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TMI Blog2023 (2) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... 53, Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2013-14 to 2020-21 respectively. The facts and the issues raised in grounds of appeal being common in all these appeals and cross-objections, therefore, same were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. 2. The Ld. CIT(A) has adjudicated the appeal for assessment year 2013-14 and result of the same has been followed in other assessment years being common facts and circumstances. Accordingly, we also take up the appeal of the Revenue for AY 201314 and cross-objection of the assessee for AY 2013-14. The grounds raised by the Revenue in its appeal for AY 2013-14 are reproduced as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 48,04,750/- on account of bogus purchase ignoring the fact that the assessee failed to prove the genuineness of purchases, and any expenditure in respect of which payments by account payee cheques is not enough evidence to prove the genuineness of the transaction?" 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, the CIT' (A) rightly deleted the addition made on the point of interest on unsecured loan, which is only consequential. 8. On the facts and circumstances of the case and in law, the CIT' (A) rightly allowed the credit for TDS. 3. Briefly stated, facts of the case are that for the year under consideration, the assessee company executed works contracts including civil contracts for Local Authorities like Bombay Municipal Corporation (BMC), and Municipal Corporation of Greater Mumbai (MCGM) etc. The assessee filed its original return of income declaring total income at Rs. 7,79,23,750/- u/s 139(1) of the Income-tax Act, 1961 (in short 'the Act'). Subsequently, a search and seizure action u/s 132 of the Act was carried out in the cases of the assessee Group on 06.11.2019. Consequent to the search, assessment proceedings u/s 153A of the Act were initiated by way of issue of notice(s) dated 02.01.2021 for AY 2013-14 to 2020-21. In response, the assessee filed return of income declaring total income of Rs. 7,79,23,750/- for AY 2013-14. The assessee also filed return of income for other assessment years. The assessment u/s 153A r.w.s. 143(3) of the Act for AY 2013-14 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted, and the assessment year under consideration being beyond said period of six assessment years, therefore, the assessment made u/s 153A of the Act is void-ab-initio. 5.1 The learned counsel supported the ground and submitted that the Assessing Officer was not justified in completing the assessment for the year under consideration under the provisions of the section 153A of the Act being beyond six assessment years provided under the section 153A of the Act. 5.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that under the provisions of the section 153A of the Act, prior to 1/04/2017 assessment could have been made only for the six assessment years but with effect from 01/04/2017, the Finance Act 2017 has amended the provisions to include further relevant assessment year or years, which could be extended up to 10 assessment years subject to ceiling of undisclosed income. The word 'relevant assessment year'(s) has been defined by way of proviso and Explanation-1 to section 153A of the Act, which, for ready reference, is reproduced as under: "Provided also that no notice for assessment or reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, 2020, by way of notification issued, the time limit for passing the assessment order was extended up to 30/09/2021. He submitted that though the assessment order is dated 30/09/2021, however the assessee gathered from the Income-tax Departmental portal (website) that no order was passed or issued on 30/09/2021 till 12:13 AM in the night. The assessee claimed to have enclosed a screenshot of the portal to its submission filed before us, however no such screenshot has been found. 6.2 The learned Departmental Representative (DR) submitted that the case of the assessee was centralized with Central Circle, which are not on the faceless mode and orders have been passed by the Assessing Officer in physical mode. Thereafter, the assessment order might have been uploaded on the Income-tax department portal after some gap of time and it might have been possible that same could not have reflected on the Income-tax portal immediately after midnight of 30/09/2021. He submitted that the allegation that assessment order has been passed after limitation of expiry period are bald allegation of the assessee without any substantive evidence and therefore same are liable to be rejected. 6.3 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. The search team identified and short listed 13 parties, which were having deficiencies viz. (i) the purchase bills were prepared using same style format / font, (ii) bills were not containting type and vehicle of the lorry use for transportation, delivery address, signature of employee or delivery (iii) invoices issued were not containing mandatory PAN (iv) no e-way bill, delivery challan, stock register etc. For the period of assessment year 2013-14 to 2020-21, the 13 parties were identified namely: V.H Enterprises, Vimalnath Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, Hitesh K. Shah (HUF), Maharashtra Pile Foundation, Jay Khodiyar Enterprises, Vimalnath Associates and Diyan Corporation. A chart of purchases from above parties recorded in books of account is reproduced as under: Name of Sellers FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 VH Enterprises 20,49,491 30,32,100 16,26,193 18,30,019 15,68,280 65,56,050 80,09,332 Vimalnath Corporation 10,07,776 32,25,653 16,57,681 22,65,013 22,09,095 64,33, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e places of their business mentioned in bills. The inspectors of the income-tax department, who were deputed for verifying their place of business submitted that business premises of M/s Rushabh Corporation, Rushabh Trading Company and M/s Hitesh K shah were found closed and persons in neighborhood denied of any business activity carried out from those places. In case of 'Kohudiyar Enterprises' also the Inspector reported that no entity or business was found to be running from the address of that party and nearby people denied of having any knowledge of said entity. The office of 'M/s Maharashtra pile foundation' was found to be closed for a very longtime. 7.3 The statements of persons recorded during survey proceedings and evidences gathered by the Inspectors of the income-tax departments were duly confronted to the representative of the assessee-company i.e. Director Sh. Nirmal Madhani on 10/11/2019 (i.e. during the course of search proceedings). 7.4 In view of observations made and material gathered during the search proceedings, the Assessing Officer during assessment proceedings on 15/09/2021, asked the assessee to produce those purchase parties for verification. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchases claimed to have been made from these parties remained unverified. 7.10 After carefully going through the legal instances available on this issue the onus lay upon the assessee to prove the genuineness of the transaction when it claimed that the purchases are genuine. From the above case laws and the discussion on investigation, it is crystal clear that - (1) The primary onus is on the assessee to establish the genuineness of the purchases claimed by it; ii) Since the primary facts are in the knowledge of the assessee it is his duty to provide the correct address or contact modes of the alleged suppliers; iii) If the investigation done by the Department leads to doubt regarding the genuineness of the purchases it is incumbent on the assessee to produce the parties along with necessary documents to establish the genuineness of the transaction. (iv) Payment by account payee cheque is not sacrosanct. (v) No proof by way of challaa/documentary evidence for payment of VAT is filed. (vi) Though it is true that sales cannot be affected without corresponding purchases, in the absence of stock register, books of accounts it is not possible to verify which goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty appeared before this office hand statement was recorded 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. Copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 3. Hitesh Kantilal Shah (HUF) 1. Party appeared before this office and statement was recorded 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assesse and hence, not maintained any stock. 3. Party provided its conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attended the office. 2. The assessee has not submitted stock book. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 9. Diyan Corporation 1. Party has not attended the office. 2. The assessee has not submitted stock book. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding. The Ld.CIT(A) may decide the case on merits based on the above facts. 10. Mahavir Enterprise 1. The assessee failed to produce the party. 2. The party has not submitted stock book. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee further submitted that without purchase material and payment to the labour contractor, the project could not have been completed. 7.9 It was further submitted that all necessary records regarding purchases were maintained and purchases were duly recorded in books of account and payment for the purchase material was made by account payee cheque. 7.10 The assessee further submitted that during the course of search no incriminating material was found with respect to disallowance of purchase and therefore in absence of any incriminating material disallowance of purchases made by the Assessing Officer is not justified. The assessee further submitted that disallowance was made on the basis of the third-party information without any further scrutiny by the Assessing Officer and therefore, same was not justified. The assessee further submitted that no cross-examination of those parties was provided to the assessee and therefore, addition should be deleted on that ground also. 7.11 The Ld CIT(A) adjudicated the legal issue challenging the addition as well as on merit. On the legal issue that addition could not have been made without the aid of incriminating material in completed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Continental warehousing corporation (supra), the Hon'ble Bombay High Court held that if the assessments of any assessment year are pending as on the date of search, same will get abated due to search action and the assessing officer can make any addition in those assessment year(s) based on the facts and circumstances of the case, not necessarily only based on incriminating material. But, assessment years in relation to which, the assessments are already completed as on the date of search, those are unabated assessments and, in those cases, no addition could have been made except based on incriminating material found during the course of search. In the case of the assessee, the AY 2020-21 and AY 2019-20 are two abated assessments and for the remaining assessment years, no addition could have been made without the aid of incriminating material. Thus, the issue now for examination before us is whether there was any incriminating material qua the addition of bogus purchase in the year under consideration? 8.3 The word ' Incriminating Material' has not been defined in the Act but in context of the provisions of the Act incriminating material can be in the form of evidences whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone basis can be an incriminating material. The relevant observations are reproduced as under: 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Revenue is aggrieved with the aforesaid impugned order and has filed the present appeal under Section 260A of the Act, proposing the following questions of law: a. Whether the ITAT is justified in deleting the additions made on account of bogus long term capital gain on the ground that the evidences found during search at the premises of entry provider cannot be the basis for making additions in assessment completed u/S. 153A in the case of beneficiary ignoring the vital fact that there was a common search u/s 132 conducted on the same day in both the cases of the entry provider and the beneficiary? b. Whether ITAT was justified in holding that mere failure of cross examination of entry operator is fatal when copy of statement was provided to the Assessee and Assessee failed to discharge the onus of providing the genuineness of LTCG especially in view of the apex court decision in the case of State of UP vs. Sudhir Kumar Singh [AIR 2020 SC 5215]? 8.6 The Hon'ble High Court answered that no substantial question arise for consideration and hence dismissed the appeal. The relevant observation of the Hon'ble High Court are reproduced as under: 10. Now, coming to the asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re duly produced before the Assessing Officer, no addition could have been sustained. The relevant finding of the Ld. CIT(A) is reproduced as under: "7.3.6 In the case of Rushabh Trading Co., Rushabh Corporation and Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the assessment proceedings, the appellant as well as the purchase parties had submitted necessary supporting documents related to purchases before the AO. Further, during the remand report proceedings also, the parties attended before the AO and provided necessary documents with respect to the purchases made by the appellant from them. The statement of keypersons were recorded. In the remand report, the AO has not made any adverse remark with respect to these 3 parties. Therefore, the disallowance of purchases made by the AO in respect of these 4 parties i.e. Rushabh Corporation, Rushabh Trading Co, Hitesh Kantilal Shah HUF and Jay Kodiyar Enterprise cannot be sustained." 9.1 In respect of other parties the Assessing Officer verified existence of the companies during remand proceeding and observed that those parties admitted the fact of accommodation entries issued by them to the assessee. The relevant findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases made by the AO in respect of these 13 parties cannot be sustained and only profit element embedded in such purchase transaction only has to be disallowed. In this regard, the decisions in the following case are relevant In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 2013 355 ITR 290 (Gujarat), the Hon'ble High Court of Gujarat has held that where assessee did purchase cloth and sell finished goods, but purchasers were not traceable, profit element embedded in purchases would be subjected to tax and not entire amount. In this case, the Hon'ble High Court of Gujarat has held as under: ..The Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. In the result, tax appeal is dismissed. [Para 6].. In the case of Pr. CIT v. Rishabhdev Technocable Ltd. 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax. 21. We are in respectful agreement with the view expressed by the Gujarat High Court. 22. Thus, we do not find any merit in this appeal. No substantial question of law arises from the order passed by the Tribunal. Consequently, the appeal is dismissed However, there shall be no order as to cost. In the case of Pr. CIT V. Jakharia Fabric (P.) Ltd. 429 IT 332 (Bom),the Hon'ble High Court of Bombay has also held that where information was received by Assessing Officer to effect that eight parties from whom purchases were made by assessee engaged in job work of dying of fabrics were hawala dealers who had issued bogus bills and he treated aforesaid purchases as bogus purchases, since without purchase of materials, it was not possible for assessee to complete job work of dying and entire purchases could not be added as bogus. profit element embedded in such transaction had to be added to total income of assessee. 9.3 The Ld. CIT(A) referred to the decision of the CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Gujarat), decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities you are proprietor, partner or Director. Ans. Sir, as stated above, I am basically not working. However, my distant relative, Hitesh Shah (Contact No. 9930195780) is managing and operating a HUF concern ie M/s Vimalnath Corporation, wherein I am karta. Other than this, I am not a partner or Director in any business entity. I am just a signatory in the HUF concern i.e. M/s Vimalnath Corporation, which is managed and operated by my distant relative, Hitesh Shah. I am not aware of the business activities carred out by Shri Hitesh Shah in M/s Vimalnath Corporation. You are requested to ask, Shri Hitesh Shah about the business activity of M/s Vimalnath Corporation. Q. 11 Please explain how many entities are being operated from this premises at Flat No. 1st floor, Neminath Apartment, 60 feet Road, Devchand Nagar, Bhayander West, Mumbai-401 101? Ans. Sir, the following entities are being operated from this premises. Sr. No. Name of the entity Proprietor Nature of business 1 M/s V.H. Enterprises Proprietor (Khushboo Vinod Shah) Not aware of the nature of business 2 M/s Vimalnath Corporation HUF concern (Karta Vinod Himmeth Shah Not ware of the nature of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who was required to establish the factum of consumption of the material with its documentary evidences but the assessee has neither shown any such evidence before the lower authorities nor before us, therefore, the deletion of disallowance of purchase corresponding to those parties by the Ld CIT(A) is not justified. 9.6 Fourthly, regarding, the other parties, who during remand proceedings remained firm on their earlier statements made that they were engaged in providing accommodation entries, ld CIT(A) has held them as bogus concerns but according to the ld CIT(A) only addition to the extent of profit element ( i.e. 5 % ) on those bogus purchases could be disallowed and not 100 % amount of bogus purchase. In our opinion the Ld CIT(A) has not analyzed the issue of bogus purchases in right perspective. The Hon'ble Bombay High Court in case of Mohamad haji Adam & Co.ITA 1004 of 2016 dated 11/02/2019 has held that in case of bogus purchases addition should be restricted to the extent of extra profit element but that case is of trader where sales are not held doubtful by the Assessing Officer. 9.7 We are of the view that when the purchases are admittedly bogus, then disallowance in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such purchase from grey market can only be added. But where, an assessee is unable to establish consumption of the bogus purchased goods into its business, then entire amount of bogus purchases are liable to disallowed. 9.8 The Hon'ble Gujrat High Court in the case of NK Proteins Ltd vs DCIT (2017) 84 taxmann.com 195 has reversed the finding of the Tribunal for restricting the disallowance at 25% of the purchases and held that in such cases where an assessee is unable to establish consumption, 100 % disallowance should be made. This decision of Hon'ble Gujrat High Court has been upheld by the Hon'ble Supreme Court vide SLP(c) No. 769 of 2017. The Tribunal Pune Bench in the case of ACIT Vs Pritam S Mahale in ITA No.183/PUN/2020 for Assessment Year : 2009-2010 hasupheld that in case of contractor where he is unable to establish consumption of such bogus purchases in his business, entire bogus purchases are liable to be disallowed. The relevant finding of the Tribunal is reproduced as under: "6. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of "ITAT Rules", perused the material placed on record, case laws relied upon by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,2887- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,2887- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,3227-." 9. In the present case too, when it has been categorically established that, the amount of bogus purchases Rs.64,33,495/- is debited to P&L by ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-15 FY 2015-16 FY 2016-17 FY 2017-18 1 Aadishwar Diamonds AAICA1905B 3,03,253 30,00,000 83,22,020 2 Aditi Gems Pvt. Ltd. AAICA6634L 2,19,000 2,19,000 1,55,400 3 Anshul Gems Pvt. Ltd. AAHCA6495 65,00,000 7,21,750 9,46,465 1,72,020 4 Antique Pvt. Ltd. AAJCA9015B 11,53,200 2,28,50,000 23,63,425 24,94,710 5 Arjay Gems Pvt. Ltd. AAPCA6887A 11,53,200 2,28,50,000 28,63,425 24,94,710 6 Bahubali Diamond Pvt. Ltd. AADCB9109R 13,35,250 78,19,000 3,18,000 7 Boetal Trading Pvt. Ltd. AACCB8137A 9,71,198 3,00,00,000 3,78,000 3,20,160 8 Burlington Mercantiles Pvt. Ltd. AABCB4362Q 8,21,250 4,80,000 9 Chaitanya Gems Pvt. Ltd. AADCC9257F 8,32,200 10 Crescent Diamond Exim Pvt. Ltd. AABCC4886B 5,80,350 45,00,000 9,34,920 11 Divyanshi Gems Pvt. Ltd. AADCD8741R 64,26,000 68,14,700 3,14,700 12 Dojahan Trading Pvt. Ltd AACCD3340F 75,00,000 6,41,085 2,08,200 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in their books of accounts. 10.2.1 The search/survey teams during the course of search analyzed the income-tax assessment records (i.e. assessment orders passed by DCIT Central circle, Surat) of two unsecured loan creditors namelyM/s Kriya Impex Pvt. Ltd. and M/s Karnavati Impex Pvt. Ltd. and found that those were accommodation entry provider, which were managed and handled by Shri Rajendra Jain. 10.2.2 Further, during search proceedings, the search team deputed various inspectors for verification of existence of the unsecured loan creditors. The reports submitted by the Inspectors have been reproduced by the Assessing officer on page 48 to 86 of the assessment order. The Inspector(s) have mainly reported that parties were not found in existence at their addresses. The Ld. Assessing Officer has reproduced photos of the places and inquiry report of the Inspector of the Department in the impugned assessment order. All the material gathered during the course of search was confronted by the search team to the Director of the assessee company Shri Nirmal Madhani. However, he failed to give any satisfactory reply in respect of those 29 parties including their current address. 10.2.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 2017-18 1,16,53,010 68,61,233 1,85,14,243 2018-19 6,62,810 7,36,547 13,99,267 Total 31,47,15,562 7,59,71,367 39,06,86,929 10.4 In respect of year under consideration, the addition for unsecured loan creditor is of Rs. 1,44,38,191/- and for interest is of Rs. 1,42,15,496/-. The relevant finding of the Assessing Officer while making addition are reproduced as under: 8.4 in response to the show cause notice assessee has submitted the documents which include ledger confirmation and ITR of the above parties. it was also submitted that the assessee has returned back loans in various parties in full. Thus, mere submission of bank statement and ledger confirmation of the parties is not sufficient to prove the genuineness and creditworthiness of the loan parties. Also, the director and the key persons of company has clearly stated in their statements recorded during the course of Search & Seizure proceedings that they have taken accommodation entries of unsecured loans. The modus operandt are that for these transactions the beneficiary will give them cash and the same will be returned to the beneficiary by issue of cheques after charging their commission on such transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court has held in the case of Shreelekha Banerjee Vs CIT [49 ITR 112(SC)) that addition for unexplained cash credit is justified simply if the assessee fails to offer an explanation or the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer. 10.5 In respect of addition by the Assessing Officer u/s 68 of the Act, before the Ld. CIT(A) the assessee provided evidences related to those 29 parties including ledger copy, confirmation, bank account details, ITR copy etc. which were forwarded by the Ld. CIT(A) to the Assessing Officer calling for the remand report. The Ld. Assessing Officer submitted that assessee did not produce those creditors before him for recording their statement on oath, hence it was not possible to verify their credentials. In rejoinder, the assessee submitted that those loans were taken long back and were repaid in financial year 2017-18, therefore, those parties were not in contact thus, cannot be produced before the Assessing Officer. However, whereas the evidence such as loan confirmation, ITR ,copy of balance sheet, bank statement in respect of those parties were already submitted during the rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of those remaining 18 parties, the Ld. CIT(A) held that those parties had filed the available evidences and the assessee discharged its onus provided u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under: "8.3.10 The AO has ignored all these evidences which were provided by the appellant company to the A during the course of assessment proceedings. The onus cast upon the assessee regarding proving identity and creditworthiness of the lender companies and the genuineness of the loan transactions, as provided in Section 68, was discharged by the appellant company. The AO has simply relied upon profiling done by the Department based on the details available in the ITBA System. The AO has not made any further enquiries to disprove the evidences submitted by the appellant during the assessment proceedings. In this regard, the decision in the case of Additional CIT v. Hanuman Agarwal [1984] 151 IT 150 (Pat.), wherein it is held that ... As the confirmatory letter was issued by the creditor subsequent to the so-called confession, it was much more incumbent upon the department to summon the creditor in order to verify the statements made in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the transaction or the capacity of the creditor to pay, the assessee has to succeed. Therefore, the impugned addition was not justified. 8.3.11 During the remand proceedings, the AO has asked the assessee to produce those parties to verify the identity, creditworthiness and genuineness of transactions of unsecured loans. The parties were not produced before the AO. However, the appellant had submitted necessary documentary evidence in support of identity and creditworthiness of lenders and genuineness of the transactions. Instead of issuing summons us. 131 or notice us. 133(6). the AO asked the assessee to produce those parties. The assessee has no power to force the parties to appear before the AO. Further, mere non-attendance of lender parties before the AO could not be a ground to make addition us. 68 of the Act. In number of the judgments the courts have held that merely because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credits as non-genuine. In the case of Commissioner of Income-tax v. Orissa Corpn, (P.) Ltd.[1986] 159 ITR 78 (SC), the Hon'ble Supreme Court of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at those credits as nongenuine * Held, yes - Whether considering totality of facts and circumstances of case, especially fact that Assessing Officer had not disallowed interest claimed/paid in relation to those credits in assessment year under consideration or even in subsequent assessment years, and tax at source had been deducted out of interest paid/credited to creditors, Tribunal was justified in deleting addition made - Held, yes - Whether as there was no substance in appeal and no substantial question of law arose, appeal was liable to be dismissed - Held, yes" In the case of Deputy Commissioner of Income-tax, Mumbai v. Acro Exports Trade (P.)Ltd. 2019 111 taxmann.com 51 (Mumbai - Trib.), the ITAT Mumbai has held that where assessee company issued shares on premium and had filed complete details to prove identity and creditworthiness of parties, and genuineness of transactions, Assessing Officer was unjustified in making additions in respect of such share capital/premium received by assessee under section 68. In this case, the ITAT has held as under: The provision of section 68 deals with a cases, where any sum found credited in the books of accounts of an assessee, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation available with it, in order to satisfy the Assessing Officer. In case, the Assessing Officer is not satisfied with documents furnished by the assessee, then he is free to carry out his own investigations by exercising powers conferred under section 131 or under section 133(6). The Assessing Officer, except issue of section 133(6) notices nothing has been done to find out, the nature of transactions between the parties. Therefore, when, the assessee has filed complete details to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for the Assessing Officer to came to the conclusion that share capital and share premium is unexplained only for the reason that during the survey proceedings, the director of the company had admitted that those five companies are shell companies ignoring the fact that such admission has been retracted by filing affidavit along with letter explaining reasons for such admission during survey proceedings. Further, additions made by the Assessing Officer cannot be sustained even on basis of statement of VS because the Assessing Officer has relied upon statement of VS, the erstwhile director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, Ensure Insure Brokers Pvt. Ltd, Karnavat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Saffron Gems Pvt. Ltd, Surya Diamond Pvt. Ltd, Badam Trading, Lalita Gems Pvt. Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd. However, from verification of records, it is noticed that during A.Y. 2013-14, the appellant has not received fresh loans from Aadishwar Diamonds, Aditi Gems Pvt.Ltd, Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Burlington Mercantiles Put. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Karnavat Impex Pvt Ltd, Kriya Impex Pt Ltd, Saffron Gems Put. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita Gems Put. Ltd, Moxa Diamond Pvt. Ltd, Shikha Diamond Pvt. Ltd. Therefore, addition of unsecured loan from these party is not justified and it is deleted. The appellant has received unsecured loan of Rs. 8,00,000/- from Ensure Insure Brokers Pvt. Ltd. As discussed in para 8.3.3 to 8.3.12 of this appellate order, the addition made by A u/s.68 in respect of unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also not sustainable. Therefore, addition of Rs. 1,44,38,191/- made by AO u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be made in respect of assessments which have become final, if no incriminating material is found during the search. It has been held that once the original assessment has attained finality, then the Assessing Officer while passing the independent assessment order us.153A r.w.s. 143(3) cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s.153A establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings." 10.6 Before us, the Ld. Counsel of the assessee has relied on the order of Ld. CIT(A), whereas the ld. DR has relied on the order of the Assessing Officer. The DR submitted that the Ld CIT(A) is wrong in concluding that assessing officer in remand proceeding has conceded the addition in respect of unsecured loan. He also submitted that unsecured loan creditors were found in existence during the course of search action and the director of the assessee company was duly confronted all the facts of non-existence of those parties, despite, the assessee failed to produce those before the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) on the issue in dispute. 10.10 As far as issue on the merit is concerned, we find that addition has been made by the Assessing Officer invoking section 68 of the Act. For discharging onus of section 68 of the Act, the assessee is required to establish 'identity' and 'creditworthiness' of the unsecured loan creditor and 'genuineness of the transaction' of loan. In the case the Ld CIT(A) has firstly, deleted the addition in respect of 9 parties, holding that loan transactions alleged by the assessing officer were not appearing in the books of accounts of the assessee. Secondly, addition in respect of 18 parties has been deleted on the reasoning that the assessee has discharged its onus u/s 68 of the Act. 10.11 Firstly, we take up the issue of addition in respect of 11 parties, which the Ld. CIT(A) has deleted. The Ld CIT(A) noted that in entries of 'Piyush Gems P Ltd' and 'Sanmati Gems Pvt Ltd' , the Assessing Officer himself has recorded that no loan was received from those parties during the period from AY 2013-14 to AY 202021. On verification of table of addition of unsecured loan creditor by the Assessing Officer, we concur with ld. CIT(A). but regarding the remaining 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad received unsecured loans from such parties and such loans were not recorded in the books of accounts of the appellant. In fact, the AO has made addition of unsecured loans as these loans were received and reflected in the book of account of the appellant but such unsecured loans were not genuine and bogus. Also there is no mention in the assessment order that there was incriminating material found during the search and it reflected certain unsecured loans received by the appellant and they were not reflected in the books of accounts. Thus, the addition u/s 68 made by AO in respect of unsecured loans received from above mentioned 09 parties is without any basis and factually wrong addition. Therefore, addition of unsecured made u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Gems is deleted." 10.12 This action of Ld CIT(A) is in violation of principles of natural justice and rule 46A of income-tax rules, 1962. Thus, we feel appropriate to restore this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of unsecured loans. It is a fact that the appellant was not made aware of the material which was being used against the appellant by the AO in the assessment order and the same material was gathered by the AO behind the back of the appellant It is a settled principle of law that no addition can be made by the AO without providing and confronting the material gathered by the AO behind the back of the assessee In the case of the appellant also, the AO has relied upon the statements of Shri Rajendra Jain and Shri Deepak Jain and also the report of the investigation wing The appellant was not provided with the relevant material which has been used by the AO in the assessment order for making addition in respect of unsecured loans. Thus, there has been clear violation of principal of natural justice Had the AO provided the copies of statements of Rajendra Jain and Deepak Jain and also the evidences gathered by the investigation wing to the appellant, the appellant would had certainly provided to the AO all the necessary documents/evidences to rebut the statements or the evidences used against it. The AO has failed to provide the material gathered by him to the appellant and also ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer Thus both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion It was thus a fit case for the exercise of power under Article 136. In the result, the appeal was to be allowed and the order of the Tribunal was to be set aside and the case was to be remanded to it with direction that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries..." In the case of KishinchandChellaramv C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have done was to grant an opportunity to the assessee to meet the case against him by providing the matenal sought to be used against him in arriving before passing the order of assessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment and therefore, renders the orders passed by the Commissioner (Appeals) and the Tribunal vulnerable. The assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents whose statements were relied upon by him. Despite the request seeking an opportunity to cross examine the deponents and furnish the assessee with copies of statements and disclose material these were denied to him. Therefore, the addition made to the income of the assessee was not justified and liable to be deleted [Para 17)..." In the case of CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) the Hon'ble High Court of Delhi has held that since material collected by revenue behind back of assessee was used against him without disclosing that material to him or giving any opportunity to him to cross-examine person whose stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not given opportunity to cross-examine the witnesses Statements were written in Hindi whereas the farmers were illiterate or semiliterate Affidavits were filed by the assessee of each and every farmer, which have been relied upon by the Commissioner of Income-tax (Appeals) and the said finding has been affirmed by the Income-tax Appellate Tribunal. 4. The Commissioner of Income-tax (Appeals) with respect to sundry creditors has given the findings that on consideration of statements of 20 farmers and the affidavits, mert has been found in the contention of the assessee that the Inspector of Income-tax was not authorized to record or collect statements and the said statements were recorded behind the back of the assessee. It was further held that to expect iterate and semi-literate farmers to recount from memory details of accounts with the assessee was asking too much. They are not expected to be familiar with concepts such as financial year and 31st March They do not understand the timing difference. Merely by the fact that the stamp papers were purchased from one stamp vendor it does not lead to the inference that the contents of the affidavits were dictated by the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Appellate Tribunal, thus, no case for interference in the appeal is made out No substantial question of law is involved with respect to the deletion of Rs. 22,41,482. In the case of CIT v. Raja Ginning Udyog[2005] 268 ITR 383(MP), the Hon'ble High Court of Madhya Pradesh has held that: "...5. With regard to ground No (1) the Tribunal has recorded a finding that some enquiry was conducted by the Assessing Officer on his own and he had not asked the assessee to produce the farmers so as to ascertain from them the payments made to them with regard to cotton purchased by the assessee Assessee was asked to produce farmers for the first time on 4th January 1993, Le about 3 months before passing of the final order. Since the farmers were busy during this period they could not be produced and no further opportunity in this regard was given Thus, finding has been recorded in the enquiry that was conducted by the Assessing Officer behind the back of the assessee This violated the principles of natural justice in the light of this finding, CIT(A) and Tnbunal both found the procedure adopted by Assessing Officer as erroneous and against law This has also now become a fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lender parties and genuineness of the transaction and he relied merely on profiling of the lender made based on details available in Income-tax Department database (ITBA), without carrying out further enquiries. The Ld CIT(A) has relied on the decision Hon'ble Patna High Court in the case of Additional CIT Vs Hanuman Agrwal (supra) where the creditors confessed the loan as unexplained cash credit, but later on filed confirmatory letter, but the ITO rejected the claim of the assessee and made addition u/s 68 of the Act. The Hon'ble High Court held the ITO should have issued summon u/s 131 of the for taking statement of the creditor when his correct address was provided by the assessee and the onus of the assessee is discharged when correct address is provided. Further, the Ld CIT(A) held that the Assessing Officer in remand proceeding also insisted upon production of the unsecured loan creditor and did not issue summon u/s 131 or notice u/s 133(6) of the Act. The Ld CIT(A) relied on the decision of Hon'ble Supreme Court in the case of CIT vs Orissa Corporation P Ltd (supra). In the said case, the assessee supplied correct name and address of the alleged creditors and Revenue issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (Suraj Singh) (Prateek Gehlot) Inspector, o/o ADIT(Inv) Inspector, o/o ADIT(Inv) Unit-3, Surat Unit-1(1), Mumbai" 10.17 This fact of non-availability of creditors at their address was duly confronted to the director of the assessee company during search proceedings itself, however, he could not provide their new address or contact number of unsecured loan creditors. During assessment proceeding or remand proceeding the assessee did not provide their new address. The assessee also did not make any request for issuing of summon to its witness or deposit their travel expenses to the office of the Assessing Officer for ensuring their attendance as per the procedure laid down under code of Civil Procedure ,1908 . The assessing officer, in view of the information gathered by the Inspectors of the department during search proceeding, insisted for personal attendance of the parties for verification of their identity. Regarding the creditworthiness, the Assessing Officer referred to their financial status from the data available in income-tax database and observed that they lacked the financial resources. The creditors shown to have given loan despite having outst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus of establishing Identity, credit worthiness and genuineness of transaction. We set aside the order of ld CIT(A) on the issue of addition to the extent of 18 unsecured loan creditors. Since we have upheld the credit from those unsecured loan parties as unexplained, the corresponding addition for interest is also upheld. 10.19 The ground No. 2 and 3 of the appeal of the Revenue are accordingly partly allowed. 11. In ground no. 4 of the cross objection, the assessee has raised the issue that despite giving no adverse comment in remand report, the Assessing Officer is not justified in preferring the appeal before the ITAT. We find that ld DR did not accept this contention of the Ld Counsel that assessing officer had not given adverse remark for unsecure loan creditors. We have also verified from the summary of remand report reproduced by the Ld CIT(A) in the impugned order and find that the contention of the assessee is not correct. Hence the ground No. 4 of the cross objection is dismissed. 12. In ground No. 5 to 7 of the cross objections, the assessee has merely supported the action of the Ld CIT(A) in making the deleting the part addition of purchases and addition of unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 21,41,548 3,51,88,167 6,92,78,200 1,95,87,741 1,80,10,577 14,42,06,233 15.1 The department conducted on the spot enquiry but the contractors were not found in existence at their given address. The report of Inspectors of the department have reproduced on page 3839 of the Impugned assessment order. During assessment proceedings, the assessee submitted various details in support of sub-contract expense, but could not produce the parties before the Assessing Officer, therefore, not being satisfied with the evidences filed by the assessee regarding sub-contract expenses, he disallowed the claim of the assessee of sub-contract expenses. 15.2 Before the ld CIT(A), the assessee submitted copy of confirmation letter from sub-contractors, bill payment, bank statement, ITR copy of sub-contractors etc. The documents submitted by the assessee were claimed to be additional evidences, hence, same were sent to the Assessing Officer for his comments. Before, the Assessing Officer in remand proceedings, the sub-contractor parties were produced by the assessee. The summary of the remand report of the Assessing Officer is reproduced as under: Sr. No. Name of the party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding measurement book etc. duly verified by the Govt authority i.e MCGM that part of the works contract had been executed by the assessee using the services of relevant subcontractor. 15.5 The Ld. Counsel of the assessee on the other hand relied on the finding of the Ld CIT(A) on the issue in dispute and submitted that parties were duly produced before the Assessing Officer and therefore, the Ld CIT(A) is justified in deleting the disallowance. 15.6 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. During the course of search proceedings, the sub-contractor parties were not found in existence at their address and even during assessment proceedings those parties could not be produced by the assessee. The assessee also could not produce any documentary evidence in support of the services rendered by those parties to the assessee. Thus, the Assessing Officer disallowed the relevant sub-contractor expenses. During proceedings before the Ld CIT(A), the assessee produced parties before the Assessing Officer in remand proceeding and thus ld CIT(A) deleted the disallowance. But we find that by way of producing those parties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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