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TMI Blog2024 (6) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessee has already shown sales in the profit and loss account, meaning thereby such sale has been offered to tax. Now, the Revenue without reducing the corresponding sales from the profit and loss account, has treated the sales of ₹ 4,76,00,000 as unexplained cash credit under section 68 of the Act. Thus such an act of the Revenue leads to the double addition of the same receipt shown by the assessee which is not desirable under the provisions of law until and unless the provisions warrant so. Thus, we are of the view that the Revenue has taken contradictory stand while framing the assessment which has been upheld subsequently by the learned CIT-A erroneously. Thus, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Whether the intercorporate deposits accepted by the assessee which were claimed to have been repaid can be made subject to the addition under section 68? - We note that the Revenue has not challenged the submission of the assessee that such borrowing has been repaid to the companies. In this respect, we find support and guidance from the judgment of Rohini builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. Disallowance on account of bad debts - AR submitted that the assessee has offered the income in the earlier year and therefore the same should be allowed as deduction under the provisions of section 36(1)(vii) of the Act - whether the amount written off by the assessee on account of bad debts, is an allowable deduction under the provisions of section 36(1)(vii)? - HELD THAT:- There was a sale made by the assessee dated 24 October 2011 amounting to ₹ 3,24,00,000 only. Against such sales the assessee has received amount to the tune of ₹ 1,74,99,800.00 with the outstanding balance of ₹ 1,49,00,200 which was written off by the assessee. From the copy of the ledger there remains no ambiguity that the assessee has offered the amount of bad debts as income in the earlier year and therefore the same should be allowed as deduction in view of the judgement of TRF Ltd [ 2010 (2) TMI 211 - SUPREME COURT] wherein it was observed that it is not necessary to establish that bad debts has become irrecoverable. For claiming deduction under section 36(1)(vii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i rajesh jhaveri a director of the assessee company was appearing in the cash and cheque sheet under various nomenclature which evidences that the assessee was acting as one of the intermediaries in introducing the clients to SCS. Besides the above, a detailed accounting sheet was also recovered from the premises of SCS containing the name of Shri rajesh jhaveri with respect to the accommodation entries provided to the client s which evidence that the clients appearing in such sheet was referred by the assessee. 3.3 Among the entries provided by SCS to the clients referred by Shri Rajesh Jhaveri, it was also found that SCS through his web of companies has also provided one time entry to the Rajesh Jhaveri Group including the assessee and other persons. As such, the assessee was provided one time entry of Rs. 12,29,45,000.00 in the year under consideration. As per the AO, there were excel sheets found during the search at SCS, containing the details of the cash received against the cheque issued to the assessee by the companies controlled and managed by SCS amounting to ₹ 12,29,45,000.00 in the year consideration. 3.4 The directors of the companies which provided one time entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed above and therefore the impugned fund represents bogus in nature. 3.10 According to the AO, the addition was not based merely basing on the statements of the parties discussed above but after considering the materials available on record which have been discussed in the preceding paragraph and therefore it was not necessary for affording the opportunity of cross examination to the assessee. As such, the statement supported/ corroborated the evidence found during the search proceedings. 3.11 There were found various documents containing information about the issuance of cheques against the receipt of cash which evidences one time entry taken by the assessee and all these transactions have not been disowned by the assessee. The AO finally, after referring to the statements of Shri SCS and other documentary evidence, concluded that the assessee has shown one time entry in the books of accounts. Thus, the AO made the addition of the same to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the Ld. CIT-A who confirmed the order of the AO by giving detailed finding with the reasons by observing as under: It is observed that AO has made addition und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich support the contention of AO that Appellant has taken accommodative entries (v) The entire modus operandi of cash receipt against accommodative entries were explained by Mr. Shirish Shah and Mr. Praveen Jain and such facts are elaborately discussed herein above. It is observed that addition under Section 68 of the Act made in the hands of Mr. Pavan Sanghvi was also confirmed by Hon'ble Ahmedabad ITAT, as discussed herein above. The above referred decision was also upheld by Hon'ble High Court and SLP of Department was dismissed by Hon'ble Supreme Court. (vi) In preceding paras, circumstantial evidences being investigation carried out by SEBI, DGCI, Crime Investigation Department, GST Intel Unit are brought on record which also prove beyond doubt that Mr. Shirish Shah was entry provider and loan received by Appellant from companies managed by him is not genuine (vii) The appellant has relied upon the confirmation, bank statement, return of income of depositors to substantiate its argument that loan taken by it was genuine. However, this contention of Appellant cannot be accepted for the reason that financial statements of depositors, as discussed herein above clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of Hon'ble Settlement Commission of denying cross examination of Mr. Shirish Shah, mere fact that cross examination was not provided to Assessee would not render the Assessment Order as infructuous order. On the contrary AO has asked to produce the relevant directors of the depositors for verification in assessment Proceedings but none of the directors have remained present. Even Mr. Shirish Shah was not produced before the Assessing Officer to prove that statement given by him during the course or search and admitting that various companies managed by him were bogus is incorrect. 24. In view of holistic consideration of all the facts, as discussed herein above the various pleas in the ground of appeal taken by the appellant are rejected and the action of the AO in making addition of Rs 12,19,45,000/- under Section 68 of the Act is justified and hence confirmed. Thus, the ground of appeal no. 1 is dismissed. 5. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 5.1 The learned AR before us filed a paper book running from pages 1 to 133 and reiterated the contentions as made before the authorities below. 5.2 On the other hand, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. 6.3 The above ratio was further followed by the Hon ble Gujarat High Court in the case of PCIT vs. Ojas Tarmake (P) Ltd reported in 156 taxmann.com 75. The relevant observation of the Hon ble Court is extracted as under: What is evident is that the Tribunal found on facts that the amount of loan received by the assessee was returned to the loan party during the year itself and all transactions were carried out through banking channel. The Tribunal on the decision of Dy. CIT v. Rohini Builders [2003] 127 Taxman 523/[2002] 256 ITR 360 (Guj.), held in favour of the assessee. 6.4 In view of the above principle laid down by the Hon ble Jurisdictional High Court, we hold that the genuineness of the transaction in the present case was proved by the fact that the loan amount was received through banking channel and repaid during the year through banking channel. In view of the above, and respectfully following the judgement of the Hon ble Gujarat High Court cited above, we hold that no addition is warranted with respect to the loan under section 68 of the Act once the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. 9.1 Indeed, the assessee has carried out various transactions of purchases and sales in the script of M/s Prraneta Industries in the year under consideration. As such there was no opening and closing stock of the script in dispute in the financial year before us. Whatever, the assessee has shown purchases for the script i.e. M/s Prraneta Industries were sold out in the year under consideration. In most of the transaction, there was profit shown by the assessee barring few transactions and that too at the fag end of the assessment, the assessee has incurred losses in the short span of time. In other words, the bottom result of the various transaction carried out by the assessee in the script of M/s Prraneta Industries was loss after adjusting the profit amounting to Rs. 42,14,344.00. There were various reasons pointed out by the Revenue for treating such loss as bogus in nature which have been elaborated in the preceding paragraph. 9.2 It is the admitted position that the core business of the assessee was dealing in shares. The assessee during the year under consideration has shown total purchases of different scripts at a value of Rs. 80,78,04,800.00 against the gross sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries that it was involved in the manipulation of the prices of the shares. Similarly, the AO has not conducted an enquiry from the SEBI or BSE about the company whether it was engaged in the frivolous activities as alleged. 9.6 We also note that in the investigation carried out by the investigation wing of Kolkata/ Mumbai, it was unearthed that there were numerous companies involved generating bogus long-term capital gain, eligible for exemption under section 10(38) of the Act. However, there was no information available on record whether the name of the company i.e. M/s Prraneta Industries was appearing in the investigation carried out by the investigation wing of Kolkata/ Mumbai or any other investigation carried out by the income tax department. 9.7 An alleged scam might have taken place in the trading of the script M/s Prraneta Industries. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee s action giving his/her involvement in the scam should be established. 9.8 The allegation imply that cash was paid by the assessee and in return the assessee rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 9.10 Respectfully following the judgment of Hon ble Delhi High Court, we hold that in absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as trading loss claimed by the assessee in the scripts of M/s Prraneta Industries. Hence the ground of appeal of the assessee is hereby allowed. 11.1 In view of the above, we set aside the finding of the land CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed. 12. In the result, the appeal of the assessee is allowed. Coming to ITA No. 399/AHD/2023, for the AY 2010-11 13. The assessee in ground No. 1 has challenged the validity of the proceedings initiated under section 143(3) read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification is carried out at the level of the AO to find out whether such loss was claimed by the other parties whose code was modified with the code of the assessee. If such loss has not been claimed by the other party, then we can presume that such loss belongs to the assessee and therefore the same should be allowed to the assessee. Accordingly, we set aside the issue to the file of the AO for fresh adjudication in the light of the above stated discussion and as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. 19. The 3rd issue raised by the assessee is that the learned CIT-A erred in confirming the disallowance of the loss of Rs. 14,47,074.00 in the trading of the scripts of M/s Prraneta Industries Limited being bogus in nature. 20. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2010-11 is identical to the issue raised by the assessee in ITA No. 401/AHD/2023 for the assessment year 2012-13 except the change of the scripts i.e. M/s Prraneta Industries Limited. Therefore, the findings given in IT(SS)A No. 401/AHD/2023 shall also be applicable for the assessment year 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the scripts. Therefore, the findings given in IT(SS)A No. 401/AHD/2023 shall also be applicable for the assessment year 2011-12. The appeal of the assessee for the AY 2012-13 has been decided by us vide paragraph No. 11 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the assessment year 2011-12. Hence, the ground of appeal filed by the assessee is hereby allowed. 28. The 3rd issue raised by the assessee is that the learned CIT-A erred in confirming the order of the AO by upholding the addition on account of unexplained cash credit under section 68 of the Act amounting to ₹ 9,68,37,850.00 29. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2011-12 is identical to the issue raised by the assessee in ITA No. 401/AHD/2023 for the assessment year 2012-13 except the change in the amount and the basis of calculation being peak credit. Therefore, the findings given in IT(SS)A No. 401/AHD/2023 shall also be applicable for the assessment year 2011-12. The appeal of the assessee for the AY 2012-13 has been decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result, the appeal of the assessee is hereby allowed. Coming to ITA No. 403/AHD/2023 for the AY 2014-15 36. The 1st issue raised by the assessee is that the learned CIT-A erred in confirming the disallowance of the loss of Rs. 55,72,040.00 in the trading of the scripts of M/s Chandni Textile Engineering Industries Limited being bogus in nature. 37. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2014-15 is identical to the issue raised by the assessee in ITA No. 401/AHD/2023 for the assessment year 2012-13 except the change of the scripts. Therefore, the findings given in IT(SS)A No. 401/AHD/2023 shall also be applicable for the assessment year 2014-15. The appeal of the assessee for the AY 2012-13 has been decided by us vide paragraph No. 11 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the assessment year 2014-15. Hence, the ground of appeal filed by the assessee is hereby allowed. 38. The 2nd issue raised by the assessee is that the learned CIT-A erred in confirming the order of the AO by upholding the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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