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TMI Blog2023 (4) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... akash Kant (Accountant Member) And Shri Pavan Kumar Gadale (Judicial Member) For the Revenue : Dr. Kishor Dhule, CIT-DR. For the Assessee : Mr. Naresh Jain, AR. ORDER PER OM PRAKASH KANT, AM These appeals by the Revenue are directed against separate order passed by the Ld. Commissioner of Income-tax (Appeals) vide dated 20.10.2022 in the case of G-Nine Modular Pvt. Ltd. and 27.10.2022 in the case of G-Trade Capital Venture and Pvt. Ltd. The facts and circumstances of the cases and grounds raised being identical, same were heard together and disposed off by way of this consolidated order for convenience. 2. First, we take up the appeal of the Revenue bearing ITA No. 3213/Mum/2022 in the case of M/s G Nine Modular P ltd for assessment year 2015-16. The grounds raised by the Revenue are reproduced as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)-48, Mumbai is right in holding that no incriminating material was found to sustain addition. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)-48, Mumbai is right in deleting the entire additions of Rs. 1,90,20,630/- made in the assessment order only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd., (ii) Kathakali Vincom Pvt. Ltd. (iii) NCL Research and Financial Services Ltd. (iv) Ojas Assets Reconstruction Ltd. & (v)Tanaya Vincom Pvt. Ltd., as unexplained cash credit. Further, the Assessing Officer noted that unsecured loan of Rs. 1,25,00,000/- received from 'Tanaya Vincom Pvt. Ltd'. and 'Kathakali Vincom Pvt. Ltd'. was already added into the income of the assessee in the assessment order passed u/s 143(3) of the Act dated 26.12.2017 and therefore, in the impugned assessment order passed u/s 153A of the Act on 08.08.2021, the Assessing Officer considered only the balance amounts of unsecured loan of Rs. 1,75,00,000/- as accommodation entry and added the same as unexplained cash credit u/s 68 of the Act. The Assessing Officer also made addition for the disallowance of interest on those accommodation entries of unsecured loan for the amount of Rs. 14,45,620/- and also, he made addition for the commission for arranging those accommodation entries amounting to Rs. 75,000/-. 4. Aggrieved with the finding of the Assessing officer, the assessee filed appeal before the ld CIT (A) and challenged the legality of the assessment proceedings as well as merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in, promoter of the GM group dated 30/11/2019 and submitted that he could not substantiate genuineness of the unsecured loans in the light of evidences gathered during the course of search and survey actions at the premises of the creditors appearing in the books of accounts of the assessee and third-party inquiries carried out by the Income-tax department. He submitted that in view of the decision of the Hon'ble Madras Court in the case of B Kishore Kumar Vs DCIT (62 taxmann.com 215) statement recorded under section 132(4) is an admissible evidence and Ld. CIT (A) has completely ignored such a statement. 6.1 The Ld. DR further submitted that disclosure of any transaction in the books of accounts is not material and even if some transaction is disclosed in the books of accounts and as a result of such action, the contents of such disclosure are found to be incorrect or false, the discovery of such a document indicating disclosed transactions would form the incriminating material. According to the Ld. DR in the light of the facts observed during the course of survey proceedings, including non-existence of the unsecured loan parties, the claim of the loans recorded in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income during search. 7.1 The Ld. Counsel submitted that not a single document or electronic evidence was found during the course of the search which could indicate in-criminality in obtaining unsecured loan by the assessee. He further submitted that in the case of survey action carried out independently at the premises of the unsecured loan parties, no incriminating material was found except that those parties were not found at their addresses. The Ld. Counsel submitted that without prejudice even the observation made during the course of survey proceedings cannot be treated as material found during the course of search at the premises of the assessee. According to him, the survey proceedings carried out at the premises of the unsecured loan parties are independent and not part of the search proceedings carried out at the premises of the assessee and therefore for utilizing the such information found during the course of survey proceedings, the AO may invoke provisions other than section 153A of the Act for assessing income on the basis of those observations, but certainly cannot invoke provisions of section 153A of the Act. Further, regarding admission u/s 132(4) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said statement has already been withdrawn. No other corroborative evidence or seized material has been found during the course of the search which could indicate that those unsecured loans are not genuine. The Ld. Counsel has referred to the decision of the Hon'ble Delhi High Court in the case of PCIT v. Best Infrastructure (India) Pvt. Ltd. 2017 (8) TMI 250. The relevant finding of the Hon'ble Delhi High Court (supra) is reproduced as under: "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature is mine and the notings relate to loans given by me on various dates. This constitutes my separate finance business. There are no regular books for this. According to the documents shown, as on date outstanding loans to be recovered is in the range of Rs. 25 Lakhs to 30 Lakhs. The rate of interest is 18% (i.e. Rs. 1.50 per 100 per month). The interest income is also not shown in the accounts. The borrowers have committed defaults in repaying the loans and more than 50% of the outstandings are to be treated as bad debts. All the advances were not disclosed in the returns filed. This has been relied upon by the Tribunal in full force. 6. With regard to the undisclosed income of Rs. 52,73,920/- supported by printouts, in the sworn statement dated 29.8.2006, the assessee says that he had separate business income which was not included in his income tax returns. Therefore, admission of undisclosed income of Rs. 52,73,920/- is categoric and undisputed. The assessee in the sworn statement made on 10.10.2006, stated that outstanding loans to the tune of Rs. 25 Lakhs to 30 Lakhs are to be recovered with interest at the rate of 18%. This is a clear admissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umarpal Banda of unsecured loan parties being not genuine, but he simply replied that at the time he was not able to reply as he had to check it. The relevant question and answer is reproduced for ready reference: "Q. 17 Mr. Kumarpal Banda in his statement in reply to Q.30 & 31 has stated that unsecured loans from various parties in different financial years have been settled later in cash and they are not genuine. The same is reproduced as under for your convenience. Q. 30 Kindly explains the name of the parties form which unsecured loan has been taken by the company M/s. G.M Modular Pvt. Ltd. Also explain the creditworthiness and genuineness of unsecured loan taken by M/s. G.M Modular Pvt. Ltd. Ans. Sir, M/s. G.M Modular Put. Ltd. has taken loans from various parties in different financial years and the same have been settled later. However I can recollect the following names of parties from which the unsecured loan is taken and they are not genuine:- 1. M/s. Essar india Ltd. 2. M/s. Matarani Commodities Pvt. Ltd. 3. M/s. Morya Industries Ltd. 4. M/s. NCL Research Financial Service Ltd. 5. M/s. Shivam Investment & Consultancy Ltd. 6. M/s. Ojas Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dalhousie, Kolkata, West Bengal - 700001. Directors are Non filer of IT. For AY 201617 shows a low PBT of Rs 0.21 lacs which does not justify the huge loan of Rs 50 lacs. Even the interest on Rs 50 lacs is not offered to tax. This is a normal practice in accommodation entry because the interest earned is not real but notional, only for book accounting purpose whereas the tax outflow would be on real basis. 1 R N Mukherjee Road, Kolkata location is well known to be a hub for shell companies as is seen for many company data base in searches conducted by Kolkata directorate in recent and earlier past. This adds credence to the belief that the company has merely provided book entries in books of assessee. 1. Nirmal Kumar Manna 2. Sandip Kumar Jain NCL Research and Financial Services Pvt. Ltd. PAN : AAACN5752D 3rd floor, Bhagyodaya Building, 79, Nagindas Master Road, Fort, Mumbai-400023 The said company is involved in arranging LTCG from Penny stock as per the Kolkata Investigation directorate report (Ref: F.No 75A/2015-16/257-273 dated 27.04.2015 of Pr. DIT (Inv.), (Kolkata). The statement of Goutam Bose, one of the directors of the company wherein he admitted on oath that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proven penny scrip as per the report of Kolkata Investigation Directorate (Ref: F.No 75A/201516/257-273 dated 27.04.2015 of Pr. DIT (Inv.), Kolkata). Statement of Mr. Mahavir Prasad Saraswat one of the director of the company Ms NCL Research and Financial Services Ltd was recorded u/s 131 of the Income-tax Act, 1961 on 27.05.2015 by DDIT(In) Kolkata. He was asked about the business activities of the company, questions about the books of accounts of the company and the number of AM attended. He was not able to answer these questions. He has agreed that he is just a dummy director in the company and has no knowledge about the business of the company. A statement of Mr. Vijay Poddar, the director of M/s NCL Research and Financial Services Ltd was also recorded us 131 of the Income-tax Act, 1961 on 27.05.2015 during the process of Survey u/s 133A of the Income-tax Act, 1961 at the registered premises of the company. In reply to Q.56 Mr. Vijay Poddar had accepted that the company is a penny stock company and is in the business of providing accommodation entries. A survey action u/s 133A of the Income-tax Act, 1961 was carried out at the registered address of the company on 13.11.2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises. Efforts were also made to record the statement of Mr. Sandip Kumar Jain and Mr. Om Prakash Saraswat, Directors of the company but the same were not traceable at the address provided in the IT. An opportunity was given to the assessee i.e. Mr. Jayantilal Jain, Promoter of GM Group on 12.01.2020, to produce the party to verify its claim that the unsecured loan is genuine. But the assessee failed to produce the party and thus failed to discharge its onus to explain the source of credit." 8.5 We note that in the case of 'Ella Fintex Co. P ltd', the assessee was intimated regarding negligible profit of said company and directors of the said company being non-filer of ITR. Further it was intimated that the area in which said unsecured loan party located was a well-known hub of shell companies. In our opinion, certain information regarding the unsecured loan party gathered by the investigation wing pre search period and thereafter confronted the same to the key person of the assessee company during the course of search, cannot be said that incriminating material was found during the course of the search qua the addition. Similar observations have been made in respect of the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is found during the course of search of third party or material is found during the course of other actions i.e. like survey or by the action of other agencies, then, the provisions to deal with those materials or observations, are different from the provisions u/s 153A of the Act. The Ld. CIT (A) in the case of the assessee for assessment year 2014-15 after considering various decisions on the issue-in-dispute has concluded as under: "6.15 Conclusion-The aforesaid detailed discussion with respect to various judicial decisions clearly laid down the following principles - (i) the assessments which have been concluded us 143(3) of the Act and not pending at the time of search proceedings, do not abate. (ii) for this purpose, intimation u/ 143(1) would constitute an assessment, relying on the decision of Hon'ble Bombay High Court in CIT V/s Gurinder Singh Bawa (79 taxmann.com 398) (iii) the proceedings us 153A of the Act do not empower the Assessing officer to re-adjudicate the settled issues again, unless fresh incriminating material for the relevant year is found during the course of search proceedings. (iv) the Assessing officer does not have jurisdiction to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r AY 2014-15, as reproduced above. Other facts and backgrounds of the case remain the same. Since all the grounds involved in Appeal No. CIT(A)-48, Mumbai/10634/2014-15 for A.Y. 2015-16 are identical to the one that is discussed above in Appeal No. CIT(A)-48, Mumbai/10716/2013-14 for AY. 2014-15, the undersigned findings for AY.2014-15 with respect to these grounds would mutatis mutandis apply to this appeal for AY 2015-16 as well. 14. Hence, it is held that in the absence of any incriminating material, the additions made i.e., (i)) Addition on account of accommodation entry of unsecured loan u/s 68 of Rs. 1,75,00,000/-, (i) Addition on account of unexplained expenditure us 69C on account of interest on accommodation entry of unsecured loan of Rs. 14,45,626/- and (ji)Addition on account of unexplained expenditure us 69C on account of commission for arranging accommodation entry of unsecured loan of Rs. 75,000 /-. for A.Y. 2015-16 deserved to be deleted." 8.10 In view of the above discussion, the Ld. DR has failed to substantiate any incriminating material found during the course of search which could establish non-genuineness of the unsecured loan. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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