TMI Blog2014 (8) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- CIT(A) has rightly come to the conclusion that there is no actual credit in the books of the assessee on account of M/s. Jayna Closure, Proprietor Rakesh Kumar as stated by the AO whereas the same was accounting adjustment passed in the accounts of S.H. Ltd. and that since the identity of S.H. Ltd., the source of payment is also not in dispute as well as the transaction entered into by the assessee with S.H. Ltd. are also not in dispute – the order of the CIT(A) in deleting the addition made by the AO u/s 68 is justified - Revenue has also not been able to rebut the finding of the CIT(A) that the amount of ₹ 19,17,500 was outstanding in the AY 2001-02 also, which was a carried forward balance in the current year from the last many years - CIT(A) has rightly deleted the addition made by the AO. Creditworthiness and genuineness of transaction – Held that:- CIT(A) has rightly come to the conclusion that the creditor was in existence and the assessee had filed sufficient evidence to support its contention regarding the creditworthiness and genuineness of the transaction as the payments have been received through banking channel and the bank statement filed also sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee found during the course of the search . 2. The facts in brief are that the search and seizure operation under section 132 of the Income-tax Act, 1961 was conducted at the business/residential premises of the assessee on 10.03.2010. The Assessing Officer issued notice under section 153A of the Income-tax Act, 1961 to the assessee. In response to which return was filed and the assessment under section 153A read with section 143(3) of the Act was framed. Learned Assessing Officer made addition of ₹ 9,83,49,684 (Rs.6,44,11,974 + 2,87,10,000 ) on account of unexplained cash credits against returned income of ₹ 52,27,710. The assessee questioned the action of the Assessing Officer on the issue of validity of acquisition of jurisdiction under sec. 153A by the Assessing Officer as the assessment was made in absence of any incriminating material found during the course of search. The assessee also questioned the additions made by the Assessing Officer. The assessee could not succeed before the Learned CIT(Appeals) on the validity of assessment framed under sec. 153A of the Act questioned before the Learned CIT(Appeals). The assessee has, however, got relief from the Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the plain reading of the statute is required to be gone through and in support he placed reliance on the following decisions: i) 77 DTR 140 (AP) Gopal Lal Bhadrupa Ors. vs. DCIT; ii) Orissa State Warehousing Corpn. another vs. CIT - 237 ITR 589 (S.C) 5. Learned CIT(DR) further submitted that there is no requirement of finding of incriminating material during the course of the search proceedings to initiate proceedings under sec. 153A of the Act. He contended that technicality of the proceedings should be avoided to make the just assessment as it has been an established proposition of the law. Learned CIT(DR) also placed reliance on the following decisions in this regard: i) Madugula Veena vs. DIT Ors., Writ Petition (C) 7656/2012, date of decision 14.12.2012 (Delhi High Court); ii) CIT vs. Chetan Dass Laxman Dass ITA No. 2045 /Del/2010, decision dated 07.08.2012 (D.HC). 6. Learned CIT(DR) also furnished the copy of the appraisal report with the submissions that additions are based on incriminating material as in the appraisal report, list of documents seized as well as hard disc of Laptop etc., ledger account were seized. In this regard, he refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment year separately : (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. 9. The issue raised before the special bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 10. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore addition in the assessment u/s 153A would be made only on the basis of incri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The related objection Nos. 1 to 5 of the C.O. on the issue are thus allowed. 12. The cross-objection is accordingly allowed. ITA No. 6706/Del/2013: 13. Both the parties also insisted for disposal of the appeal preferred by the revenue which is on the merit of the addition deleted by the Learned CIT(Appeals). 14. The revenue has questioned first appellate order on the following grounds: 1. The Learned CIT(Appeals) erred in law and on facts in deleting the addition of ₹ 6,44,11,974 made on account of unexplained cash credits. 2. The Learned CIT(Appeals) erred in law and on facts in deleting the addition of ₹ 2,87,10,000 made on account of unexplained cash credits. 15. The facts in brief are that the Assessing Officer had made addition of ₹ 6,24,94,470 received from the creditor M/s. Jayna Closure, ₹ 19,17,500 from M/s. Jayco Pipes Ltd. and ₹ 2,87,10,000 from M/s. Quasar India Fincap Pvt. Ltd. as unexplained under sec. 68 of the Act on the basis that assessee has failed to explain the identity, creditworthiness and genuineness and that the loan creditors were not produced for verification before the A.O. Before Learned CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) being satisfied with the submissions of the assessee has deleted the addition which has been questioned by the revenue. 17. In support of the ground, Learned CIT(DR) has basically placed reliance on the assessment order. Learned CIT(DR) referred contents of page Nos. 2 3 of the assessment order. He submitted that as per the assessment order M/s. Jayco Closure, proprietaryship concern of M/s. Jayco Pipes Ltd. which is also a company owned by the family and Smt. Santosh Bala Jain is a director in this company. The above loans received from the said two persons were credited in the account of Shenectady Herdicia Ltd. ( in short SH Ltd. ) in the ledger of the assessee firm which continued to remain there up to 31.3.2006. The assessee stated that this amount was independently so. On 01.04.2006, this amount was transferred in the ledger account of Shri Rakesh Kumar (M/s. Jayco Proprietaryship firm ) on the same day i.e. 01.04.2006, this liability was written off by the firm M/s. Paras Dyes Chemicals (the assessee) and the amount was credited in the accounts of partners in the firm, Shri Parvesh Jain and Shri sarthan Jain (Rs.3,86,47,184 and ₹ 2,57,64,789 respectively ). Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners Shri Parvesh Jain and Sarthak Jain by an amount of ₹ 3,86,47,184 and ₹ 2,57,64,789 respectively after waiver of the loans. It was pointed out and explained before the Assessing Officer that the list of loan creditors filed with the return of income for the earlier years did not reflect loan outstanding in the name of the above two loan creditors. It was explained that it might be so at that time this amount was credited in the written account. In the confirmation letters filed by the assessee, the creditors have confirmed that there was no dues whatsoever in any manner from the assessee. With this further certification that old receivable stand settled and accounts remain squared up in all respect as on date, he tried to justify first appellate order on the issue. He submitted that the Learned CIT(Appeals) has discussed the issue in detail at page Nos. 9 to 20 of the first appellate order and on page Nos.21 22, he has given his findings. Learned CIT(Appeals) has also called for remand report from the Assessing Officer. 19. Having gone through the orders of the authorities below, we find that the Assessing Officer had made addition in question under sec. 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is seen that the appellant has been regularly dealing with a company, named Schenectady Herdillia Ltd. to whom they are selling dyes and chemicals regularly and it has a running account with the company. In support of its contention the appellant has filed its balance sheet as on 31st March 2003 along with list of the debtors ₹ 22,43,71,351.91 (paper book pages 86-101). This list of debtors includes a sum of ₹ 2,24,29,046.71 due from Schenectady Herdillia Ltd. The appellant has also filed copy of account of the said company starting from financial year 2002-03 to financial year 2006-07. On going through the above details filed by the appellant with respect to transactions of the appellant with Schenectady Herdillia Ltd., following facts emerge: (i) In assessment year 2004-05 i.e. the year under consideration, the appellant had made sales to Schenectady Herdillia Learned. as part of its regular business activity for ₹ 29,67,31,291 and against which the appellant received ₹ 28,45,14,154. However, in assessment year 2006-07 the appellant made a journal entry of ₹ 6,24,94,474 comprising of following cheques which were already shown as part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts submitted by the appellant support the above facts explained by the appellant. The identity and genuineness of the transactions with Schenectady Herdillia Ltd. has not been questioned by the A.O. also. Hence in view of these facts the contention of the appellant is correct that no addition can be made on account of unexplained credit of ₹ 6,24,94,474 as has been made by the A.O. in the year under consideration. In the remand report the A.O. has raised the issue that the appellant has not been able to establish that how an amount due to a limited company being a business associate of the appellant has been converted in the name of Jayna Closure. The A.O. has further stated that the appellant has failed to provide any reason and the documents for transferring this amount in the name of Jayna Closure. In my humble view, this contention of the A.O. cannot be the sole ground for justifying an addition under sec. 68 of the Income-tax Act, 1961 as unexplained credit unless it is backed by any credible evidence that the said amount has come from the coffers of M/s. Jayna Closures. The appellant has filed copy of the account and the bank statement and all relevant supporting do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the same was accounting adjustment passed in the accounts of S.H. Ltd. and that since the identity of S.H. Ltd. is not in dispute, the source of payment is also not in dispute as well as the transaction entered into by the assessee with S.H. Ltd. are also not in dispute. These material finding of the Learned CIT (Appeals) have not been successfully rebutted by the Learned D.R. We are thus having no reason to interfere with the first appellate order which, in our view, is a comprehensive and reasoned order. We, thus, uphold the action of the Learned CIT(Appeals) in deleting the addition of ₹ 6,24,94,474 made by the Assessing Officer under sec. 68 of the Income-tax Act, 1961 in this regard as justified. 21. The revenue has also not been able to rebut the finding of the Learned CIT(Appeals) that the amount of ₹ 19,17,500 was outstanding in the assessment year 2001-02 also, which was a carried forward balance in the current year from the last many years. The assessment for the assessment year 2001-02 was completed under sec. 143(3) of the Act. The balance was a continuing balance and the assessee had also filed confirmation from M/s. Jayco Pipe Ltd. giving complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also raised doubts about the genuineness of the transaction. In this regard, he placed reliance on the decision of Hon'ble Delhi High Court in the case of NAF Academy Pvt. Ltd. 2013 , TIOL.1017-XE-Del-IT. 24. Learned AR on the other hand placed reliance on the first appellate order. He also referred copies of several documents filed in the shape of paper book on behalf of the assessee in support of its claim before the Tribunal as well. He also referred the following case laws relied upon by him; a) Addl. CIT Bihar vs. Hanuman Agarwal (1985) 151 ITR 151 (Patna); b) Jalan Timber vs. CIT (1997) 223 ITR 11 (Gauhati High Court); c) Neeru Devi Kothari vs. ITO (2001) 116 Taxman 224 (Jodhpur); 28 d) Sarogi Credit Corporation vs. CIT (1976) 103 ITR 344 (Patna HC); e) Nemi Chand Kothari vs. CIT (2004) 264 ITR 254 (Gau.) f) S. Hastimal vs. CIT 49 ITR 272; g) CIT vs. K.S. Kanan Kunhi 87 ITR 3958; h) CIT vs. Pithampur Conzima (P) Ltd. (2000) 244 ITR 442 (MP High Court); i) Tolaram Daga s case (1996) 59 ITR 632 (Assam); j) CIT vs. Mehrotra Brothers 270 ITR 157 (MP). 25. Having gone through the orders of the authorities below, we find that the revenue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Fincap Pvt. Ltd. as on 31st March 2004 was more than ₹ 10 crores. The amount standing in the name of the appellant firm is being shown in the balance sheet of each of the year of the creditor company. Further Quasar India Fincap P. Ltd. has been filing its income-tax return and these returns have been accepted and the assessment orders are placed in the paper book. No adverse inference has been drawn about these transactions and the financials of the creditor company by the tax authorities. Thus, it cannot be said that the creditor is not in existence. The appellant firm has filed sufficient evidences in support of its contention regarding the credit worthiness and genuineness of the transaction. The payments have been received through banking channel and the bank statement filed in support also in support of then contention of the appellant. There is nothing incrimination material brought on record by the Assessing Officer. It is also not a case of the A.O. that anything adverse or incriminating material was found regarding this credit during the course of the search. There is no denial from any quarter nor any adverse statement from any person about these credits. ..... 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