TMI Blog2004 (3) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned assessment proceedings, commenced in terms of s. 148, the assessee was asked to explain the nature and genuineness of the impugned loan. The assessee could not obtain the confirmations for the impugned cash credit but nevertheless obtained and filed a copy of the balance sheet of M/s Sumit Polymers Ltd., i.e., the creditor and stated that the impugned credits were reflected as loans and advances in the said balance sheet of the creditor. The AO was not satisfied with the explanations furnished by the assessee and held that the assessee had not discharged its onus as laid down in s. 68. Secondly, after making a detailed discussion, the AO also held the impugned loans as mere accommodation entries which reflected a sham transaction. The background relevant to the second objection of the AO can be understood in the following lines. There was a search and seizure action under s. 132 on the assessee and its allied concerns. Sh. Parveen Kumar is a director of the assessee-company. Similarly, a search action under s. 132(1) was also carried out at the premises of one Shri Praveen Khurana who is a director of M/s Sumit Polymers Ltd., the loan creditor. The aforesaid two searches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereby taking control of Sumit Polymers..." On the basis of the aforesaid, the AO concluded that the assessee had entered into the impugned loan transaction with the purpose of mere accommodation in so much as that cash was paid outside the books by the assessee to the said Shri Parveen Khurana in lieu of the impugned loans having been received through banking channels. 3. Another feature of the transaction analysed by the AO to reach at the above conclusion is as follows. The AO noticed that there were four entities who were interconnected in carrying out the impugned transaction. Firstly was the assessee and a company XILON (P) Trading Company (hereinafter referred to as XILON) on one side and M/s Sumit Polymers Ltd., the creditor and M/s Blue Star Enterprise (on behalf of Golden Falcon Ltd.) on the other side. The former two companies, according to the AO, are controlled by the assessee and the latter two are in control of Shri Parveen Khurana. It was noticed by the AO from the perusal of the bank accounts of the aforesaid entities that the assessee-company liquidated the impugned loan by making an initial payment to M/s Sumit Polymers Ltd. of a small amount. The said pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enquiries conducted by the AO. It was also submitted that the AO did not find any deficiency or discrepancy with respect to the information furnished by the assessee during the course of the assessment proceedings. That at no stage the AO confronted the assessee with any adverse material. That the AO reached improper conclusions on the basis of material which was not confronted to the assessee. In this manner it was pleaded before the CIT(A) that on facts as also in law, the impugned addition was not justified. 5. The CIT(A), however, was not satisfied with any of the pleas of the assessee and instead sustained the action of the AO. Hence, the present appeals of the assessee before us. 6. Before us, Shri Ashwin Kumar, learned counsel appearing on behalf of the appellant, has reiterated the earlier stand taken before the lower authorities. It is further submitted by the counsel that the reply will establish rule of "audi alteram partem" has been violated in so much as that the impugned addition has been made by placing reliance on statement of a third party without confronting the same to the assessee during any stage of the assessment proceedings. It is vehemently argued o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authorities. The learned Departmental Representative has in extenso taken us through the orders of the lower authorities in support of his submissions. With regard to the denial of opportunity for cross-examination and non-confronting of the statement of Shri Praveen Khurana to the assessee, the learned Departmental Representative submitted that the matter may be remitted to the file of the AO for carrying out the said exercise. 8. In reply, the learned counsel for the assessee submitted that the facts and circumstances of the case do not warrant any remand in so much as that the records evidently portray that the impugned additions are liable to be set aside. 9. We have heard the rival counsels, perused the orders of the lower authorities and the material placed before us conscientiously and on the basis of the same we proceed to dispose of the impugned issue in the following lines. In our view, the impugned appeals throw up the two issues for adjudication. Firstly, as to whether the impugned transaction of loan could be said to be a sham transaction. Secondly, whether the assessee has been able to discharge the onus cast under s. 68 to explain the nature and sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g statement and the same has not been subjected to any cross-examination. The Department has not led any evidence or material which would lend support to the averments made by said Shri Parveen Khurana on19th Oct., 2001, which is extracted by us in the earlier paragraphs. 12. The said issue can also be looked at from a different angle. Even if the statement of Shri Parveen Khurana is accepted, yet certain questions remain unanswered which arise out of the enquiries conducted by the AO. The circuitous route of repayment noticed by the AO leads to a definite conclusion that the transactions done through banking channels and that the parties existed and were identifiable as the bank accounts were maintained. Further, the furnishing of the balance sheet of the creditor by the assessee also lends credence to the existence and identification of the source of loans. It is a moot point to consider as to whether all these conclusions could be brought to nought by a mere statement made by the third party, that also, at the back of the assessee. In fact the averment in the statement of Shri Parveen Khurana that monies have been paid in cash on behalf of the assessee-company with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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