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TMI Blog2024 (8) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... mended Sections 147 and 148 of the Act. The judicial principles laid down in the Saumya Construction case [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] regarding the necessity of incriminating material for reassessment of completed assessments are still relevant. Therefore, the judgment in Saumya Construction Pvt. Ltd. (supra) retains its relevance and can be relied on to support the argument that reassessment post-search should be based on incriminating material, ensuring that the reassessment process is grounded in tangible evidence. Given the lack of incriminating material and the reliance on judicial precedents, the additions made by the AO are not sustainable and void ab initio. CIT(A) has provided a thorough analysis of the legal principles and factual background, leading to the conclusion that the additions cannot be sustained and directed AO to delete the additions made on account of fictitious commodity losses from respective assessment years. Thus, these grounds of appeal related to fictitious commodity losses by revenue for AYs 2009-10 to AY 2014-15 are dismissed. Unexplained Credit u/s 68 - AO and CIT(A) have not made any efforts to verify the source of source despite the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the Act ) and the Assessee is in Cross Objections for AYs 2009-10 to 2014-15. 2. At the outset, ld.AR submitted that though these appeals belong to different assessment years but the issues are identical except for the assessment years and amounts and, therefore, all these appeals heard together. Ld.CIT-DR did not object to the aforesaid submission made by the ld.AR. We, therefore, for the sake of convenience, proceed to dispose of all these appeals of the Revenue and Assessee as well as Cross Objections of the assessee by a consolidated order and for reference, we proceed with the facts for AY 2009-10 in Revenue s appeals. Facts of the case: 3. The assessee filed his original returns of income for respective years and the same were processed u/s 143(1) of the Act. A search u/s 132 of the Act was conducted in Ahmedabad Commodity Traders Group on 18-12-2014. The assessee was also covered u/s 132 of the Act. Therefore, notices u/s 153A were issued to the assessee for the A.Y. 2009-10 to A.Y. 2014-15 on 15-7-2015. The assessee furnished the return of income in response to the notice on 13-8-2015. The summary of all returns, addition by the AO and relief granted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years. This scheme of assessment or re-assessment of the total income of a person searched will become frivolous if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, whereas, there is no such stipulation in sec. 153A and sec. 153C of the Act. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating material found during the course of search u/s. 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2 On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years. This scheme of assessment or re-assessment of the total income of a person searched will become frivolous if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3, On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, whereas, there is no such stipulation in sec. 153A and sec. 153C of the Act. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. (c) In IT(SS)A No.3/Ahd/2021 for AY 2011-12 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that any addition during the assessment u/s.153A has to be confined to the incriminating material found during the course of search u/s,132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years. This scheme of assessment or re-assessment of the total income of a person searched will become frivolous if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search u/s.132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years. This scheme of assessment or re-assessment of the total income of a person searched will become frivolous if no addition is allowed to be made for those six assessment years in the absence of any seized Incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, whereas, there is no such stipulation in sec. 153A and sec. 153C of the Act. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years. This scheme of assessment or re-assessment of the total income of a person searched will become frivolous if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, whereas, there is no such stipulation in sec. 153A and sec. 153C of the Act. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in the case of the assessee, and that if the interpretation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law, the Ld. CIT(A) has erred in not considering the material facts and evidences brought on record by the AO as mentioned in the assessment order that the assessee was continuously booking losses from a single platform i.e NMCE in the last quarter of each year and said fictitious losses are set off with the profits earned from trading from other platforms. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3.1. Grounds raised by the Assessee in his two-appeals are as under: (a) In IT(SS)A No.66/Ahd/2020 for AY 2014-15 The Ld. CIT (A) has grossly erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. 1(i). The Ld. CIT (A) has erred in law and on facts in confirming the addition on account of alleged unexplained credit of Rs. 1,09,52,204/- (after rectification order by the AO) by observing in Para 10.12 on Page 93 of the appellant order that the AO to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Jurisdictional Gujarat High Court, other High Courts and Tribunals relied upon by the appellant in a proper perspective. (v) The appellant humbly submits that the Ld. AO has not carried out any cross enquiry from 5 Parties and not examined them by recording the statements of 5 Parties u/s. 131 of the Act for alleged additions. (vi) The appellant humbly submits that the Ld. AO has not carried out any cross enquiry from 5 Parties and not examined them by recording statements of 5 Parties for alleged additions. (vii) The appellant humbly submit that the Ld. AO has not granted the opportunity of cross examination of 5 Parties and violated the principles of Natural Justice in view of Judicial Pronouncements of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata - II [2015] 62 taxmann.com 3 (SC), Hon'ble Jurisdictional Gujarat High Court decision in the case of CIT vs. Ramanbhai B. Patel in Tax Appeal No. 207 to 210 of 2008, DCIT vs. Mahendra Ambalal Patel (2010) 40 DTR 243 (Guj.), Prarthana Construction Pvt. Ltd., Tax Appeal No. 79 of 2000 (Guj.). The appellant company also relied upon the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In ITA No.577/Ahd/2020 for AY 2015-16 The Ld. CIT (A) has grossly erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. 1(1). The Ld. CIT (A) has erred in law and on facts in confirming the addition on account of alleged unexplained credit of Rs. 36,80,676/- (after rectification order by the AO) by following the appellate order rendered for A.Y. 2014-15. (ii). The Ld. CIT (A) has erred in law and on facts in failing to appreciate the fact that in fact the appellant had received the unsecured loan during the year from 5 parties namely (i) Riddhi Siddhi Enterprises, (ii) Kiranben Pineshbhai Panchiwala, (iii) Rekhaben Devchand Panchiwala, (iv) Pinesh Devchand Panchiwala - HUF and (v) Devcahnd K. Panchiwala and appellant had already discharged primary onus to prove identity and capacity of lenders as well as genuineness of transaction by submitting the details in the form of Name, PAN complete Address of all parties, copy of Contra Confirmation of the Lender Parties, Acknowledgement of Return filed by lender parties for the year under consideration, Bank Statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2017. The SLP filed against the said judgment has been dismissed by the Hon'ble Supreme Court in Special Leave Petition (CIVIL) Diary No (s). 9432/2018. The Hon'ble Rajasthan High Court in Para 6 of the judgment took the cognizance of the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise Kolkata II (cited supra) and also taken the cognizance of the Hon'ble Supreme Court in the case of Common Cause (A Registered Society) and Ors vs. Union of India and Orsin 77 taxmann.com 245 (SC) (2017). The appellant has also relied upon the various other judicial pronouncements of the Hon'ble Supreme Court, jurisdictional Gujarat High Court and other High Courts. (vii) The appellant humbly submits that in the search proceedings in the case of appellant, no incriminating material for payments of cash in lieu of cheque payments were found and seized. 2(1) The Ld. CIT(A) has erred in law and on facts in confirming the disallowance u/s. 14A of the Act of Rs. 11,86,356/- out of total disallowance of Rs. 24,90,730/- by observing in Para 11.7 on Page 101 of the order that However, it has been seen that the appellant is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2015] 61 taxmann.com 412 (Delhi) as well as other judicial pronouncements relied upon by the appellant. 2. The Ld. CIT (A) has rightly held in Para 5.4 on Page 55 of the Appellate order that from the perusal of the assessment order, it is seen that there is no specific mention of any incriminating material seized during the search in the case of the appellant and not even in the search of various concerns and individuals grouped as Ahmedabad Commodity Traders which might have been relied upon by the AO for the purpose of additions made including the additions on account of disallowance of loss claimed on the trading of commodities made on NMCE Platform, in the case of the appellant . The Ld.CIT(A) further observed in Par 5.7 of the appellate order that It is seen in Para 2.4 of the assessment order that the AO has relied upon the statement of Shri Jamnalal R. Thakkar (Proprietor of Prime Commodities), Shri Ramavtar Dhoot (Director and key person of M/s. Jet Air Agency Pvt.Ltd of Kolkata) and Shri Darshan Thakkar for making the aforesaid addition. However, the AO neither provided the copy of their statements recorded nor the opportunity of cross examination to the appellant even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources of funds in the hands of the lender and had made a conclusive case that the lender had no capacity to advance a loan of Rs. 71.05 Lakh to the appellant. Otherwise also in context of proceedings u/s. 153A and the AY being unabated the AO could not have made the addition without these being any related incriminating material found during the search. A general statement of the director of BCCL cannot be sole basis of denying the unsecured loan taken and treating it as undisclosed / deemed income. Under the circumstances the addition made by the AO does not stand the tests of law and the Ld.CIT(A) has correctly deleted the addition of Rs. 71,50,000/- made by the Ld.AO on account of unexplained credit u/s. 68 of the Act. 5. The Ld.CIT(A) after carefully considering the facts of the case, submission of the appellant has rightly held in Para 5.20 of the appellate order that As the unsecured loan of Rs. 75 lakh from Bhoomidev Credit Corporation Ltd. is held as not genuine, the payment of interest thereon of Rs. 1,00,529/- is also held genuine and allowable and the Ld.CIT(A) has rightly deleted the addition of Rs. 1,00,529/- made by the AO on account of alleged unexplained expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Rs. 53,00,000/- being unsecured loan treated as unexplained cash credits and addition of Rs. 2,54,547/- being disallowance of interest expenses thereon made by the AO. 3. The Ld.CIT(A) has rightly held in Para 6.9 on Page 68 of the appellate order that while under normal circumstances the AO should have been directed to restrict the disallowance u/s.14A to the extent of exempt income by way of dividend of Rs. 7,06,519/-, but as the assessment is related to unabated AY and there is no incriminating material related to the issue, on legality the entire addition of Rs. 11,89,915/- made in the assessment order has to be deleted and the Ld.CIT(A) has rightly deleted the addition of Rs. 11,89,915/- made by the AO. 4. The Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection. (c) In CO No.16/Ahd/2021 (in IT(SS)A No.3/Ahd/2021) for AY 2011-12 All the grounds in this Cross Objections are mutually exclusive and without prejudice to each other: 1. The Ld.CIT(A) has rightly held in Para 7.5 of the Appellate order that following the decision for AY 2009-10 before, it is held that legally those additions could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made on the merits of the issues made by the appellate become mere academic and are not required to be gone through. However as apparently there was an element/allegation of scam made by the FMC in the dealings on NMCE platform, the addition related to disallowance of fictitious commodity losses of transactions made through NMCE platform have been carefully looked into and in view of the facts brought out by the appellant and failure of the AO to bring on record direct cogent evidences in relation there to and relying upon various case laws cited in its support by the appellant, the disallowance of such loss has not been found sustainable and the Ld.CIT(A) has correctly deleted the addition of Rs. 2,87,05,829/- made by the AO on account of disallowance of alleged fictitious commodity losses of transactions made through NMCE Platform. 2. The Ld.CIT(A) after carefully considering the facts of the case, submission of the appellant as well as the various judicial pronouncements relied upon by the appellant has rightly held in Para 8.7 on Page 72 of the appellate that While under normal circumstances the AO should have been directed to restrict the disallowance u/s.14A t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the Hon'ble jurisdictional Gujarat High Court, other High Courts and Tribunals as well as following the Appellate Order rendered by the Ld. CIT (A) for A.Y. 2009-10, held in Para 9.8 on Page 75 of the appellate order that the facts related to the additions of Rs. 2,37,48,985/- being unsecured loan treated as unexplained cash credits are same as those for AY 2009-10, the additions are made without there being any related incriminating material found during the search and therefore, following the decision made there, these additions are directed to be deleted and the Ld. CIT (A) has correctly deleted the addition of Rs. 2,37,48,985/- on account of unsecured loan treated as unexplained cash credits. 3. The Ld.CIT(A) after considering the facts of the case, submission of the appellant as well as the various judicial pronouncements relied upon by the appellant has rightly held in Para 9.9 on Page 75 of the Appellate order that While under normal circumstances the AO should have been directed to restrict the disallowance u/s. 14A to the extent of exempt income by way of dividend of Rs. 2,76,643/-, but as the assessment is related to unabated AY and there is no incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stained on the merits of the facts of the issue and the Ld.CIT(A) has rightly deleted the addition of Rs. 4,43,10,925/- made by the AO. 2. Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection. On the common grounds of appeal Related with Fictitious Commodity Losses 4. First, we deal with the common grounds, except for the quantum, of appeal filed by revenue and corresponding grounds of Cross Objection (CO) filed by assessee. Ground Nos. 1 to 6 of appeal(s) filed by Revenue for A.Y. 2009-10, A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13, A.Y. 2013-14 and Ground Nos. 1 2 for A.Y. 2014-15 and Ground Nos. 1 to 3 of CO in case of A.Y. 2009-10, Ground No. 1 of CO in case of A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13, A.Y. 2016-14 are common dealing with alleged fictitious commodity losses of transactions made through NMCE platform. 5. The Ld.Departmental Representative (DR) explained the facts of the case and contented that the assessee booked the losses in the last quarter of the financial years to offset profit earned. The Ld.DR further submitted that Forward Market Commission (FMC) released an Annual Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same were squared off within the same day. The AO further observed that for any given day across one year the assessee always had a cumulative loss at the end of day and almost each buy sell paid of transactions, invariably, resulted in loss alone. 5.4. The Ld.DR stated that AO made additions on the basis of FMC report and the trade data obtained from the assessee's computer during the search. He further submitted that the nature of transaction and the quantum of transactions were such that it would be very difficult to establish such clustering pattern and synchronized transaction in normal day to day life. 5.5. The Ld.DR placed reliance on decision in the case of Spicy Sangria Hotels (P.) Ltd. Vs. Income Tax Officer, Ward 10(1)(4) [2019] 111 taxmann.com 491(Bombay), wherein the Hon'ble Bombay High Court observed that where Assessing Officer received information from DDIT (Investigation) regarding tax evasion by clients/members of MCE Exchange by misusing this platform, and one such record found was related to assessee, same would be sustainable reason to conclude that taxable income had escaped assessment. He also placed reliance on the decision in the case of Saga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Gujarat High Court): The court held that in cases where no incriminating material is found during the search, the AO cannot make additions under Section 153A of the Act for assessment years where assessments have already been completed (unabated assessments). The Hon ble Gujarat High Court emphasized that Section 153A does not give arbitrary powers to the AO to reopen assessments without any incriminating evidence discovered during the search. (2) CIT vs. Kabul Chawla 380 ITR 573 (Delhi High Court): The Court ruled that in the absence of incriminating material, no additions could be made to the concluded assessments under Section 153A of the Act. The rationale was that Section 153A of the Act is not an automatic tool for reopening completed assessments; it is contingent upon the discovery of incriminating evidence during a search. (3) CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 (Bombay High Court): The court held that assessments under Section 153A can be framed only on the basis of seized material. The assessment or reassessment under Section 153A is linked to the incriminating evidence found during the search. (4) ACIT, Central Circle-2(3), Ahmedab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al are crucial factors in determining the legality of the additions. The Ld.CIT(A), after critically looking into the arguments of AO and the assessee, observed that there was no basis by way of cogent evidence, in spite of searches and surveys conducted, which also do not support addition on merit. 7.1. The Ld.CIT(A) also referred to the Hon ble Supreme Court s dismissal of the SLPs filed by the Department against the decisions in Kabul Chawla and Saumya Construction, reinforcing the assessee's contention that additions under Section 153A of the Act require incriminating material. The Ld.CIT(A) highlighted the AO's failure to provide the assessee with an opportunity to cross-examine key individuals whose statements were used to make the addition, which violates the principles of natural justice. This aspect was emphasized in the Andaman Timber Industries vs. Commissioner of Central Excise Kolkata II [2015] 62 taxmann.com 3 (SC), where the Supreme Court held that not allowing the assessee to cross-examine witnesses whose statements are relied upon for making additions is a violation of the principles of natural justice. 8. We have considered the contentions of both the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinues to be relevant under the amended Sections 147 and 148 of the Act. The judicial principles laid down in the Saumya Construction case regarding the necessity of incriminating material for reassessment of completed assessments are still relevant. Therefore, the judgment in Saumya Construction Pvt. Ltd. (supra) retains its relevance and can be relied on to support the argument that reassessment post-search should be based on incriminating material, ensuring that the reassessment process is grounded in tangible evidence. 8.4. Given the lack of incriminating material and the reliance on judicial precedents, the additions made by the AO are not sustainable and void ab initio. The Ld.CIT(A) has provided a thorough analysis of the legal principles and factual background, leading to the conclusion that the additions cannot be sustained and directed AO to delete the additions made on account of fictitious commodity losses from respective assessment years. Respectfully following the judicial precedents and considering the facts and circumstances of the case, we do not find any reason to interfere with the decision of the Ld.CIT(A). Thus, these grounds of appeal related to fictitious co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has produced contra confirmations, copy of bank statement and copy of income tax returns of the parties, AO has no basis to hold that the tests laid down by the courts in the context of section 68 have not been satisfied. He also concluded that AO has not mentioned in his order as to how and why he was not satisfied about the nature and source of credit as stipulated u/s 68 of the Act. He also stated that the AO could not have made addition unless the source in the hands of lender is examined and concluded that lender had no capacity to advance money. 10. Before us, the Ld.AR stated that the unsecured loans from BCCL is repaid in full in the A.Y. 2011-12 and submitted ledger account extract along with master data of BCCL to support that the company is active. He also submitted that the TDS on interest is also deducted and paid. 10.1. In light of the above findings, we conclude that the assessee has satisfactorily established the identity and genuineness of the lenders by providing confirmation letters, PAN details, and copies of ITRs. The AO's reliance on the director's statement from BCCL was not corroborated by any incriminating evidence found during the search, thus wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have knowledge about the transactions carried out by the said party in his bank account. He placed reliance on decision of Hon ble High Court of Delhi in case of CIT Vs. Vrindavan Farms (P.) Ltd. in ITA No. 71 of 2015 dated 12-8-2015 and decision of Allahabad Tribunal in case of Anand Prakash Agrawal reported in 6 DTR 191 (All-Trib). 11.2. The Ld.CIT(A) while deleting the addition of Rs. 2,37,48,985/- for the A.Y. 2013-14 concluded that the additions are made without there being any related incriminating material found during the course of search. However, the Ld.CIT(A) confirmed the addition of Rs. 1,09,52,204/- for the A.Y. 2014- 15 after deducting opening balance of Rs. 2,37,48,985/- from the addition of Rs. 3,23,55,968/- made by the AO. For the A.Y. 2015-16 Ld.CIT(A) confirmed the addition of Rs. 36,80,676/- after deducting opening balances. While doing so, the Ld.CIT(A) concluded that - The assessee must prove the identities and creditworthiness of the creditors and the genuineness of the loans. - The AO accepted the identities of the lenders based on PANs and ITRs. - The AO doubted the creditworthiness of the lenders due to their low incomes and immediate deposits in their ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary information and no proper inquiry has been conducted by both AO and the Ld.CIT(A). It is also noted that the loans are repaid along with interest in subsequent years. 12.2. The Hon ble High Court of Gujarat in the case of DCIT Vs. Rohini Builders (256 ITR 360) has dealt with similar fact and deleted the additions on account of unsecured loans u/s 68. For the sake of clarity, we reproduce the relevant paras of the judgement: 7. We have considered the rival submissions and have also gone through the order passed by the Assessing Officer, the relevant portion of which we have also extracted in para. 2 above. The Commissioner of Income-tax (Appeals) more or less confirmed the addition on the reasoning given by the Assessing Officer in the assessment order. A perusal of the chart given by us in para. 3 above indicates that out of 21 creditors the Assessing Officer has recorded the statements of only six creditors, viz., creditors at serial Nos. 1, 2, 3, 4, 6, and 7. However, in respect of all the 21 creditors the assessee has furnished their complete addresses along with GIR numbers/permanent account numbers as well as confirmations along with the copies of assessment orders p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years. On the grounds relating to disallowance u/s 14A 13. Following disallowances u/s.14A of the Act are made by the AO and dealt with the Ld.CIT(A): A.Y. Amount disallowed by AO in Rs. Decision of CIT(A) Revenue s Ground No. Assessee s CO no. 2010-11 11,89,915/- Deleted the entire addition 9 3 2012-13 5,78,357/- Deleted the entire addition 7 2 2013-14 8,62,736/- Deleted the entire addition 8 3 13.1. During the course of assessment proceedings, the AO observed that the assessee has earned dividend income which is exempt, and assessee has failed to disallow such expenses in accordance with section 14A r.w. Rule 8D. The AO asked to furnish the working of the disallowance u/s 14A of the Act in reply to which the assessee submitted that he is a dealer in shares and securities and the profit earned from the same is included in the total income and since dividend is incidental income, there is no question of disallowance u/s 14A. The AO noted that the assessee has not maintained separate accounts for the purpose of exempt income and therefore it could not be discerned which part of expenses was relatable to exempt income. Therefore, AO, applying rule 8D and relying on some judici ..... X X X X Extracts X X X X X X X X Extracts X X X X
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