9911796707
TMI Blog2022 (4) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT (A) grossly erred, both on facts and in law, in confirming the AO's action of making the impugned additions in the appellant's income for the relevant assessment year without considering the material fact that having already furnished original return of income under s. 139 of the Act, on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and therefore, without having recourse to any seized incriminating document or material, no addition could have been made on any count in view of the settled legal position. 3a). That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the addition to the extent of Rs. 1,50,54,863/-made by the AO in the appellant's income on account of alleged unexplained unsecured loans by invoking the provisions of s. 68 of the Act and payment of interest thereon, without considering the material fact that having already furnished original return of income under s. 139(1) of the Act, on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by it on the genuine borrowings of the loans made for the purpose of its business. 4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary." 2.2 Grounds of appeal raised by the Assessee for AY 2014-15 in IT(SS)A No. 71/Ind/2020: "1. That, on the facts and in the circumstances of the case, the action of the learned CIT (A) in confirming the entire additions aggregating to a sum of Rs. 1,89,81,875/-made by the AO in the appellant's income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2. That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the AO's action of making the impugned additions in the appellant's income for the relevant assessment year without considering the material fact that having already furnished original return of income under s. 139 of the Act, on the date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment year under consideration and therefore, without having recourse to any seized incriminating document or material, no addition could have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial fact that the interest expenditure so claimed by the appellant, were duly recorded in its regular books of account, and the same have been incurred out of the explained sources and therefore, the provisions of s. 69C could not have been invoked in the instant case. 3f). That, without prejudice to the above, the learned CIT (A) grossly erred in confirming the addition of Rs. 4,81,875/-on account of disallowance of interest on unsecured loans without considering the material fact that the interest expenditure so claimed by the appellant were genuinely incurred by it on the genuine borrowings of the loans made for the purpose of its business. 4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary." 2.3 Grounds of appeal raised by the Assessee for AY 2015-16 in IT(SS)A No. 72/Ind/2020: "1. That, on the facts and in the circumstances of the case, the action of the learned CIT (A) in confirming the additions to the extent of Rs. 16,77,174/-made by the AO in the appellant's income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2a). That, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered necessary." 2.4 Grounds of appeal raised by the Assessee for AY 2016-17 in IT(SS)A No. 73/Ind/2020: "1. That, on the facts and in the circumstances of the case, the action of the learned CIT (A) in confirming the additions to the extent of Rs. 21,52,945/-made by the AO in the appellant's income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2a). That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the addition to the extent of Rs. 21,52,945/-on account of alleged unexplained unsecured loans by invoking the provisions of s. 68 of the Act and payment of interest thereon, without confronting the appellant with any information as regard to the creditors allegedly gathered behind the back of the appellant either in the case of the appellant itself or in the cases of some other assessees and as also, without giving any opportunity of cross-examination to the appellant. 2b). That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the impugned addition to the extent of Rs. 21,52,945/-without considering the material fact that the appellant had duly discharged its initial onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant either in the case of the appellant itself or in the cases of some other assessees and as also, without giving any opportunity of cross-examination to the appellant. 2b). That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the impugned addition to the extent of Rs. 85,44,654/-without considering the material fact that the appellant had duly discharged its initial onus of proving the identity of the loan creditors, the genuineness of the transactions and creditworthiness of loan creditors beyond all doubts by producing all the necessary documentary evidences. 2c). That, the learned CIT (A) grossly erred, both on facts and in law, in confirming the AO's action of making the impugned addition without adhering to the appellant's prayer to issue either summons under s. 131 or letters under s. 133(6) of the Act to the loan creditors. 2d). That, the learned CIT (A) grossly erred in confirming the addition of Rs. 14,44,654/-made by the AO in the appellant's income on account of disallowance of interest on unsecured loans, claimed by the appellant, by invoking the provisions of s. 69C r.w.s. 115BBE of the Act, without considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 Returned income (in Rs. ) Date of filing of Return in response to the notice u/s. 153A Income declared in Return u/s. 153A (In Rs. ) Additional Income offered, if any (In Rs. ) 2012-13 30/11/2012 12,030/- 14/03/2018 12,030/- Nil 2014-15 21/09/2014 1,08,700/- 14/03/2018 1,08,700/- Nil 2015-16 30/10/2015 (-)2,22,987/- 14/03/2018 (-)2,22,987/- Nil 2016-17 31/03/2017 Nil 14/03/2018 Nil Nil 2017-18 30/03/2018 Nil NA NA Nil 3.2 In the case of the assessee, a reference was made for special audit u/s. 142(2A) of the Act and accordingly, the special auditors submitted their report on 20.06.2019. The report of the special auditors, as produced by the assessee, was duly perused and considered by the AO and as also, by the CIT(A). A copy of the Special Auditors Report was also filed by the assessee before this Bench which has been perused and placed on record. 3.3 Finally, the AO made additions of Rs. 1,60,32,263/-in A.Y. 2012-13 Rs. 23,00,000/-in A.Y. 2013-14 Rs. 1,89,81,875/-in A.Y. 2014-15 Rs. 20,72,174/-in A.Y. 2015-16 Rs. 21,87,135/-in A.Y. 2016-17 and Rs. 85,76,149/-in A.Y. 2017-18 on account of unexplaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the addition confirmed by the ld. CIT (A) and therefore, no separate adjudication on this Ground is warranted. Accordingly, this ground of appeal for A.Y. 2012-13, A.Y. 2014-15to A.Y. 2017-18 is hereby Dismissed. 8. Ground No. 2 of the Assessee for A.Y. 2012-13& A.Y. 2014-15 8.1 Through the Ground No. 1 taken for A.Y. 2012-13& A.Y. 2014-15, the assessee has challenged the action of the ld. CIT (A) in upholding the additions made by the AO in completed assessment years without having recourse to any incriminating material found during the course of search. 8.2 Before the ld. CIT(A), the assessee furnished the detailed written submissions on the subject ground, which has been reproduced by the ld. CIT (A) at page no. 16 to 24 of his Order. While adjudicating the ground, the ld. CIT (A) held that for A.Y. 2012-13 and A.Y. 2014-15, the assessee had filed its return of income u/s. 139 of the Act much prior to the date of search and seizure operations in its case which were carried out on 12/07/2016. The ld. CIT (A) further held that as on the date of the search no assessment proceedings were pending for such assessment years and further, the time limit for issuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year under consideration. Further, during the course of search operations carried out in the business premises of the assessee and as also in the residential premises of its directors along with the group concerns, not even a single incriminating material or document or valuable article or thing, pertaining to the assessment year under consideration, was found on the basis of which addition has been made by the learned AO in the returned income of the assessee. 1.03 The learned AO has made the impugned additions of Rs. 1,60,32,263/in the assessee's income for A.Y. 2012-13 and that of Rs. 1,89,81,875/-for A.Y. 2014-15. The additions have been made by the AO on account of unsecured loan obtained by the assessee company by invoking provisions of section 68 of the Act and disallowance of interest expenditure thereon, without having any recourse to any seized incriminating document or material or valuable article found during the course of search proceedings. Such an act on the part of the learned AO is patently wrong, unjustified, unwarranted and bad in the eyes of law in view of the facts and circumstances of the case and as also in view of the settled legal position as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey, bullion, jewellery or other valuable articles or things or books of account or documents which have not been or would not have been disclosed by such person for the purpose of the Income-Tax Act, 1961. The purpose of the provisions of section 132 is not to make any assessment or reassessment but to gather the material necessary for the purpose of making assessment or reassessment. It is submitted that the provisions of section 132 are not aimed for discovery of those assets, books or documents or transactions, which are already in the specific knowledge or domain of the revenue or if required may come in the specific knowledge or domain of the revenue. It shall thus be appreciated that the provisions of section 132 are not meant for verifying the transactions which are already recorded in the regular books of account of an assessee. For such verification, the powers of assessment or reassessment are duly vested with the AO under the provisions of section 143/ 147 of the Act. As a natural corollary it thus follows that very purpose of initiating action under s. 132 is to unearth or discover any undisclosed income or undisclosed asset of an assessee and its objective is not at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153A, it has been enjoined that assessment or reassessment, if any, relating to any of the six assessment years which is pending on the date of initiation of the search or making the requisition shall abate. On a plain reading of the proviso, it becomes abundantly clear that only the assessment proceedings which were pending on the date of initiation of search or requisition shall get abate whereas the assessment proceedings for other assessment years, which have attained finality, shall not get abated. Thus, a clear cut distinction has been made in the section itself in respect of those assessment years in respect of which proceedings have attained finality at the AO stage and those assessment years where the assessment proceeding have not so attained the finality at AO stage. It is submitted that while making the assessment under s. 153A, an AO has to make a specific distinction for non-abated assessment years with that of the abated assessment years. 3.00 It is submitted that the issue relating to scope of assessment under s. 153A/153C is not res integra. The Hon'ble High Court of Delhi in the case of CIT vs. Kabul Chawla (2015) 9 TMI 80 (Del.), after considering all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 57 CCH 0031 (Gau. Trib.) xiv) Rashmi Metaliks Ltd. and ANR vs. DCIT and ANR (2019) 72 ITR (Trib.) 0226 (Kolkata) xv) Amitbhai Manubhai Kachadiya and Ors. vs. DCIT (2019) 56 CCH 0189 (SuratTrib.) xvi) Smt. Sanjana Mittal vs. DCIT (2019) 55 CCH 0644 Asr Trib. xvii) SVM Buildcon Pvt. Ltd. vs. DCIT [IT(SS) A no. 71/Ind/2016 Order dated 26-10-2017] xviii) Chugh Real Estate Pvt. Ltd. vs. DCIT [IT(SS) A no. 60&61/Ind/2016 Order dated 26-10-2017] xix) Kamta Prasad Dwivedi vs. ACIT-1(1), Bhopal 2018 (9) TMI 1746 - ITAT Indore xx) Smt. Rashmi Mujumdar vs. DCIT(Central)-1, Bhopal 2018 (12) TMI 688 - ITAT Indore xxi) ACIT vs. Sudeep Maheshwari [ITA No. 524/Ind/2013, Order dated 13-02-2019] xxii) M/s. Ultimate Builders vs. ACIT [ITA No. 134/Ind/2019, Order dated 09-08-2019] xxiii) Sainath Builders vs. ACIT (2019) 35 ITJ 77 (Trib.-Indore) xxiv) DCIT-2(1), Indore vs. Shri Satish Neema [IT(SS) 149, 150 & 152/Ind/2016; Order dated 07-02-2020] 4.00 Your Honours, in the instant case, undisputedly, the assessee had voluntarily furnished its return of income under the provisions of s. 139 of the Act for A.Y. 2012-13 on 30-11-2012 and further since, the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d material. It is submitted that although in the opening lines of para (8.5) at page no. 8 of the assessment order, the ld. AO has mentioned that upon analysis of seized documents, he noticed that some documents were found & seized during the course of the search but, in the entire body of the assessment order, there is not a whisper or mention of any such so called seized document. It is submitted that even in the Show Cause Notices issued to the assessee, as abstracted by the ld. AO himself at para (8.1) of his assessment order, there is no reference of any so called seized documents. It is submitted that the entire additions have been made by the ld. AO only based upon the regular books of account maintained by the assessee company in its normal course of business and no addition is based upon any incriminating seized material. 5.02 Your Honours, it is submitted that the second ground taken by the ld. CIT (A) for dismissing the legal plea of the assessee is that according to the ld. CIT(A), the assessee had obtained accommodation entries from some entry operator. It is submitted that first of all, such a finding is factually incorrect, as demonstrated in the subsequent paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries found made in the tally data containing the regular books of account of the assessee, without making reference of any seized document or any other evidence gathered during the course of search. Before us, the ld. CIT (DR) also could not bring on record any single incriminating material on the basis whereof the additions have been made by the AO in the assessment order for the aforesaid two assessment years. In our considered view, even in respect of the loan transactions claimed to have been carried out by the assessee with various companies operated by Shri Sharad Darak, while making the additions, the AO has not made specific reference of any single seized document or material. Thus, in our considered view, the two assessment years viz. A.Y. 2012-13 and A.Y. 2014-15 are non-abated assessment years and therefore, as per the settled position of the law, any addition in such non-abated assessment years could have been made only on the basis of some incriminating material or evidences gathered during the course of the search which is not a case here. 9.4 We find support from the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 53 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 9.5 The above stated ratio laid down by the Hon'ble Delhi High Court has been applied by this Tribunal in the case of Kalani Bros. [IT(SS) No. 71/Ind/2015 dated 6.11.15] observing as follows:- "We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/ s 132 of the Act or a requisition has been made u/ s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/ s 153A of the Act. Once notices are issued u/ s 153A of, the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particulars issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectively following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly." 9.6 Similar view also taken in the case of DCIT, Indore vs. Shri Satish Neema (2020) 37 ITJ 308 (Trib. Indore).and in the case of Rajmohan Agrawal (Ind), Bhopal vs. ACIT-2(1), Bhopal [IT(SS)A No. 04/Ind/2019 Order dated 07-09-2021] 9.7 Thus, respectfully following the settled judicial precedence which are squarely applicable on the instant issue, we are of the view that while making an assessment under s. 153A of the Act in pursuance of a search under s. 132, no addition could have been made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuineness of loan transactions. The AO, while framing the assessment order, averted that the assessee had accepted unsecured loans from shell/ paper companies and employees. Finally, vide details given in para (8.53), the AO made an addition of Rs. 1,60,32,263/-in A.Y. 2012-13 Rs. 23,00,000/-in A.Y. 2013-14 Rs. 1,89,81,875/-in A.Y. 2014-15 Rs. 20,72,174/-in A.Y. 2015-16 Rs. 21,87,135/-in A.Y. 2016-17 and Rs. 85,76,149/-in A.Y. 2017-18 by holding the unsecured loans obtained by the assessee and interest paid thereon as unexplained cash credits u/s. 68 and unexplained expenditure u/s. 69C respectively. 10.3 Aggrieved with the Order of Assessment, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. Before the ld. CIT(A), the assessee also furnished certain additional evidences, under Rule 46A, to substantiate the identity & creditworthiness of the lenders and genuineness of loan transactions which were forwarded to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -17 &Rs.62,270/-in A.Y. 2017-18]; (viii) M/s. Zyka Merchandise Pvt. Ltd.[loan-Rs. 10,00,000/-in A.Y. 2017-18] [Interest - Rs. 17,207/-in A.Y. 2017-18] The AO vide para 8.14 of the assessment order has held that all the aforesaid companies are controlled/ managed companies and associated concerns of Shri Sharad Darak, a well known accommodation entry provider. Since the findings in respect of all the aforesaid companies have been commonly given by the AO at para (8.3) to para (8.28) of the impugned Order, the cash credits in respect of all such cash creditor companies are being dealt with together. The written submission made by the appellant during appellate proceedings in respect of the above mentioned companies are on same line contending that (i) during the course of the assessment proceedings, it had furnished all the necessary documents to establish the identity of the loan creditors, the genuineness of the loan transactions and the creditworthiness of the loan creditors, as contemplated under the provisions of s. 68 of the Act; (ii) after having discharged its initial onus of proving during the course of the assessment proceedings, the appellant had specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of incorporation, memorandum & articles of association, copies of income-tax returns, copies of master data downloaded from website of MCA, copies of loan confirmation letters duly given by the lender companies, copies of relevant bank statements of the lender companies, copies of the relevant bank statements of the appellant, copies of the audited financial statements of the lender companies, copies of the Affidavits duly sworn by Shri Sharad Darak confirming the loan transactions and in some cases, copies of the assessment orders passed u/s. 143(3) of the Act. However, furnishing of all these documents by themselves cannot establish the genuineness of the loan transactions which goes to the root of section 68 of the Act. I find that from the various enquiries conducted by the Investigation Wing and various income-tax authorities, now it has got established beyond all doubts that Sharad Darak is a defamous entry provider of Indore. The genuineness of the loans provided by the companies of Shri Sharad Darak have not been accepted in various cases. Once it is proved that the assessee has taken any loan from any entry provider company then, furnishing of any documentary evidences ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A) on this issue. 10.6 Per Contra, Learned Counsel for the assessee has filed written submission before us. The relevant portion of such written submission is being reproduced as under: "Details of the Additions confirmed by the ld. CIT (A) for which the assessee is in Appeal : A.Y. Name of the Lender Principal Sum Interest Total Relevant Finding by the CIT(A) Remarks 2012-13 M/s. Jayant Security and Finance Ltd. 75,00,000 40,685 75,40,685 Para (4.4.9)[D] at page no. 129 to 132 Sharad Darak Company M/s. Jay Jyoti India Pvt. Ltd. 75,00,000 14,178 75,14,178 ---do--- ---do--- TOTAL 1,50,00,000 54,863 1,50,54,863 2014-15 M/s. Octagon Media Matrix Pvt. Ltd. 50,00,000 1,12,500 51,12,500 ---do--- ---do--- M/s. Rajwadi Retail Trade Systems Pvt. Ltd. 50,00,000 1,12,500 51,12,500 ---do--- ---do--- M/s. Ranjeet Securities Ltd. 35,00,000 1,44,375 36,44,375 ---do--- ---do--- M/s. Suzlon Securities Pvt. Ltd. 50,00,000 1,12,500 51,12,500 ---do--- ---do--- TOTAL 1,85,00,000 4,81,875 1,89,81,875 2015-16 M/s. Octagon Media Matrix Pvt. Ltd. - 4,54,058 4,54,058 ---do--- ---do--- M/s. Rajwadi Reta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of initiation of the search under s. 132, no assessment proceeding was pending in respect of the assessment years A.Y. 2012-13 & A.Y. 2014-15 and therefore, without having recourse to any seized incriminating document or material, no addition could have been made in the total income of the assessee. 1.02 Your Honours, at para (8.5) of the impugned assessment order, the learned AO has made an attempt to justify his action of making the addition on the pretext that during the course of the search proceedings details of unsecured loans were found mentioned in documents and tally datas seized during the course of search. According to the AO, such details and tally datas meet the requirement of existence of incriminating material for making the additions. In this regard, it is submitted that such a premise taken by the ld. AO is patently wrong and against the established canon of law. It is submitted that the details and tally datas, as referred to by the ld. AO in the body of the assessment order, were maintained by the assessee in its ordinary course of business and based upon such datas only the assessee had furnished its returns of income under s. 139 of the Act, from year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derations and also without bringing any adverse material on record to substantiate his allegation that the assessee was engaged in routing its own unaccounted funds into its books of account in form of cash credits, by making its employees and other persons/ concerns as conduit for the same. 3.03 Your Honours, the learned AO, at page no. 46 & 47 of the impugned assessment order has given the break-up of the sum of Rs. 1,60,32,263/-in respect of which the subject addition has been made for the assessment year under consideration. For the sake of convenience, the break-up so given is summarized, in a tabular form, as under: S. No. Name of the loan creditor Amount A. Loans from Companies managed/ controlled by Shri Sharad Darak 1. M/s. Jayant Security & Finance Ltd. 75,40,685 2. M/s. Jay Jyoti India Pvt. Ltd. 75,14,178 TOTAL (A) 1,50,54,863 B. Loan From Employee 3. Smt. Kshamta Dubey 9,77,400 TOTAL (B) 9,77,400 GRAND TOTAL (A+B) 1,60,32,263 4.00 Your Honours, during the course of assessment proceedings, the assessee vide its letter dated 30-07-2019 [kindly refer Page No 115 to 151 of our paper book], had furnished the necessary documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me hearsay allegations against the loan creditors and information gathered behind the back of the assessee. 7.00 Your Honours, the ld. AO, for making the impugned addition, relied on the reports submitted by the Special Auditors u/s. 142(2A) of the Act. However, during the course of assessment proceedings, the assessee had got its preliminary objection registered against the observation made by the ld. AO as well as by the Special Auditors appointed under s. 142(2A) of the Act, that the scope of the Special Auditors had to be restricted to the examination, verification and audit of books of account and other documents, pertaining to the assessee or as found and seized during the course of the search. The scope would not include an investigation into the affairs of the auditee or for that matter, to occupy the judgment seat of an Assessing Officer. The scheme of the Special Audit nowhere contemplates satisfaction of the Special Auditors as regard to the genuineness of the loan transactions which have duly been recorded in the books of account. The Assessing Officer who is competent to examine the ingredients of the cash credits such as identity of the loan creditor, genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences so furnished by the assessee. Instead, the learned AO, merely on his own surmises and conjectures, without bringing any cogent material on record, disbelieved the loan transactions genuinely carried out by the assessee with various companies and made the addition under s. 68 of the Act which was not so warranted. 9.00 Your Honours, without prejudice to the above, now, on the merits of the case, we would be dealing with each and every ingredients of s. 68 of the Income-Tax Act, 1961 in respect of the subject loan creditors in the ensuing paras. 10.00 UNSECURED LOANS FROM COMPANIES CONTROLLED/ MANAGED BY SHRI SHARAD DARAK 10.01 LOAN FROM M/S. JAYANT SECURITY & FINANCE LTD. ['JSFL']-Rs.75,40,685/--A.Y. 2012-13 [AO's Findings at para (8.53) at page no. 46] [CIT(A)'s Findings at para (4.4.9)[D] at page no. 129 to 132] (A) IDENTITY: (i) The JSFL is a private limited company duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Gujarat, on 22-06-1994, vide registration No. L67993GJ1994PLC022313 of 1994-95. A copy of certificate of incorporation of the company is placed at Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with JSFL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, we are submitting herewith a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the JSFL to the assessee, is placed at Page No. 270 of our Paper Book. (ii) The assessee's claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the relevant statements maintained with the banks in which the transactions regarding to receipt of loan by the assessee from JSFL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 271 & 272 of our Paper Book. (iii) Further, to establish the fact that the unsecured loan was genuinely given by JSFL through their bank accounts, a copy of relevant bank statement of JSFL for the relevant period, is placed at Page No. 273 to 277 of our Pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the copy of the bank statement in respect of the bank account maintained by the JSFL [kindly refer PB Page no. 273 to 277], it shall be observed by Your Honours that in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iv) Your Honours, on a further perusal of the bank statement of the JSFL, it would be observed by Your Honours that JSFL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with JSFL by making cash deposits in its bank account. Thus, in such circumstances, the sources of providing loan by JSFL cannot be doubted. (v) Your Honours, the creditworthiness of the JSFL also gets substantiated from the Affidavit of Shri Sharad Darak, director of JSFL, wherein he has stated on oath that the unsecured loan of Rs. 75,00,000/-ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged unexplained unsecured loan and disallowance of interest paid thereon deserves to be deleted. (iii) Reliance is also placed on the following judicial pronouncements: i) Shri Rajendra Prasad Agrawal vs. Addl. CIT, Range-1, Indore [ITA No. 327/Ind/2015; Order dated 20-05-2016] ii) M/s. Vajdi Education Society vs. ACIT-2(1), Indore [ITA No. 653/Ind/2013; Order dated 09-02-2018] iii) Chhatrachhaya Nirman Pvt. Ltd. vs. ACIT-2(1), Indore [ITA No. 508/Ind/2018; Order dated 23-01-2020] 10.02 LOAN FROM M/s. JAY JYOTI INDIA PVT. LTD. ['JJIPL']- Rs. 75,14,178/-A.Y. 2012-13 [Presently Known as M/s. Jayganga Exim India Pvt. Ltd.] [AO's Findings at para (8.53) at page no. 46] [CIT(A)'s Findings at para (4.4.9)[D] at page no. 129 to 132] (A) IDENTITY: (i) The JJIPL, originally incorporated with the name of "Jay Jyoti India Pvt. Ltd.", is a private limited company, duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Maharashtra, on 06-12-1999 vide Registration No. 11-122929 of 1999. Subsequent to the loan transactions carried out by the assessee company, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from JJIPL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee, is placed at Page No. 391 of our Paper Book. (iii) Further, to establish the fact that the unsecured loan was genuinely given by JJIPL through their bank accounts, a copy of relevant bank statement of JJIPL for the relevant period, is placed at Page No. 392 of our Paper Book. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the loan creditor JJIPL in its return of income for the relevant assessment year. (v) It shall be pertinent to note that the assessee company has repaid the entire loan of Rs. 75,00,000/-to JJIPL through banking channel in the immediately succeeding previous year relevant to A.Y. 2013-14. In support of such assertion, a copy of relevant bank statement of the assessee company, is placed at Page No. 393 of our Paper Book. The repayment of loan by the assessee in the succeeding year itself proves the genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with JJIPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by JJIPL cannot be doubted. (v) Your Honours, the creditworthiness of the also gets substantiated from the Affidavit of Shri Sharad Darak, director of JJIPL, wherein he has stated on oath that the unsecured loan of Rs. 75,00,000/-has been given by JJIPL out of its own funds only [kindly refer PB Page No. 394 & 395]. (vi) Your Honours, during the course of the appellate proceedings, the assessee had furnished all the necessary documents to establish the identity of the loan creditor, genuineness of the transaction and creditworthiness of the creditor but, despite that, the ld. CIT (A) merely on the basis of assumptions confirmed the action of the ld. AO in making the addition. 9.01 LOAN FROM M/S. OCTAGON MEDIA MATRIX PVT. LTD. ['OMMPL']- Rs. 51,12,500/-A.Y. 2014-15 & Rs. 48,30,107/-for A.Y. 2017-18 [Presently Known as 'Ojasvi Media Matrix Pvt. Ltd.'] [AO's Findings at para (8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by the authorized signatory of the lender company, confirming the transactions of loan given by the OMMPL to the assessee, is placed at Page No. 100 of our Paper Book. (ii) The assessee's claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from OMMPL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 101 of our Paper Book. (iii) Further, to establish the fact that loans were genuinely given by OMMPL through their bank account, a copy of relevant bank statement of OMMPL for the relevant period is placed at Page No. 102 of our Paper Book. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the loan creditor OMMPL in its return of income for the relevant assessment year. (v) The genuineness of the loan transaction also gets fortified from a very vital fact that the director of the OMMPL namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits in bank account. Thus, in such circumstances, the sources of providing loan by OMMPL cannot be doubted (v) Your Honours, the creditworthiness of the OMMPL also gets substantiated from the Affidavit of Shri Sharad Darak, director of OMMPL, wherein he has stated on oath that the unsecured loan of Rs. 50,00,000/-has been given by OMMPL out of its own funds only [kindly refer PB Page No. 103 to 105]. (vii) Your Honours, during the course of the appellate proceedings, the assessee had furnished all the necessary documents to establish the identity of the loan creditor, genuineness of the transaction and creditworthiness of the creditor but, despite that, the ld. CIT (A) merely on the basis of assumptions confirmed the action of the ld. AO in making the addition. 9.02 LOAN FROM M/S. RAJWADI RETAILS TRADE SYSTEM PVT. LTD. ['RRTSPL']-Rs.51,12,500/-A.Y. 2014-15 [Presently Known as '3.Rajyeshwar Retail Trade Systems Pvt. Ltd.'] [AO's Findings at para (8.53) at page no. 46] [CIT(A)'s Findings at para (4.4.9)[D] at page no. 129 to 132] (A) IDENTITY: (i) The RRTSPL is a private limited company duly registered under the erstwhile Companies Act, 1956, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copy of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from RRTSPL are clearly getting reflected. Copies of such abstracts of the relevant bank statements of the assessee are placed at Page No. 159 of our Paper Book. (iii) Further, to establish the fact that loans were genuinely given by RRTSPL through their bank account, a copy of relevant bank statement of RRTSPL for the relevant period is placed at Page No. 160 of our Paper Book. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loan after making necessary TDS which has been duly incorporated by the RRTSPL in its return of income for the relevant assessment year. (v) It shall be pertinent to note that the assessee company has repaid the entire loan of Rs. 50,00,000/-to RRTSPL through banking channels in the succeeding previous year relevant to A.Y. 2017-18. In support of such assertion, a copy of relevant bank statement of the assessee company, Page No. 161 to 163 of our Pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be observed by Your Honours that RRTSPL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with RRTSPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by RRTSPL cannot be doubted (v) Your Honours, the creditworthiness of the RRTSPL also gets substantiated from the Affidavit of Shri Sharad Darak, director of RRTSPL, wherein he has stated on oath that the unsecured loan of Rs. 50,00,000/-has been given by RRTSPL out of its own funds only [kindly refer PB Page No. 164 to 166]. (vi) Your Honours, during the course of the appellate proceedings, the assessee had furnished all the necessary documents to establish the identity of the loan creditor, genuineness of the transaction and creditworthiness of the creditor but, despite that, the ld. CIT (A) merely on the basis of assumptions confirmed the action of the ld. AO in making the addition. 9.03 LOAN FROM M/S. RANJIT SECURITIES LTD. ['RSL']-Rs.36,44,375/-A.Y. 2014-15 [AO's Findings at para (8.53) at page no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim to the effect that all the loan transactions had taken place through banking channels can be verified from the copy of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from RSL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 233 of our Paper Book. (iii) Further, to establish the fact that loans were genuinely given by RSL through their bank account, a copy of relevant bank statement of RSL for the relevant period is placed at Page No. 234 to 237 of our Paper Book. (v) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the RSL in its return of income for the relevant assessment year. (vi) It shall be pertinent to note that the assessee company has repaid the entire loan of Rs. 35,00,000/-to RSL through banking channels in the succeeding previous year relevant to A.Y. 2016-17. In support of such assertion, a copy of relevant bank statement of the assessee company, is placed at Page No. 238 & 239 of our Paper Book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .'] [AO's Findings at para (8.53) at page no. 46] [CIT(A)'s Findings at para (4.4.9)[D] at page no. 129 to 132] (A) IDENTITY: (i) The SSPL is a private limited company duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Maharashtra, on 22-09-2009, vide registration No. U67100MH2009PTC195932 of 2009-10. The name of the SSPL has now been changed in the records of the Ministry of Corporate Affairs as 'Salween Securities Pvt. Ltd.'. A copy of certificate of incorporation of the company is placed at Page No. 259 & 260 of our Paper Book. (ii) The SSPL was incorporated with the objects of carrying out the business of trading in various securities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 261 to 287 of our Paper Book. (iii) The registered office of the SSPL is presently situated at GR-76, Harmony Commercial, C-Wing, Near Motilal Nagar, Link Road, Goregaon (West), Mumbai, (MH.). (iv) The SSPL, since its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Affidavit, duly sworn before Notary Public, has duly affirmed the transaction of loan of Rs. 50,00,000/-given by his company SSPL to the assessee company. Shri Sharad Darak, at paras (4) & (7) of the Affidavit, has stated that the subject loan was given by SSPL out of its own funds only. A copy of the Affidavit of Shri Sharad Darak is placed at Page No. 293 to 295 of our Paper Book]. The Affidavit so furnished by a director of the lender company also establishes the genuineness of the borrowing made by the assessee from JSFL. For such proposition, reliance is placed on the decision of the Hon'ble High Court of Karnataka in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (2007) 291 ITR 44 (Kar.). (C) CREDITWORTHINESS OF SSPL: (i) For establishing capacity and creditworthiness of SSPL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of SSPL along with its Auditors' Report, in respect of the financial year ended 31st March 2014. A copy of such audited financial statements is placed at Page No. 296 to 314 of our Paper Book. (ii) On a perusal of the aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, Madhya Pradesh, on 01-041999, vide registration No. U65921CT1999PLC020108 of 1999-00. A copy of certificate of incorporation of the company is placed at Page No. 69 of our Paper Book. (ii) The EWFIL was incorporated with the objects of carrying out the business of trading in various commodities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 70 to 126 of our Paper Book. (iii) The registered office of the EWFIL is presently situated at Sanjay Heights in front of Rajaswa Colony, Flat No. A/102, Sarkanda, Bilaspur (CT)-495001. (iv) The EWFIL, since its inception, is regularly assessed to income-tax under PAN-AADCE1236G. The EWFIL had also furnished its return of income for the relevant assessment year. In evidence of such fact, we are furnishing herewith a copy of acknowledgement of return of EWFIL, for A.Y. 2016-17, is placed at Page No. 127 of our Paper Book. (v) The EWFIL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness of the loan transaction also gets fortified from a very vital fact that the director of the EWFIL namely Shri Sharad Darak, through his Affidavit, duly sworn before Notary Public, has duly affirmed the transaction of loan of Rs. 3,00,000/-given by his company EWFIL to the assessee company. Shri Sharad Darak, at paras (4) & (7) of the Affidavit, has stated that the subject loan was given by EWFIL out of its own funds only. A copy of the Affidavit of Shri Sharad Darak is placed at Page No. 133 to 135 of our Paper Book. The Affidavit so furnished by a director of the lender company also establishes the genuineness of the borrowing made by the assessee from JSFL. For such proposition, reliance is placed on the decision of the Hon'ble High Court of Karnataka in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (2007) 291 ITR 44 (Kar.). (C) CREDITWORTHINESS OF EWFIL: (i) For establishing capacity and creditworthiness of EWFIL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of EWFIL along with Auditors' Report, in respect of the financial year ended 31st March 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed at Page No. 167 to 193 of our Paper Book. (ii) Your Honours, the Hon'ble ITAT, Indore Bench, again, in the case of ACIT vs. Shri Pramod Kumar Sethi (2019) 34 ITJ 39 (Trib.-Indore), by following its earlier decision in the case of ACIT vs. Shri Girish Kumar Sharda (2014) 23 ITJ 701 (Trib.-Indore), vide para 16 & 17 of its Order, has held that the two companies namely 'M/s. Trimurti Finvest Ltd.' and 'M/s. East West Finvest India Ltd.' [also belonging to Mr. Sharad Darak] were genuine companies and unsecured loans obtained from these companies cannot be held to be unexplained under s. 68 of the Act. A copy of the aforesaid judgment is placed at Page No. 194 to 202 of our Paper Book. In the said decision, the aforesaid two companies were also held by the AO to be accommodation entry provider companies. It is submitted that in the instant case too, the subject creditor company M/s. East West Finvest India Ltd. has been alleged to be an accommodation entry provider company of Shri Sharad Darak. In such circumstances, the ratio laid down by the Hon'ble Jurisdictional Tribunal in the aforesaid case shall be applicable to the case of the assessee company as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. (v) The ZMPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In evidence of such fact, a copy of the Master Data downloaded from the official website of the MCA is placed at Page No. 279 of our Paper Book. (vi) The ZMPL has been maintaining its bank accounts with various banks. During the relevant previous year, the ZMPL was maintaining its current account with Indusind Bank at its Branch at Mumbai vide account No. 200999050936. (B) GENUINENESS OF THE TRANSACTIONS: (i) As regard the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with ZMPL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, we are submitting herewith a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the ZMPL to the assessee, is placed at Page No. 280 of our Paper Book. (ii) The assessee's claim to the effect that all the loan transactions had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus. (iii) Your Honours, on a perusal of the copy of the bank statement in respect of the bank account maintained by the ZMPL [kindly refer PB Page no. 282], it shall be observed by Your Honours that, in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iv) Your Honours, on a further perusal of the bank statement of the ZMPL, it would be observed by Your Honours that ZMPL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with ZMPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by ZMPL cannot be doubted. (v) Your Honours, the creditworthiness of the ZMPL also gets substantiated from the Affidavit of Shri Sharad Darak, director of ZMPL, wherein he has stated on oath that the unsecure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara (8.14) of the Order, the learned AO has alleged that during the assessment proceedings, search and survey actions of the Income Tax Department, it has come to the light that Shri Sharad Darak is a full time entry provider. However, the learned AO has not given the basis of such assumption. 12.03 Your Honours, the learned AO, at paras (8.15) & (8.16) of the assessment order, has made a reference of some survey proceedings u/s. 133A carried out in the business premises of some of the companies namely M/s. East West Finvest Pvt. Ltd., M/s. Purvi Finvest Ltd. and M/s. Trimurti Finvest Ltd., having a common address at Kamla Hari Villa, Besides Apollo Pharmacy, Main Road, Vidhya Nagar, Bilaspur, allegedly controlled by Shri Sharad Darak. At para (8.16), the learned AO has made a reference of some statement given by some Mr. Dinesh Agrawal, Auditor of the companies controlled by Shri Sharad Darak, who was found the occupant of the premises where the survey proceedings were carried out. The learned AO has also given the gist of the statement given by such Mr. Dinesh Agrawal. In this regard, at the outset, it is submitted that during the previous year under consideration, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e borrowed information and that too, without confronting the basis of such information to the assessee. 12.06 Your Honours, without prejudice to the above, it is submitted that if the claim of the learned AO is accepted that some survey in the business premises of the lender companies were carried out under s. 133A of the Act and further, the statements of auditors/ directors were recorded either during the course of such survey or under s. 131 of the Act, then, the identity of the lender companies cannot be doubted for the reason that without there being existence of any such company or directors thereof, there could not have been any occasion for the Department to conduct the survey and to record the statements. 13.00 Your Honours, without prejudice to the above, it is submitted that learned AO has made the impugned addition merely on the basis of some information available with him as regard to the loan creditors allegedly gathered behind the back of the assessee in the cases of some other assesses. The learned AO in the Assessment Order has referred to the statements of Shri Dinesh Agrawal and Shri Sharad Darak. But while doing so, the learned AO committed gross violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cross-examine those dealers and what extraction the Assessee wanted from them. 6. As mentioned above, the Assessee had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the above, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held: 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice." [Emphasis supplied] 13.03 The Hon'ble Gujarat High Court in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directors of a lender company is an entry provider, all the transactions carried out by all the companies in which such director was a common director, with all the persons cannot be regarded to be bogus transactions. For such proposition, reliance is placed on the decision of the Hon'ble Apex Court in the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 15.00 Your Honours, a similar case for adjudication arose before the Hon'ble ITAT Mumbai in the case of ITO vs. Smt. Pratima Ashar 2019 (7) TMI 1313 (ITAT Mumbai). In such case, the AO made addition on the allegation that some Mr. Praveen Jain was an accommodation entry provider and the assessee had claimed to have taken loans controlled by such Mr. Praveen Jain. The addition was entirely deleted by the CIT (A) and against the Order of the CIT(A), the Department preferred appeal before the ITAT. The ITAT confirmed the action of the CIT (A) in deleting the addition and held that merely on the basis of a statement given by some person, all the transactions carried out by various companies controlled by such person cannot be held to be non-genuine in a circumstance when the assessee had furnished ample of documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, there is no reason why the assessing authority should not draw such an inference. Such an inference is an inference of fact and not of law. (Para 10) The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him and it will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee-The burden thereafter shifts on to the Revenue to show that the entry represented assessee's suppressed income-Department has to be in possession of sufficient and adequate material in order to reach to such conclusion Held : When cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the ITO is entitled to satisfy himself as to the true nature and source of the amounts entered therein, and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee. When these credits entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these entries and to show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 40,000 in the books of account of the assessee and those of S is not in view of the rest of the material on record sufficient to reject the assessee's case. Therefore, it must be held that the amount of Rs. 2,50,000 standing in the books of the assessee to the credit of R on the 10th Oct., 1942 and the further entries of Rs. one lakh and of Rs. 40,000 occurring in the said account on 16th March, 1948, and 19th July, 1948, did not belong to the assessee and did not constitute his undisclosed income. Conclusion : On the facts and circumstances of the case, assessee's initial burden stood discharged and there being no material to show that Revenue discharged its burden, cash credit could not be treated assessee's suppressed income. iii) ASHOK PAL DAGA vs. CIT (1996) 220 ITR 0452 (MP) Decision in favour of: Assessee Reference-Question of law-Assessee having satisfied the IT authority as to the identity of the third party and also supplied the relevant evidence showing prima facie that the entries were not fictitious, the initial burden can be said to be discharged by the assessee-Treating the cash credits and interest thereon as undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could not be a basis to conclude that the assessee has invested its undisclosed income and invoke provisions of s. 68 against assessee- AO failed to carry his suspicion to logical conclusion by further investigation-More steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant companies and the assessee were not taken-It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability-Additions rightly deleted-In the peculiar facts and circumstances of the case, order of remand was not called for v) Ariba Foods Pvt. Ltd. vs. Asstt. Commissiner of Income Tax (2021) 9 TTJ Online 9 (Trib - Indore) CashCredit-Section68oftheIncome-taxAct,1961-A.Y.2015-16- AOmadeadditionsof Rs. 8.80lacsu/s68-CIT(A)deletedtheadditions- HELD-Assesseehasfurnishedcopyof PAN, bank account statement of lender company, audited financial statement, profit and loss account statement, certificate of incorporation, copy of MOA and AOA, etc. - Assessee had discharged its onus of providing the genuineness of the sum credits - ITAT satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der any head of income." 16.01 Your Honours, it is submitted that the provisions of section 69C can be invoked if an assessee is found to have incurred any expenditure and the sources of such expenditure are not explained by the assessee. However, in the instant case, the assessee has not only explained the interest payments made by it but has also explained the sources of the funds in respect of which such interest payments have been made. It is therefore, most humbly submitted that the entire interest payment of Rs. 54,863/-so made by the assessee to the lender companies is genuine and deserves to be allowed. 16.02 Your Honours, it is submitted that the assessee company has incurred the interest expenditure for the purposes of its business only and therefore, the entire interest expenditure deserves to be allowed under the provisions of s. 36(1)(iii) of the Act. 16.03 Your Honours, in the instant appeals, the ld. CIT (A) has confirmed the aforesaid additions made by the ld. AO under s. 68 of the Act by way of giving his findings at para (4.3.9)(D) from page no. 129 to 132 of the impugned appellate order. It is submitted that the ld. CIT (A) has although acknowledged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Security and Finance Ltd. and Jay Jyoti India Pvt Ltd.. Thus, in totality, for A.Y. 2012-13, the AO vide para (8) of his Order, has made an addition of Rs. 1,60,32,263/-in the income of the assessee. Likewise, for A.Y. 2014-15, the AO has made addition amounting to Rs. 1,85,00,000/-on account of loans claimed to have been received by the assessee from four companies namely Octagon Media Matrix Pvt. Ltd., Rajwadi Retails Trade Systems Pvt. Ltd., Ranjit Securities Pvt. Ltd. and Suzlon Securities Pvt. Ltd.. For such assessment year 2014-15, the AO has also made addition u/s. 69C in respect of interest payment amounting to Rs. 4,81,875/-to the aforesaid four companies. Thus, in aggregate, for A.Y. 2014-15, the AO vide para (8) of his Order, has made an addition of Rs. 1,89,81,875/-in the income of the assessee. We find that the aforesaid additions for both A.Y. 2012-13 and A.Y. 2014-15 have been made by the AO (i) on the basis of some information available with him regarding procurement of loans by the assessee from some dubious/shell companies (ii) the report of the Special Auditors obtained during the course of the assessment proceedings; (iii) one excel sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further, in respect of loan from four companies namely, M/s. Octagon Media Matrix Pvt. Ltd., M/s. Rajwadi Retails Trade Systems Pvt. Ltd., M/s. Ranjit Securities Ltd. and M/s. Suzlon Securities Pvt. Ltd. respectively of a sum of Rs. 50,00,000/- Rs. 50,00,000/- Rs. 35,00,000/-and Rs. 50,00,000/-during the A.Y. 2014-15 and interest payments of Rs. 1,12,500/- Rs. 1,12,500/- Rs. 1,44,375/-and Rs. 1,12,500/-respectively to such companies during A.Y. 2014-15, the AO has made additions of Rs. 1,50,00,000/-for A.Y. 2012-13 and Rs. 1,85,00,000/-for A.Y. 2014-15 u/s. 68 of the Act and has also made additions amounting to Rs. 54,863/-and Rs. 4,81,875/-respectively for A.Y. 2012-13 and A.Y. 2014-15 on account of unexplained interest payment u/s. 69C of the Act to such loan creditors. Although, in respect of such additions, on the legal ground as discussed in para (11.3) supra, that the assessment years 2012-13& A.Y. 2014-15 were complete assessment years and therefore, for such assessment years, no addition could have been made without having recourse to any incriminating material found during the course of the search. But, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely Jayant Security and Finance Limited and East West Finvest India Limited were also featuring in the investigation report of the Directorate of Income-Tax (Inv.) Kolkata, as bogus loss/ exempted income providing paper companies. Finally, the AO reached to the conclusion that the subject eight lender companies were bogus/paper companies controlled by the accommodation entry provider Shri Sharad Darak. Accordingly, he made the addition u/s. 68 of the Act in the income of the assessee for various assessment years in respect of the loans taken from the above named eight lender companies and further made addition u/s. 69C of the Act for various assessment years, by holding the interest expenditure as unexplained expenditure. 11.4.3 We find that before the ld. CIT(A), the assessee had made a detailed explanation on the subject issue along with the various documentary evidences. We find that copies of the written submission made by the assessee before the ld. CIT (A) have also been furnished by the assessee before us in its Paper Books for various assessment years. 11.4.4 We find that the main grounds of contention of the assessee before the ld. CIT (A) was that (i) during the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid loan creditors at para (4.4.9.D) of his Order. We find that the ld. CIT (A) has given a categorical finding that before him, the assessee had furnished numerous documents for establishing its claim regarding the identity of the loan creditors, genuineness of the loan transactions and creditworthiness of the loan creditors. However, we find that having given such categorical findings, the ld. CIT (A) held that from the various inquiries conducted by the Investigation Wing and the Income-Tax Authorities, it had got established that Shri Sharad Darak was a defamous entry provider of Indore. The ld. CIT (A) further held that in many of the cases, the genuineness of the loans provided by the companies of Sharad Darak have not been accepted. Finally, with the above findings, the ld. CIT (A) concluded that once it is proved that the assessee has taken any loan from any entry provider, then, furnishing of any documentary evidences could not establish the loan transactions as contemplated u/s. 68 of the Act and accordingly, confirmed the various additions for various assessment years, made by the AO on this count. 11.4.6 We find that before us, in respect of the subject loan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the lender companies, copies of relevant bank statements of the lender companies, copies of the relevant bank statements of the assessee, copies of the audited financial statements of the lender companies, copies of the Affidavits duly sworn by Shri Sharad Darak confirming the loan transactions and in some cases, copies of the assessment orders passed u/s. 143(3) of the Act. We also find that in respect of the loan transactions, the assessee has made the payment of interest and has also made the necessary TDS thereon. Thus, in our considered view, by furnishing all the necessary documents, such as the certificates of incorporation, copies of Memorandum and Articles of Association, copies of acknowledgement of income tax returns, copies of the master datas downloaded from the official website of the MCA, copies of the PAN Cards, the assessee could be able to establish the statutory as well as the physical identity and existence of all the aforesaid eight loan creditors. We further find from the copies of duly signed letters of confirmation, copy of the relevant abstracts of the bank accounts of the loan creditors that all the loan transactions have been carried out through ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awal who was found during the course of the survey conducted. We find that the AO has not provided the assessee the copy of statement of Shri Dinesh Agrawal on whose statement, he has placed reliance for making the subject additions. Even from the abstracts of the statement of Shri Dinesh Agrawal, which was only an Auditor of some of the companies of Shri Sharad Darak, it cannot be inferred that the above named eight lender companies were merely paper companies or for that matter, the transactions carried out by the assessee with such companies were not genuine. We find that the AO has also made a reference of some statement u/s. 131 of Shri Sharad Darak recorded by some other assessing officer in the case of some other assessee but again, the copy of such statement was not provided by the AO to the assessee. We find that before the ld. CIT(A), the assessee had duly furnished the copies of Affidavits duly sworn by Shri Sharad Darak before Notary Public. We also find that copies of such Affidavits were also provided by the ld. CIT (A) to the AO under Rule 46A of the Income Tax Rules, 1962, but the AO did not make any further examination or inquiry from Shri Sharad Darak. From the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to us, not allowing the Assessee to crossexamine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the orderof the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the Assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors.,AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors.AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem. 28. The meaning of providing a reasonable opportunity to show cause against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mons u/s. 131 or by way of issuance of letters u/s. 133(6) of the Act to the aforesaid lenders. We also find that the various case laws relied upon by the AO are not applicable to the assessee's case. Thus, relying upon the decisions of the Hon'ble Jurisdictional High Court in the cases of CIT vs. Metachem Industries (2000) 245 ITR 0160 (MP), CIT vs. STL Extrusions Pvt. Ltd. (2011) 333 ITR 269 (MP), PCIT vs. Chain House International (P) Ltd. & Ors. (2018) 408 ITR 0561 (MP), Ashok Pal Daga vs. CIT (1996) 220 ITR 0452 (MP), CIT vs. Mehrotra Brothers (2004) 270 ITR 0157 (MP), the decision of the Hon'ble High Court of Gujarat in the case of DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj.), the decisions of the Hon'ble High Court of Delhi in the cases of CIT vs. Kamdhenu Steel and Alloys Ltd. & Ors. (2014) 361 ITR 0220 (Del.) and CIT vs. Dalmia Resorts International (2007) 290 ITR 508 (Del.), the decision of the Hon'ble High Court of Patna in the cases of CIT vs. Hanuman Agrawal (1985) 151 ITR 150 (Patna) and again in the case of Add. CIT vs. Bahari Brothers (P) Ltd. (1985) 154 ITR 0244 (Patna) andthe decision of the Hon'ble Apex Court in the case of CIT vs. Orissa Corporation P. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Finvest India Limited, Jayant Security and Finance Ltd., Jay Jyoti India Pvt. Ltd., Octagon Media Matrix Pvt. Ltd. and Purvi Finvest Ltd. was before the Hon'ble Bench has held that all these lending companies were existing companies and were having capacity to grant the loan to the assessee. We also find that this Bench in the case of M/s. Tirupati Construction, Ujjain vs. DCIT, Ujjain in AppealNo. ITA/522/Ind/2014 vide is Order dated 14/07/2016 has held that the loan transactions carried out by the assessee with East West Finvest India Limited, Jayant Securities and Finance Ltd. and KK Patel Finance Limited, companies controlled by Shri Sharad Darak were genuine. Further, this Bench in the case of ACIT vs. Pramod Kumar Sethi as reported in (2019) 34 ITJ 39 (Trib.Indore) and again in the case of Shri Sanjay Shukla, Indore vs. ACIT, Central Circle-2, Indore as reported in 2022 (4) TMI 385-ITAT, Indore has also upheld the action of the CIT (A) in deleting the additions made by the AO in the assessee's income on account of loans taken by the respective assessees from the various companies controlled by Shri Sharad Darak. In the case of Shri Pramod Kumar Sethi (supra) this Bench has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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