globe Stock & Securities in connection with the main search in the case of M/s. R.S. Ispat (P) Limited. The assessee-company after receiving the Show Cause Notice from the Assessing Officer got in touch with Shri Arun Khemka in pursuance of which Shri Arun Khemka handed over the sworn affidavit in which he retracted the statement made before the survey party stating therein that the said statement had been recorded by the survey party and that survey operation being carried out at his premises on 20.09.2007 in the case of M/s. Globe Stock & Securities which shall be converted into search and seizure operation which according to Shri Arun Khemka will adversely affect his business. After perusing the affidavit of Shri Arun Khemka, the asssessee-company also filed a copy of Affidavit duly framed by Shri Subhas Chandra Agarwalla, Director of the Company retracting the statement at the time of search proceedings as the statement was recorded by search party under duress and coercion. He signed the 132(4) statement on the dotted line and the assessee was not given any opportunity to verify the statement under section 132(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to explain the factual matrix. Hence, the Director of the assessee-company, Shri Subhas Chandra Agarwalla retracted the same. The time taken for retraction may be due to non-supplies of copies of deposition of Shri Arun Khemka and the denial of cross examination opportunity that accepted under the principle of Natural Justice may be the reason for the delay in retraction and the assessee is pursuing remedy. Hence, that delay is not material when the facts are clearly establishing the genuineness and bona fide transactions of the assessee-companies. Hence, the retraction has to be valid in the eyes of law and we accept the same as it is a valid retraction. 12. As we have already accepted the retraction and it is based on the misunderstanding of the facts as well as in law. Now, we will proceed whatever the material available to sustain the position. It is settled law that the burden is on the assessee to prove the identity, creditworthiness and capacity of the authorities. The assessee has to prove the genuineness of the transaction. The burden is on the assessee and it is also settled that the assessee has to discharge the initial burden. The identity of the party is not dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a matter entirely within the assessee's knowledge as to how the cash credits to be introduced and once it is postulated that such cash credit belongs to the assessee then his failure to explain the same or to explain it satisfactorily can constitute a reasonable ground for an inference that the source thereof must be an item taxable to tax. Therefore, it is the burden of the assessee to explain the same by discharging the onus to prima facie prove the identity, creditworthiness of the loan creditor and the genuineness of the transaction. (c) The Section 68 of Income Tax Act empowers the Assessing Officer to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine, he has every right to add these as income from other sources. But before rejecting the assessee's explanation Assessing Officer must make proper enquiry and in the absence of proper enquiries addition is justified. (d) The assessee is also entitled to cross examine the person whose statement has been relied by the Assessing Officer and such statement is proposed to be used by the Assessing Officer. The Hon'ble Jurisdictional High Court in the case of CIT vs. Eastern Commercial E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity to the assessee to cross examine the deponent Mr. Arun Khemka. This was denied inspite of Ld. CIT(A)'s direction. The confirmation letter from the loan creditors were brushed aside by the Assessing Officer. The Ld. CIT(A) considered the same. The nature and source of the loans were also duly considered by the Ld. CIT(A). The creditworthiness of the loan creditors were also satisfactorily explained by the assessee with regard to various parties which had investments in the share capital of the assessee-company and which extended the unsecured loans to the assessee-company. The loan creditors have in their return shown interest income as income of the loan creditors were also duly considered by the Ld. CIT(A). The explanation of the assessee that the alleged Group Companies are the sister concern of the Assessee-Group and they were not sham companies and it was established with relevant share holding details some shares were held by Group Companies and some by the individuals who are the Directors in the Group Companies. 14. The audited books of accounts and Income-tax returns for all the years for all the parties i.e. loan creditors and share applicant companies were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led law that the addition should be based on search material as held by Hon'ble Delhi High Court in the case of CIT vs. Oasis Hospitalities (P) Limited and others [2011] 333 ITR 119 (Delhi). 15.1 Further, the decision of CBDT Circular No. F. No.286/2/2003/IT(inv) dated 11.03.2003 has directed its offices to focus on collection of evidence on undisclosed income and not on obtaining confession of undisclosed income. This CBDT Circular has not been followed by the Assessing Officer and the Assessing Officer simply went on the confession statement made by one Shri Arun Khemka and without being opportunity to cross examine Shri Arun Khemka. The Assessing Officer further relied the deposition of the assessee-companies Director Shri Subhas Chandra Agarwalla which is totally on a week foundation. Hence, also their confession is not an admissible evidence under the given set of facts and circumstances as it was rightly retracted subsequently establishing the fact that the confession was made under duress and confession and the assessee was asked to sign on dotted lines without verifying the contents of the statement and after having knowledge that he had made wrong admission of facts with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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