TMI Blog2019 (1) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Accordingly, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted. Addition u/s 68 - receipt of unsecured loans - accommodation entry - Held that:- There is no dispute that the AO was not having any evidence or even any statement to impugn the transactions as bogus accommodation entries. Further, the assessee has produced all the relevant supporting documentary evidence as we have reproduced in the foregoing paras as referred by the ld. A/R of the assessee and these creditor companies were subject to regular assessments and scrutiny assessments under section 143(3). As at the time of granting of loans to the assessee the companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As discussed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. - Appeal decided against revenue - ITA No. 997 to 1002/JP/2018 & 1119/JP/2018, ITA No. 1057 to 1062/JP/2018 & 1210/JP/2018 - - - Dated:- 31-12-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Vijay Goyal Shri Gulshan Agarwal (CAs) For the Revenue : Shri Varinder Mehta (CIT) ORDER PER BENCH : These are seven sets of cross appeals directed against the respective orders of the ld. CIT (A) arise from the assessment framed in pursuant to the search and seizure action under section 132 of the IT Act for the assessment years 2010-11 to 2016-17 respectively. Out of these seven assessment years, the assessments were framed under section 153A for the assessment years 2010-11 to 15-16 and the assessment for the assessment year 2016-17 was framed under section 143(3) read with section 153B(1)(b) of the IT Act. 2. Common grounds have been raised by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961 by :- a) Solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee. b) Giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.), Kolkata. c) Holding that the assessee has not adduced any evidence to rebut the adverse factual finding made by the AO in the assessment order though detailed paper book for relevant AY and common paper books have been submitted, and d) Holding that incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkata. 5. On the facts and in the circumstances of the case and in law the ld. CIT (A) erred in confirmation the addition of ₹ 12,36,49,999/- made by ld. AO u/s 68 of Income Tax Act, 1961 on account of unsecured loans taken from following parties and erroneously held that the iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity in producing the lenders nor produced them either. 5. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd. and M/s. Sangam Distributors Pvt. Ltd. merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions. 6. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon ble Supreme Court in Navodaya Castles (P) Ltd. vs. CIT (2015) 56 taxmann.com 18 (SC) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT (A) was justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal return of income filed under section 139(1) was not pending on the date of search under section 132 conducted on 2nd July, 2015. Even for the assessment year 2010-11 the assessment was completed under section 143(3) on 15.03.2013. Therefore, as per the provisions of section 153A, the AO is bound to issue notice to the assessee to furnish the return of income for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. The AO is empowered to assess or reassess the total income of all the six years which means that there can be only one assessment order in respect of each of the six assessment years in which both disclosed and undisclosed income would be brought to tax. If there is no undisclosed income for any of the assessment year out of the six assessment years in question, then the AO has to complete the assessment or reassessment on the total income as assessed under section 143(1)or 143(3)of the IT Act.The common facts and disputes running through all the assessments framed under section 153A are that the AO proposed to make the addition under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for otherwise addition can only be made on the basis of undisclosed income derived from material/documents seized as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of any incriminating material found or seized during the course of search and seizure proceedings, the additions made by the AO during the course of reassessment under section 153A of the Act are without jurisdiction and liable to be deleted. In support of his contention the ld. A/R has relied upon the decision of Hon ble Delhi High Court in case of Kabul Chawla, 380 ITR 573 (Delhi) and submitted that Hon ble High Court has held that in case of completed assessment not abated by virtue of search under section 132 of the Act in the absence of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act. 5. On the other hand, the ld. D/R submitted that the additions made to the total income of the assessee relate to the unexplained cash credit in the books of account introduced in the garb of unsecured loans, partners capital which in fact is the rerouting of the assessee s undisclosed income. It is clearly evident from the innumerable evidences which came to the fore in the numerous investigations, enquiries, search and survey actions carried out by the Investigation Wing of the Department that the AO received information from the Investigation Wing Kolkata regarding the involvement of KBM Group (assessee) in obtaining entries of bogus unsecured loans, partners capital, special deposits etc. detected in the investigation carried out by the Investigation Wing Kolkata. Such information was received prior to the initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Accordingly, during the course of assessment proceedings under section 153A, the AO conducted further enquiry about the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of these four assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in respect of these four assessment years would be in the nature of reassessment and not in the nature of assessment as in the cases of the remaining two assessment years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee s total income, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v . In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi . Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii . Completed assessments can 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 alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination. The SLP filed by the revenue against the said decision of Hon ble Delhi High Court was dismissed by the Hon ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under :- 55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta ( supra ). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled Assessment in case of search or requisition . It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extrem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 ( Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd. ), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with. 59. In Kabul Chawla ( supra ), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla ( supra ) in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. ' 60. In Kabul Chawla ( supra ), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla ( supra ) as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla ( supra ) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. ( supra ). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of ₹ 14.5 crores against declared income of ₹ 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla ( supra ), of the Rajasthan High Court in Jai Steel (India) ( supra ) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on . It is well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa ( supra ), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. ( supra ) and of this Court in Kabul Chawla ( supra ). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. ( supra ) followed the decision of this Court in Kabul Chawla ( supra ) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. ( supra ), too, followed the decision of this Court in Kabul Chawla ( supra ). In Gurinder Singh Bawa ( supra ), the Bombay High Court held that: 6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads thus: Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes. 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of ₹ 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta ( supra ), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta ( supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. The Hon ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon ble Jurisdictional High Court in the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the ld. CIT (A). The relevant observations of the Hon ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under :- 53. At this stage, it is also to be noticed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition shall abate . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's ( supra ) has held as under:- 19. The second proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. In the case in hand, the transactions of unsecured loans as well as introduction of capital by the partners were duly recorded in the books of account and available with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolkata. It is pertinent to note that the said information was available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015. Therefore, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see are totally off the mark. Against the self-speaking facts of the very nature of the activities of the so called partner s providing huge partner s capital in the most uninterested manner and providing huge unsecured loans without any collateral or other security, the emphasis of the assessee firm in its submissions has been on seeking protection under various judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances; a. The department has very sound basis to treat, the receipts of unsecured loan and partner s capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not based on any presumption, assumption, guess or bare suspicion. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source as enumera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained for any previous year if the assessee offers no explanation about the nature and source thereof or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. It places no duty upon the Assessing Officer to point to the source from which the money was received by the assessee. Where an assessee fails to prove satisfactorily the source and the nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender s identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner s capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circumstances, I am left with no option than to tax the entire unexplained credits by way of partner s capital and Unsecured loans received from the persons mentioned in para 5 above as unexplained cash credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. 3.2.3 The concept of assess or reassess and shall abate as contemplated u/s 153A is under hot judicial debate. I find that legally, this issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., and SLP has been filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court has granted leave vide order dated 12.10.2015 as reported in 64 taxmann.com 34 (S.C.). Similarly, in the case of Kabul Chawla SLP has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. On appeal, the ld. CIT (A) has deleted the additions made by the AO in respect of all the parties except in case of M/s. Jalsagar Commerce Pvt. Ltd. which was stated to be the company managed by Shri Anand Sharma. The ld. CIT (A) has deleted the addition in respect of all other parties on the ground that the AO was not having any documentary evidence or even statement of the persons who have allegedly provided the accommodation entries to the assessee through the other companies/concerns. Thus both the assessee as well as the revenue are aggrieved by the order of the ld. CIT (A) on the merits of the addition and filed these cross appeals. 8. Before us, the ld. A/R of the assessee has submitted that the assessee received unsecured loans from registered NBFC and other companies. The AO issued show cause notice to the assessee calling upon to file the supporting evidence. The assessee filed detailed reply of the show cause notice which has been reproduced by the AO at pages 26 to 48 of the assessment order. The ld. A/R has pointed out that while passing the assessment order under section 143(3), the AO has accepted the loan as genuine transaction. Further, the partners capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 707-775 4 Confirmation of loan given to assessee from books of accounts of party. 776-783 5 Confirmation of loan given to assessee from books of accounts of assessee. 784-787 6 Copy of affidavit of Sangeeta Somani director of company. 788-791 7 Copy of balance sheet of company of 31.03.2010, 31-03-2011,31-03-2012, 31-03-2013, 31-03-2014,31-03-2015 and 31-03-2016 792-798 8 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 2007-08, AY 2011-12, AY 2012-13 and 2014-15. 799-839 9 Copy of ROC master data. 840-841 10 Copy of PAN card. 842 All the loans were received through bank and verifiable from bank statement of the assessee as well as bank statements of the loan creditors. The onus under section 68 of the Act is to prove the identity, capacity and genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the assessee. The assessee has paid interest after deduction of TDS and the interest expenditure was accepted by the AO as a genuine claim in the assessment framed under section 143(3) as well as in the assessment framed under section 153A of the IT Act. Once the interest payment is accepted, then the loan amount cannot be treated as bogus and unexplained credit. The ld. A/R has pointed out that even the assessee has repaid the loan amount in the subsequent years which proves the genuineness of the transaction of loan and repayment of the same. Therefore, the finding of the AO treating the loan as an accommodation entry is without any basis, material evidence but the same is based purely on surmises, conjectures and irrelevant material. No positive material was brought on record by the AO to show the loan creditor company is a shell company whereas the assessee has produced all the relevant documents to establish the identity, creditworthiness and genuineness of the transaction as well as loan creditor. 9. The next objection/contention of the ld. A/R is that the sole basis of addition is the statement of Shri Anand Sharma whereas the assessee was not given the opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation was received even prior to initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Once the AO has confronted the assessee with the report of the Investigation Wing Kolkata as well as the statement of Shri Anand Sharma and other persons who have admitted to have provided accommodation entries of bogus unsecured loans, share capital, special deposits etc. to the various parties through their companies and concerns and assessee has shown the unsecured loans as well as partners capital from those concerns, then onus was shifted on the assessee to establish the genuineness of the transactions of unsecured loans and partners capital. During the course of assessment proceedings, the AO again conducted enquiries through Investigation Wing Kolkata regarding the genuineness of the transaction and the assessee was duly confronted with the results of all these enquiries and information shared by the Investigation Wing Kolkata. In these circumstances and in the interest of natural justice, the assessee was required to produce the alleged creditors for examination so that genuineness of cash credit could be verified by the AO. Desp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge its onus to rebut the evidence unearthed by the Investigation Wing Kolkata which shows that the transactions of unsecured loans as well as partners capital are nothing but bogus accommodation entries wherein the assessee s own undisclosed income has been routed in the garb of unsecured loan and partners capital. As regards cross examination of the witnesses, since the witnesses belong to Kolkata and statements were also recorded at Kolkata by the Investigation Wing, therefore, it was not possible for the AO to issue summon to the witnesses for cross examination at the office of the AO at Kota. The ld. CIT D/R has relied upon the order of the AO. 11. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the assessee has challenged the addition sustained by ld. CIT (A) in respect of unsecured loan from M/s. Jalsagar Commerce Pvt. Ltd. The other additions made by the AO on account of unsecured loans as well as partners capital for the assessment year 2010-11 were deleted by the ld. CIT (A) on the ground that the AO was not having in his possession even the statement of the concerned persons in support of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of M/s Jalsagar Commerce Pvt. Ltd. is clearly mentioned as beneficiary company in the statement of Shri Anand Sharma, and Shri Anand Sharma is mentioned that some of such paper company are sold to beneficiary party, in view of fact that name of M/s Jalsagar Commerce Pvt. Ltd. Is mentioned in the reports as discussed in para 4.4.7 above, a genuine doubt is raised on the identity and genuineness of company. Further, the adverse facts pointed out in the reports as discussed in para 4.4.7 above for established background of all these share holders / depositors being the puppet in the hand of one or other accommodation entry providers, layering the transaction by cheque deposit on the same day or preceding day of share application / deposits, the assertions of the AO for nocreditworthiness or in-adequate creditworthiness of the so-called shareholders / depositors holds fields. During the appellate proceeding before me, though paper books for relevant AY and common Paper Books have been submitted, the same does not adduce any evidence to rebut the adverse factual finding made by the AO in the assessment order as mentioned by me in Para 4.1 above and categorically mentioned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly reveal that they were not having any source and it was the money of the assessee which was routed through the bank accounts of the creditors for the purpose of giving credits to the assessee. These were, therefore, accommodation entries only and as such, could not be considered as genuine transactions. Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. On consideration of the facts of the case in the light of above discussion and decision, there is no justification to interfere with the order of the ld. CIT(A). The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter. All the creditors have been rightly found to be men of meager means and no source of income have been filed to prove that they were having sufficient funds or savings in order to give loans to the assessee. On verification of the bank account of the depositors, it was specifically found that there were no suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 2009. Directors/Principal officers were required to personally come and depose. The summonses, as per the assessment order, were received back unserved. At the same time, the assessee filed details and confirmations of the alleged share capital. Earlier on 8th December, 2009, a detailed show cause notice was issued, fixing the hearing on 14th December, 2009. The assessee was asked to produce the shareholders along with their books of accounts to substantiate its claim of genuineness of the cash credits. In fact on 10th December, 2009, authorized representative had appeared and he was apprised that the summons issued to the shareholders under Section 131 had been received back unserved in five cases and he was requested to provide the present postal address of the parties. Inthemeanwhile, the Assessing Officer managed to get hold of the bank statements of the shareholders, who had allegedly made deposits by way of cheques and pay orders. The assessment order specifically records that huge cash deposits in lacs were being regularly deposited in the said accounts and then pay orders/cheques were issued to the respondent assessee. 8. On 14th December, 2009, authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of ₹ 80,000 and the other being receipt of ₹ 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmations of shareholders were filed and income tax record numbers of the shareholders were made available, but the Assessing Officer, who had sufficient time, failed to carry out inquiry and examination. reference was made to the observations in Divine Leasing (supra) to the effect that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue, but when there is preponderance of evidence to show absence of culpability, the assessee should not be harassed by the Revenue. A delicate balance must be maintained between the two interests. In Divine Leasing (supra), the following proposition was elucidated:- In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the credit worthiness or financial strength of the creditor/subscriber. (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan a smokescreen conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence ormaterial in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. 18. Lovely Exports Pvt. Ltd.(supra) was also considered and distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that the entire evidence available on record has to be considered, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according to us is the correct and true legal position, as identity, creditworthiness and genuineness have to be established. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated as sufficient to discharge the onus, even when payment is through bank account. 19. On the question of credit worthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fresh adjudication keeping in view the aforesaid case law. The question of law is, therefore, answered in favour of the Revenue and against the respondent-assessee, but with an order of remit to the tribunal to decide the whole issue afresh. As reported at 2015-TIOL-314-SC-IT, in the above case, the Hon ble Supreme Court observed to effect that merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account 5.7 It may be mentioned that as repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entries and tried to give it a colour of purchase of share capital and then sale of the same at a loss. Thus the Assessee's capital increased or was enhanced by a substantial figure through these dubious transactions. This should be and has to be checked. 36. Out of ₹ 4.35 crores received as share capital including premium, only ₹ 92 lacs has been received from the directors or their family members and the remaining amount has been received from parties totally unrelated to the Assessee. Notices to some of the investors could not be served and even the Inspector who was deputed to serve the summons stated that none of the addresses could be found. The authorised representative of the Assessee refused to produce the parties who had invested in the share capital on the ground that they were not in a position to produce them. The fact that the Assessee failed to produce the persons who had invested towards share capital shows that these were people who were completely unrelated to the Assessee and as such, all the entries were merely accommodation entries. Otherwise, in a private limited company, it would not have been difficult on the part of the Assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stt. year 2005-06 light of genuineness and creditworthiness, he issued summons u/s 131 of the Act to all the above 15 persons. They were asked to produce the copies of return for AY. 2005-06 and their ledger accounts from which the source of above share application money could have been verified. All the above summons were returned unserved with the comments from the postal authorities as no such person in the above address . The AO accordingly brought this fact to the notice of the counsel of the assessee vide order sheet entry dated 18.12.2007 and he was given an opportunity to produce the functional directors of the above companies for verification. As mentioned in the assessment order, after certain adjournments, a letter was finally filed from the appellant mentioning that it is no in touch of the above share holders and their present whereabouts are not known to it. The appellant, however, relying upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. In which the powers of the Assessing Officer was not precluded from making enquiries in share application money, submitted that no addition can be made. 2.1.1 The AO however was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tt. year 2005-06 operated and only one account might be shown for the purpose of audit and filing income tax returns. The entry operators provide entry in the garb of share application money, gifts, loans etc. through these accounts, in lieu of cash, to any person who is having unaccounted money. 2.1.2.1 The AO observed that some of the companies show above by the appellant as its share holders were found to have stated before investigation wing that they were mere name lender for advancing money. To quote some of them, Shri Rajesh Bansal, Director of M/s. Rubicon Associates Pvt. Ltd., Shri Mahesh Garg, Director of M/s. S.J. Hosiery Pvt. Ltd. Etc. have categorically stated before the Investigation wing, in their statement taken on oath, that they used to take the amount in cash and give entries to different concerns as gift, loan or share application money. According to AO, to enquire into this aspect also, the appellant was asked to produce the functional directors of such share holders. 2.1.3. In view of these facts and circumstances, the Assessing Officer concluded that the credit in the name of these shareholders are not genuine and represents unexplained cash cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofitability in the near future. The income declared by the assessee is only by way of short term capital gain and the assessee do not seem to have carried on any business. Asstt. year 2005-06 In such circumstances the share premium is not found to be justified by any of the act on the part of assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before it. There is something more than that meets the eye. As rightly contended by Ld. DR in such situation the observation of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 and in the case of Sumati Dayal Vs. CIT 214 ITR 801 are apt for application. We therefore do not find any reason to hold that the share capital receipts by assessee were from persons whose identity is established and the amount is genuinely received towards share capital. 5.10 In a recent decision in case of Principal Commissioner Of Income vs Bikram Singh in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This Court in Kamdhenu (supra) referred to CIT v. Sophia Finance, 205 ITR 98 which had held to the same effect. The Divine leasing (supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 is well settled. ............................................................................................................................... 43. The transactions in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness. 5.11 In my considered view, the technical objections raised by the Appellant in respect of loan from M/s Jalsagar Commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance of the case, it could not be said that AO did not followed the binding decision of the Hon ble Supreme Court and the Hon ble jurisdiction Court. Therefore, in view of above facts discussed in Para 4.1 4.4.7, 5.1 to 5.3 and legal position apprised in Para 5.5 to 5.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to ₹ 12,36,49,999/- from M/s Jalsagar Commerce Pvt. Ltd. sustainable and the same is confirmed. Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata. We find that the report of the DDIT (Inv.) Kolkata is also based on the statements of various persons recorded during their investigation and the statement of Shri Anand Sharma was also sent along with the report of the AO. The ld. CIT (A) has confirmed the addition because of the reason that the statement of Shri Anand Sharma was very much in the possession of the AO who has admitted in his statement that M/s. Jalsagar Commerce Pvt. Ltd. was engaged in the activity of providing accommodation entry. However, we find that M/s. Jalsagar Commerce Pvt. Ltd is not managed or controlled by Shri Anand Sharma, rather the company M/s. Royal Cryst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture. Undisputedly, the assessee has produced the income-tax record of the loan creditor, bank statement, financial statements including Balance Sheet, copy of ROC master data showing the status of loan creditor company as active , confirmation of loan given to the assessee. Further, the AO issued summons and also got the summons served through DDIT Kolkata under section 131 of the IT Act which were duly responded by the loan creditor. Except the statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata, the AO has not brought on record any other material to controvert or disprove the documentary evidence produced by the assessee. It is pertinent to note that the loan creditor was assessed to tax and the AO completed the assessment under section 143 (3) for various assessment years which are relevant for the assessment year under consideration. The AO in case of loan creditor has not disturbed the transactions of loan given by this company to the assessee. From the financial statements of the loan creditor it is apparent that the loan creditor was having sufficient funds to advance the loan amount to the assessee and once the said financial statements wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an creditor were completed under section 143(3). The details of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and repayment of loan amount as well as closing balance are as under :- Name of Company AY Opening Balance Loan taken during the year Interest credited in loan a/c during the year Interest credited in interest Paid /payable a/c Loan repayment/ TDS/transfer in partner capital during the year Closing balance Jalsagar Commerce Private Ltd 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Jalsagar Commerce Private Ltd 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Jalsagar Commerce Private Ltd 12-13 53,05,000 78,95,00,000 1,07,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee cross examination of the witnesses due to the reason that the witnesses belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them . 7. As mentioned above, the appellant 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 oflevy 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal by its order dated 28-11-2008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case ( supra ), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. Thus the Hon ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- 2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to ₹ 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns. The AO further relied upon the decision of Hon ble Supreme Court in the case of C. Vasantlal Co. Vs. CIT 45 ITR 206(SC) and Hon ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard. The Hon ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that whether there was any material evidence to justify the findings of the Tribunal that the amount of ₹ 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the loans taken from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. He has referred to the details of the documentary evidences produced in respect of these three companies as under :- 1. M/s Birla Arts Pvt. Ltd PB pages 1 Copy of Ack. of ITR of AY 2010-11 481 2 Copy of balance sheet of company and Annexure of loans advances of AY 2010-11 482-483 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 484-492 4 Confirmation of loan given to assessee from books of accounts of party. 493-495 5 Confirmation of loan given to assessee from books of accounts of assessee. 496 6 Copy of affidavit of Neelam Gautam director of company. 497-500 7 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 621-622 3. M/s Sangam Distributors Pvt Ltd 1 Copy of Ack. of ITR of AY 2010-11 623 2 Copy of balance sheet of company AY 2010-11 624 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 625-644 4 Confirmation of loan given to assessee from books of accounts of party. 645-646 5 Confirmation of loan given to assessee from books of accounts of assessee. 647 6 Copy of affidavit of Neelam Gautam director of company. 648-651 7 Copy of Order Passed by Calcutta High Court regarding amalgamation of other companies in this company. 652-678 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 679-682 9 Copy of assessment order passed in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,600 M/s Sangam Distributors Pvt.Ltd 2013-14 6,79,400 M/s Sangam Distributors Pvt.Ltd 2014-15 Nil The ld. A/R has then referred to the copies of the Master data of ROC of all three companies and submitted that the status of these three companies have been shown by the ROC as active and, therefore, these companies cannot be treated as Shell company. Further, as per financial statements of these companies, they are having more than sufficient funds to give the loan. In support of his contention, he has relied upon the decision of Hon ble Jurisdictional High Court in the case of Aravali Trading Company vs. ITO, 8 DTR (Raj.) 199. Thus the ld. A/R has reiterated his contention as raised in ground nos. 3 to 5 of the assessee s appeal. He has also supported the order of the ld. CIT (A). 15. We have considered the rival submissions as well as the relevant material on record. The AO has made the addition on account of unsecured loans taken from all the parties whereas the ld. CIT (A) has deleted the addition in respect of the loans taken from M/s. Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators. 6.4 For these three creditors namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, which are available at page no.443 to 644 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower . In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 131 or 133(6) of the IT Act were issued to M/s Birla Arts Private Limited, however as far as the companies M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited are concerned, these have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 6.6 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal is not a partner in the Appellant Firm. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant firm or its total income, this basis of addition adopted by the AO is farfetched cannot be concurred. 6.7 It is further seen that AO has not brought any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel Ramniklal Hirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Income-tax-4 v. G G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/Del/2012 vide its order dated 10.02.2016. Further, Hon ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujrat High Court (supra). 6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the Appellant Firm as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in case of the Appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of any incriminating material found during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of unsecured loan u/s 68 of the Act is legally untenable and unjustified. 6.14 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-2005 3,69,50,000 2007-2008 2006-2007 3,26,00,000 2010-2011 2009-2010 250,00,000 2011-2012 2010-2011 20,00,000 2014-2015 2013-2014 67,57,37,000 M/s Teac Consultants Pvt. Ltd Assessment Year Financial Year Share capital raised 1996-1997 1995-1996 26,00,000 2001-2002 2000-2001 73,98,000 2003-2004 2002-2003 1,00,00,000 2005-2006 2004-2005 4,85,50,000 2007-2008 2005-2006 3,35,00,000 2010-2011 2009-2010 2,76,00,000 2011-2012 2010-2011 94,00,000 M/s Sangam Distributors Pvt. Ltd . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO is identical as in respect of the unsecured loans taken by the assessee. The ld. CIT (A) deleted the said addition on the identical reasoning as given for deletion of addition on account of unsecured loans taken from the three companies, namely, M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. Thus the ld. CIT (A) has considered the relevant facts as well as the documentary evidence produced by the assessee and found that on the one hand the assessee has produced all the supporting documentary evidence and further the notices issued to the four companies under section 131/133(6) of the Act were duly complied with along with the copies of the relevant documents. The affidavits of the Directors of all the companies were submitted wherein the infusion of the partners capital was confirmed. Since there was no statement in the possession of the A.O and even the report/inspection report was also not shared with the assessee during the assessment proceedings, therefore, the ld. CIT (A) deleted the addition. 17. Before us, the ld. CIT D/R has reiterated his contention as made in respect of the other issues raised in the assessee s app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copies of relevant bank a/c of partner showing the entries of payment made to assessee against capital introduce. 860-872 6 Copy of affidavit executed by Mr. Ravi Mundra director of Doshi Management Pvt. Ltd on behalf of amalgamated Company M/s Vasundhara Advisory Pvt Ltd, 873-875 7 Copy of order of Calcutta High Court regarding amalgamation of company in Doshi Management Pvt. Ltd 876-900 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013. 901-904 9 Copy of assessment order passed in the case of above named company for AY 2014-15. 905-908 10 Copy of ROC master data. 909 11 Copy of certificate dated 06.11.2011 issued by registrar of companies regarding modification of charges/mortgage. 910 12 Copy of PAN card. 911 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3), Kolkata u/s 131 of Income Tax Act, 1961. 1005-1008 28 Copy of reply submitted by the company in response to summon/notice issued to it along with displaced proof 1009-1011 M/s Macro Soft Technology Pvt. Ltd. 29 Copy of ledger a/c of partner from books of accounts of assessee. 1012-1013 30 Copy of Ack. of ITR of AY 2010 and computation of total income. 1014-1015 31 Copy of Balance sheet of AY 2010-11 1016-1024 32 Confirmation of a/c of the assessee from books of accounts of partner. 1025-1027 33 Copies of relevant bank a/c of partner showing the entries of payment made to assessee against capital introduce. 1028-1033 34 Copy of affidavit of Deepa Kriplani director of company. 1034-1037 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Doshi Management Pvt. Ltd 1104-1128 51 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013. 1129-1132 52 Copy of assessment order passed in the case of above named company for AY 2014-15. 1133-1137 53 Copy of ROC master data. 1138-1139 54 Copy of certificate dated 06.11.2011 issued by registrar of companies regarding modification of charges/mortgage. 1140 55 Copy of PAN card. 1141 56 Copy of Summon No. 1438 dated 13.10.2017 and reminder notice No. 1580 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. 1142-1145 57 Copy of reply submitted by the company in response to summon/notice issued to it along with dispatched proof 1146-1148 Thus it is apparent that in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005-06 5,76,00,000 2010-11 2009-10 6,61,50,000 2011-12 2010-11 5,43,50,000 2014-15 2013-14 10,82,35,000 M/s Prithvi Vinimay Pvt. Ltd Assessment Year Financial Year Share capital raised 2005-06 2004-05 1,51,00,000 2006-07 2005-06 4,68,20,000 2007-08 2006-07 2,72,20,000 2010-11 2009-10 7,84,00,000 2011-12 2010-11 1,96,00,000 2014-15 2013-14 12,87,50,000 M/s Macro Soft Technology Pvt.Ltd Assessment Year Financial Year Share capital raised 2002-03 2001-02 9,98,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contributions by four companies, namely, M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited. The same is evident from the respective details for above lenders in the above reports dated 28.11.2017 and 06.12.2017 as under:- With reference to your above quoted letter, this office has issued Summon notices u/s 131 of the Income Tax Act, 1961 dated 13.10.2017 to the following sixteen (16) companies based in Kolkata as mentioned in your above quoted letter requesting to furnish the requisite details related to share application money/share premium/special deposits/unsecured loan/capital introduced by partners or any transactions made with group concerns of the KDM Group for the period from F.Y. 2009-10 to 2015-16 within 05 (five) days of receipt of Summon Notices. As regards 5 (five) assesses, Summons notices u/s 131 of the Income tax Act, 1961 has not been issued since it is observed that the present address of five (5) companies is located either in Rajasthan or Patiala. ............. In response to said both notices dated 13.10.2017 31.10.2017, none of the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd by DDIT (Inv.) Unit 1(3) Kolkata .......this office has also verified the companies as per database of paper/shell companies/entities prepared by Directorate of Investigation Wing, Kolkata on the basis of statements of various entry operators at different occasions before the Income Tax Department. On verification, the following facts has been emerged out from the database which reveals that some companies are listed in the database of paper/shell companies controlled managed by entry operators and the same is being produced as under in the tabular form: SL. NO. NAME OF CONCERNS PAN ADDRESS GIVEN IN COMMISSION NOTICE ISSUED ENTRY OPERATO R DUMMY DIRECTOR 1 BANSIDHAR ADVISORY PVT LTD (AMALGAMATED WITH DOSHI MANAGEMENT PVT LTD) AACCB7815M 11A ESPLANADE EAST 3 RD FLOOR, KOLKATA 700069 NOTICE ISSUED U/S 131 AT GIVEN ADDRESS This company is amalgamate dwith M/s Doshi Management Pvt Ltd which has been identified as paper/shell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of Entry Operator 1. VASUNDHARA ADVISORY PVT LTD PUNAM RAMANI 28.02.2011- TILL DATE NAWAL KISHORE JALAN 2. PRITHVI VINIMAY PVT LTD DEEPAK TIBREWAL 28.03.2014- TILL DATE PANKAJ AGARWAL 3. BANSIDHAR ADVISORY SHASHI KUMARI 09.01.2009- 16.03.2012 ANKIT BAGRI PVT LTD RAMANI It may be mentioned here that three companies namely; M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited were amalgamated with M/s Doshi Management Pvt Ltd in July 2014 in accordance with permission from Kolkata High Court, whereas the statements entry operator Anand Sharma are dated 02.07.2013 and 06.02.2017 i.e. prior to March 2014 by which M/s Doshi Management Pvt Ltd. Might have been identified as paper/shell company. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activities of the Assessee Firm as there is no working Partner on their behalf and none of them have nominated any Director or other Officer of the Company to act as Working Partner in the Assessee Firm. 7.3.3 However, the A/R of the Appellant while representing the case has argued the matter in detail and has filed detailed submissions as reproduced above in response to the findings and allegations of the AO. A summarized form of the submissions and arguments put forth by the A/R is given hereunder: a) The Appellant has duly discharged the initial onus cast upon it u/s 68 of the Act by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank Statement and Confirmation from the Partners, Balance Sheet etc. Through the said documents, identity, creditworthiness of the corporate partners along with the genuineness of the transactions carried out with them was duly established. b) The AO has not observed anything in the assessment order regarding any defect or flaw in the documents submitted. c) The capital contributions of the companies that have been treated as unexplained by the AO were introduced in AY 2012-13. In the assessment proceedings of AY 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various partners in firms which only do investment in the firm and do not participate in the regular business activities of the firm. Such partners are called sleeping partners and the said partners do exist in the normal business parlance. 7.3.6 The Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents as well as the relevant assessment orders, which are available at page no. 645 to 867 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower . In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid similar findings and allegations have already been dealt with in Ground No. 2 above, these are not again dealt with for the sake of brevity. However, my view regarding the findings and allegations as already discussed in Ground No. 2 above, shall mutatis mutandis apply to the findings and allegations of the AO with respect to partner s capital made in this ground of appeal. 7.3.9 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition of ₹ 42,47,25,000/- on account of partner s capital from M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited is not sustainable and hence the same stands deleted. Thus the finding of the ld. CIT (A) are based on the facts as well as the documentary evidence produced by the assessee whereas the AO has not brought on record any contrary evidence except the allegation made in the report of the Investigation Wing Kolkata. Therefore, the documentary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical to the finding in respect of M/s. Jalsagar Commerce Pvt. Ltd. for the assessment year 2010-11. Accordingly, in view of our finding on this issue, the addition sustained by the ld. CIT (A) is deleted. Rest of the parties for which the additions were deleted by the ld. CIT (A) are same for which the AO was not having any material or document to substantiate the finding of bogus accommodation entries as in the case of other parties, namely, M/s. Birla Arts Pvt. Ltd., M/s. Tech Consultants Pvt. Ltd., M/s. Sangam Distributors Pvt. Ltd. As regards the corporate partners who have introduced the capital, they remain the same for all the years and, therefore, the issue is common for all these years except the fact that for the assessment year 2014-15 only one partner, namely, M/s. Bansidhar Advisory Pvt. Ltd. introduced some capital of ₹ 13.00 lacs and for the assessment year 2013-14 only three partners introduced the capital. Therefore, in view of our finding on all these issues while deciding the cross appeals for the assessment year 2010-11, the grounds raised by the assessee and revenue for the assessment years 2011-12 and 14-15 stand disposed off on the same terms and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention as raised for the assessment year 2010-11. 26. We have considered the rival submissions as well as the relevant material on record. The AO has given the identical finding for all the assessment years which is based on the report of the Investigation Wing Kolkata as well as the statement recorded by the DDIT Kolkata. We note that the surrounding circumstances and the facts are identical as for the A.Y. 2010-11 as recorded by the AO as well as the ld. CIT (A). The ld. CIT (A) has turned down the request of cross examination in para 3.12 to 3.13 at pages 188 to 190 as under :- 3.12 In my considered view, the technical objections raised by the Appellant in respect of loan from Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. as above, are of no avail to the appellant due to following undisputed facts: i. It is undisputed fact that the Income Tax Department has made tremendous investigations in such shell companies of Kolkata, Mumbai and Delhi providing accommodation entry and statements made by several accommodation entry providers have become virtually in public domain. It is no argument that the AO did not provide such statement before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts discussed in Para 2.1, 2.4.3 to 2.4.7 and 3.1 to 3.4 3.12 and legal position apprised in Para 3.6 to 3.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to ₹ 1,50,00,000/- and ₹ 10,88,45,000/- from M/s Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. respectively, is sustainable and the same is confirmed. Thus the ld. CIT (A) has decided the issue on identical terms as for the assessment year 2010-11. We have already given our finding on this issue and referred various decisions of Hon ble Supreme Court, Hon ble High Courts as well as this Tribunal. Therefore, our finding on the issue for the assessment year 2010-11 is squarely applicable as the facts and issues are identical for these years. Accordingly, we hold that the addition based on the statement of third party recorded at the back of the assessee without affording opportunity of cross examination is not sustainable in law. 27. Apart from the issue of violation of principles of natural justice, we find that on merits the assessee produced all relevant documentary evidences in support of the claim which is identical to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annexure of Loan Advances 1145 Copy of relevant page of bank statement showing the entry of payment made to assessee. 1146-1152 Confirmation of loan given to assessee from books of accounts of party. 1153-1154 Confirmation of loan given to assessee from books of accounts of assessee. 1155 When all the relevant details and documentary evidences produced by the assessee to establish the identity, creditworthiness and genuineness of the transactions, then the said evidences cannot be rejected on the basis of the statement without any contrary documentary evidence. We further note that the assessments were completed under section 143(3) of M/s. Caplin Dealcomm Pvt. Ltd. and the details of which are as under :- Name of Company Assessment year Income Assessed Assessment Order u/s 143(3) at PB pg of Vol.-III M/s Caplin Dealcomm Pvt. Ltd 2008-09 1,40,710 1053-1054 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO of Rs. ₹ 4,23,19,238/-. Therefore, both the assessee as well as the revenue are in appeal against the said issue. The revenue has raised this issue in ground no. 7 of the cross appeal. 29. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. At the outset, we note that an identical issue was considered and decided by this Tribunal in assessee s own case for the assessment year 2008-09 and 09-10 and the ld. CIT (A) has decided this issue by following the earlier order of this Tribunal in para 7.3.1 to 7.3.3 at pages 189 and 190 as under :- 7.3.1. In my considered view, the late delivery charges are on account of contractual obligations of the Appellant with the Government departments. As per the terms and conditions of the contract the assessee is required to compensate to ICDS government of Jharkhand or ICDS Government of Gujarat on account of late supply make to them. A copy of contract of the government department has also been submitted during the appellate proceedings. Therefore, as the said expenditure of the Assessee is on account of contractual obligations, it cannot be regarded as any expenditure incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s there was no statement of any person of alleged entry operator having control over these companies or managing these companies. 31. An identical issue was involved in all the assessment years of the revenue wherein the ld. CIT (A) has deleted the additions for want of any documentary evidence or any other material in support of the finding of the AO. Therefore, in view of our finding on this issue in assessment year 2010-11, the finding of the ld. CIT (A) is upheld. 32. The revenue has also raised a ground regarding trading addition after rejection of books of account which is common for the assessment year 2011-12, 13-14 to 16-17. 33. During the course of assessment proceedings, the AO rejected the books of account on the ground of non maintenance of quantitative details and then made a lumpsum addition of ₹ 20 lacs. On appeal, the ld. CIT (A) has reversed the finding of the AO and deleted the adhoc addition made by the AO. 34. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. The ld. D/R has relied upon the order of the AO. On the other hand, the ld. A/R of the assessee has submitted that the assessee is maintaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of books of accounts, the AO is bound to estimate the income of the assessee on the basis of some proper and reasonable criteria. It is settled proposition of law that the past history of GP declared by the assessee can be a proper and reasonable guidance for estimation of the income of the assessee after rejection of books of accounts. We note that the assessee has declared GP for the year under consideration which is better than the earlier assessment year. The details of the comparative sales and the GP of the assessee are as under :- Assessment Year Sales Gross Profit G.P. Ratio 2009-10 91,73,52,630 5,15,69,065 5.62% 1010-11 145,59,46,303 5,52,49,358 3.79% 2011-12 499,23,48,131 21,40,87,419 4.29% It is also not in dispute that for the assessment year 2010-11 that the AO has accepted the GP declared by the assessee at 3.79% and no addition was made. Therefore, comparing the earlier years GP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at two terminals is only balancing factor. Admittedly out of this four components of trading result, there could not have been any ground for the Revenue to arrive at different result. So far as closing stock is concerned, inventories of existing stock were not found to be incorrect by the Assessing Officer i.e.that position of stock as shown in the account books was not incorrect. There being no dispute about the sales and purchases, non-maintenance of stock register lost its significance so far as arriving at GP is concerned. Therefore, the CIT(A) was right in his reasoning about admitted state of affairs. Resorting to estimate of GP rate was founded on no material. It was merely a case of making certain additions on the basis of certain defects pointed out by the Assessing Officer and which he has shown in different account by giving margin of unvouched expenses. He has disallowed certain expenses. 11. The Tribunal committed basic error in not appreciating the reasoning given, by the CIT(A). It is trite to say that in the facts and circumstances of present case, account books are maintained as they were ordinarily maintained years after years and which were found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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