9911796707
TMI Blog2011 (11) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 modus operandi of the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) (Rs.) 01 M/s Bhagawati Syndicate P. Ltd. 16 lakh 11,047 02 M/s Summit Packaging P. Ltd. 100 lakh 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile filing returns of income. In such circumstances, confessions in the course of search and seizure and survey operations do not serve any useful purpose. It is therefore advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed 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 document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the post search enquiry, if any, never mentioned about any material found to arrive at the conclusion with the alleged loan is a bogus loan. Ld. CIT(A), therefore, came to the conclusion that the assessee has discharged the burden under section 68 of the Act to explain the capacity of the parties and duly discharged the credit of the loan creditors 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement in the absence of search material. To support the facts that there was accommodation entry, the uncorroborated testimony is not a reliable piece of evidence except there is material to support the same. The assessee after meeting Shri Arun Khemka got the copy of the statement from Shri Arun Khemka which was the statement obtained by previous 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 Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e details with respect to the loan creditors companies as well as the details of share holding and the sources of funds of the loan creditors alongwith the return of income, profit loss account. This being the case once the assessee able to establish that there is a mistaken admission of fact in 132(4) statement and it is duty bound as the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (b) In the case of Section 68 - Cash Credit, 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 Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation is satisfactory or not. (h) This power was not exercised by the Assessing Officer. On appeal by the assessee, the Ld. CIT(A) in the appeals under our consideration has assumed the co-terminus power of the Assessing Officer and weighed the evidence with great care and caution. The Ld. CIT(A) found that the Assessing Officer should have afford the 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 Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Globe Stock Securities dated 20.09.2007 and the statement of Shri Subhas Chandra Agarwalla which were recorded in the course of survey/search. The statements of Shri Subhas Agarwalla and Shri Arun Khemka were subsequently retracted as stated in foregoing paragraphs. Hence, there is no material to sustain the addition as the retraction is held to be valid. It is settled 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 confessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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