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2016 (9) TMI 1043

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..... than the searched person, Assessing Officer completely failed to satisfy the provisions of section 158BD of the Act. We are, therefore, of the view that the impugned assessment order for the block period passed under section 143(3),r.w.s. 254 r.w.s. 158BD of the Act needs to be quashed in the given facts and circumstances of the case wherein no satisfaction has been recorded as per the provisions of section 158BD of the Act before framing the block assessment. We quash the block assessment order.- Decided in favour of assessee Addition u/s 68 - Held that:- Assessee has miserably failed to explain the cash credits appearing in the audited financial statements attached with the original return of income. The later submissions made by assessee that the previous audit report was fictitious (even when signed by independent audit) and the revised balance sheet audited by another auditor is correct, is not convincing. It seems that assessee is indulged into mal practices of fabricating books of accounts and depicting unrealistic financial data with a view to cheat the public and, therefore, deserves no mercy. We find no reason to interfere with the order of ld. CIT(A). The appeal of th .....

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..... appeals in ITA No.1811-1813/Ahd/2012 for Asst. Years 1991-92 to 1993-94 are directed against separate orders of CIT(A) XI, Ahmedabad, dated 16.06.2012, 18.6.2012 18.6.2012 in appeal Nos.CIT(A)-XI/422-424/JCIT(OSD)/10-11 11-12, respectively, passed against separate orders u/s 143(3) r.w.s. 254 of the Act framed on 27.12.2011by Jt. CIT (OSD), Circle-5, Ahmedabad. 3. Revenue s appeal in ITA No.1601/Ahd/2013 and Cross Objection of assessee are filed against order of ld. CIT(A)-XI, Ahmedabad, dated 15.03.2013 in appeal no.CIT(A)-XI/425/JCIT, Cir- 5/11-12 passed against order u/s 143(3) r.w.s. 254 of the Act framed on 27.12.2011 by Jt. CIT, Circle-5, Ahmedabad. 4. Since the assessee in all these appeals and Cross Objection is the same and issues are similar these were heard together and are being disposed of by this common order for the sake of convenience. 5. First we take up appeal in IT(SS)A No.15/Ahd/2012 wherein the grounds raised are as under :- 1. The present assessment order under section 143(3) r.w.s. 254, r.w.s. 158BD dated 27/12/2011 is bad in law as the same has been passed without prior approval of the C.I.T. and thus required to be quashed. 2. The impugn .....

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..... uired to be deleted from Block Assessment. 11. The Id. A.O. has also erred in considering ₹ 24,45,500/- as deposits in bank as unexplained and undisclosed. In view of explanation furnished, there being no undisclosed deposits, addition of ₹ 24,45,500/- requires to be deleted. 12. The Id. A.O. has also erred in considering an amount of ₹ 9,48,000/- deposit in bank as undisclosed. In view of the facts and details, the addition of ₹ 9,48,000/-is required to be deleted. 13. The Id. A.O. has also erred in considering ₹ 5,30,728/- deposits in bank as undisclosed. In view of explanation and details furnished, the addition of ₹ 5,30,728/- is required to be deleted. 14. The A.O. has also erred in considering an amount of ₹ 23,22,0007- deposits in bank as unexplained. In view of the facts and details furnished, the addition of ₹ 23,22,000/- is bad in law and required to be deleted. 15. The Id. A.O. has also erred in considering an amount of ₹ 25,00,000/- being amount withdrawn from Renco Finance Ltd. as unexplained. In view of the facts and details furnished, the addition of ₹ 25,00,000/- is bad in law and thus requir .....

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..... ned to be same income as was assessed earlier u/s 158BD r.w.s 144 dated 28/9/1998. 7. Aggrieved, assessee is now in appeal before the Tribunal. 8. First we take up ground nos. 1 2, which are as under :- 1. The present assessment order under section 143(3) r.w.s. 254, r.w.s. 158BD dated 27/12/2011 is bad in law as the same has been passed without prior approval of the C.I.T. and thus required to be quashed. 2. The impugned order of assessment is also bad in law, as there being no satisfaction recorded as required under section 158BD, the present assessment proceedings are bad in law and thus entire assessment required to be quashed. 9. Ld. AR submitted that the order passed under section 143(3) r.w.s. 254 r.w.s. 158BD/158BG of the Act on 27/12/2011 is bad in law as it has been passed without prior approval of the Commissioner of Income Tax (CIT). Ld. AR further submitted that ex parte order u/s 158BD/158BG r.w.s. 144 was passed wherein there is a mention that the assessment order is passed with prior approval of CIT-1, Ahmedabad, whereas in the impugned assessment order u/s 143(3) r.w.s 254 r.w.s.158BD/158BG of the Act there is no such mention about the prior approv .....

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..... n support of his contention ld. AR referred and relied on the judgment of Hon. Supreme Court and the decisions of the Tribunal wherein it has been held that once the assessment is set aside by higher appellate authority, the original order gets wiped off and all the provisions of the Act which are needed to frame such assessment order needs to be complied with. Ld. AR submitted that - i) As per decision of Hon'ble ITAT, Bangalore Bench in the case of ACIT vs. Smt. Kamakshidevi Avaru (1993) 46 ITD 49 (Bang.) If the original assessments were of the nature of regular-assessments and the assessments in their entirety, were set aside by the appellate authority for some reason or other with a direction to the Assessing Officer to redo them, the reassessments done accordingly would simply take place of the original assessments and should, therefore, possess all the characteristics of the original assessments. In such cases, therefore, there should be no reason why these reassessments should also not be considered as regular assessments, especially when these reassessments are required to be done essentially in accordance with the provisions of Section 143(3) or 144. Here, the ass .....

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..... ained, the impugned Block Assessment Order requires to be quashed as void-ab-initio and bad in law. 11. On the other hand, ld. DR could not place anything new before the Tribunal. When the question was proposed about furnishing of approval of CIT before proceedings u/s 143(3) r.w.s. 254 r.w.s. 158BD/158BG of the Act, ld. DR denied to have any such proof of approval being granted by the CIT and similarly could not throw any light on the issue for supplying the satisfaction note. 12. We have heard the rival contentions and perused the material on record and judgments and decision referred by the ld. AR. In these two grounds raised by the assessee it is contemplated that the block assessment order u/s 143(3) r.w.s. 254 r.w.s. 158BD/158BG of the Act on 27/12/2011 is bad in law as the same has been passed without prior approval of Commissioner and also no satisfaction was recorded as required u/s 158BG/158BD of the Act respectively. We observe that search in the case of Renco Finance Ltd. was conducted on 23.11.1995. During the course of search certain documents/assets relating to the director of the company i.e. assessee Shri Gautam A. Parmar were also seized and the same were .....

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..... r assets have been requisitioned under section 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of section 158BC in respect of any other person, the conditions precedent wherefor are : (i) satisfaction must be recorded by the Assessing Officer that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 of the Act ; (ii) the books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such other person ; and (iii) the Assessing Officer has proceeded under section 158BC against such other person. The conditions precedent for invoking the provisions of section 158BD, thus, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A of the Act. 10. That the Special Bench of the ITAT in the case of Manoj Aggarwal (supra) has considered the above decision of the Hon ble Apex Court and also other decisions of var .....

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..... satisfaction . In such circumstance, the recording of such satisfaction is impliedly to be done in the course of the section 158BC proceeding as the satisfaction has to be recorded only by the Assessing Officer making the block assessment in the case of the person searched which in turn means the section 158BC proceedings such satisfaction cannot be recorded beyond the date of the block assessment in the section 158BC proceeding and the date of the block assessment is the outer limit for recording such satisfaction. This is for the reason that the satisfaction has to be recorded by the Assessing Officer examining the material in the case of the person searched and he will have to find out whether there is any undisclosed income at all unearthed which again can only be in the course of such proceeding. After finding that there is undisclosed income, he will have to give a finding as to whether such income belongs to the person searched and this too has to be in the course of the said proceeding only. If he finds that any or all of such income belongs to a person not searched, then he has to record such finding in this behalf and takes follow-up action as envisaged in section 158BD .....

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..... of cases, then the name of the assessee would have been Jayraj Group of cases and not as Shri Upendra N. Patel, Shri Lalit M. Patel Shri Champak M. Patel. iii) In the first line of the satisfaction note, the AO has menioned the Search and seizure action in the Jayraj group of cases was carried out under Section 132(1) on 19-12-2001 . If the satisfaction note was recorded by the AO of Jayraj group of cases, he would have mentioned a search and seizure action has taken place in the case of the assessee. iv) At the end of the notice, the AO has mentioned since this fact could be discovered from the various MOUs seized during the course of search in Jayraj Group, the notices u/s.158BD are issued to the assessees . This noting clearly proves that the reason was recorded by the AO of Shri Lalit M. Patel and not of the AO of Jayraj group. If the satisfaction has been recorded by the AO of Jayraj Group cases, he would have mentioned that during the course of search in the case of the assessee, various MOUs belonged to Shri Upendra N. Patel, Shri Lalit M. Patel Shri Champak M. Patel were found. The same are being forwarded to their AO for taking action under Section 1 .....

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..... see is not the one searched since the impugned proceedings are under section 153C of the Act conducted on 25.03.2008 in case of M/s. Kunvarji Commodities Brokers Pvt. Ltd. There is further no issue that the DCIT Central Circle 1(1) is the common assessing authority in case of both the assessees. The legal position envisaged under section 153C of the Act is very clear that the Assessing Officer of the searched assessee has to satisfy himself that any money, bullion, jewellery or other valuable articles etc. belongs to some other persons and not the searched assessee. This has to be followed by another exercise in case of such other assessee that the same is caused escapement of any income. It is at this stage that both parties have cropped up the instant issue. The assessee s case is that there is no satisfaction at first level in case of the searched entity opposed by the Revenue by saying that the Assessing Officer is the same who has expressed satisfaction in assessee s case. The law about entering of such a satisfaction is very well settled now. Hon ble apex court in the case of Manish Maheshwari vs. ACIT (2007) 289 ITR 341 (SC) holds that such a satisfaction is indeed mandatory .....

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..... scussion hereinabove and revert back to facts of the instant case. We reiterate that the assessee s case is that once the Assessing Officer does not specifically record satisfaction in searched entity s case that the money, bullion, jewellery etc. in question belongs to a third person, places the same in it s file followed by an opinion of the above stated material having caused escapement of any income. It is accordingly argued that the impugned satisfaction does not adhere to above stated settled law. The Revenue on the other hand makes out a case that the Assessing Officer s satisfaction has come only after careful examination of the above stated incriminating material being examined together in the cases of M/s. Kunvarji as well as the assessee. We find no reason to agree with this contention. As observed by the learned coordinate bench in Lalit Kumar M. Patel s case, the Assessing Officer in the impugned satisfaction mentions only assessee s name on top of the satisfaction note and not that of the searched entity. There is no material placed on record before us that the Assessing Officer had kept the case files of the searched party and that of the assessee together before dra .....

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..... he Act. We are, therefore, of the view that the impugned assessment order for the block period passed under section 143(3),r.w.s. 254 r.w.s. 158BD of the Act needs to be quashed in the given facts and circumstances of the case wherein no satisfaction has been recorded as per the provisions of section 158BD of the Act before framing the block assessment. We quash the block assessment order. Accordingly, ground no. 2 of assessee s appeal is allowed. 16. As far as ground no.1 is concerned through which assessee has pleaded that assessment u/s 143(3) r.w.s. 254 r.w.s. 158BD of the Act needs to be quashed as it has been passed without prior approval of the Commissioner of Income-tax. Ld. AR pleaded that in the first round of assessment necessary approval was taken from the Commissioner of Income-tax for framing the assessment under section 158BD of the Act. However, in the second round of assessment post the decision of Co-ordinate Bench in assessee s case for framing de novo assessment order, necessary approval as required u/s 158BG was not taken. As we have already quashed the block assessment proceedings passed u/s 143(3) r.w.s. 254 r.w.s. 158BD of the Act while adjudicating groun .....

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..... ly addition towards unexplained cash credit of ₹ 46,62,471/-. Ld. Assessing Officer during the course of making addition u/s 68 on account of unexplained cash credit observed as below :- 2.2 The submissions made by the assessee have been carefully considered and not acceptable as the onus of proving the cash credits is on the assessee. The assessee has stated that the credit balances were shown in the names of nonexistent persons to balance the effect of inflation in purchases, stock, sales and machinery which were not genuine. The submission that the original accounts were falsified and the accounts that are submitted now is the corrected and actual version is not acceptable as the assessee has not produced the books of accounts in original during the course of this assessment proceeding. In the absence of any evidences/supporting documents, the audited accounts filed now cannot be considered as presenting the true and correct accounts of the assessee. The assessee, even at the time of the original assessment proceedings failed to produce the books of accounts. The assessee's submission that the cash credits were actually not received but was only created to balance t .....

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..... cash credit of ₹ 46,62,471/-. We observe that observe that assessee owned sole proprietary concern M/s Renco Engineering Works. At the time of filing of return of income audited financial statements including Tax Audit Reports framed as per books of accounts contained cash credits taken during the year at ₹ 46,62,471/-. During the assessment proceedings Assessing Officer required the assessee to file documentary evidences to prove the identity of the creditors, genuineness of the transactions and creditworthiness. Assessee submitted that these loans have never been received by it and the loans declared in the balance sheet are fictitious. Thereafter assessee placed on record new audited balance sheet which did not have the amount of unsecured loans and cash credits. 25 We further observe that ld. CIT(A) dismissed the appeal by observing as under :- 3.4 I have carefully considered the rival submissions. I have also perused the submissions made by the appellant during the appellate proceedings and various case laws relied upon by the appellant. It is a matter of fact that the appellant has annexed along with the return of income dated 31/3/92 duly verified form no .....

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..... e it very clear that the appellant along with another sister concern IWs. Renco Gears has inflicted a huge fraud on public. At first instance they collected a sum of ₹ 5,25,00,000/- from public at the time of first public issue. It is also a matter of fact that the highest price of Renco Gears Ltd. share had touched ₹ 270/- per share. This indicate that the appellant has undertaken lot of inside trading in these shares and might have made substantial money out of inside trading. The appellant has also collected substantial amounts from public in the year 1995 at the time of .second public offer. These facts clearly indicate that the appellant had enjoyed gainfully fraudulently collected money from public and used the same for his personal benefits. The public money was collected by showing a rosy picture on the basis of alleged falsification of the accounts. However, when the tax dues are raised on the basis of so called falsified accounts the appellants contention is that these accounts are fictitious and should not be considered for the tax purposes. In my considered view, the appellant cannot be allowed to present the different facts on different occasions. The appel .....

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..... to discharge its onus as mandated by sec.68 of the I.T. Act. The appellants contention that these entries are fictitious cannot be accepted as the balance sheet was duly verified by the statutory auditor and the appellant. The appellant had placed reliance on various case laws in his written submissions. I have gone through these case laws and in none of these cases the duly verified Balance Sheet and Profit Loss Account filed along with the income-tax return has been disowned. All these case laws can be distinguished on this single fact. Accordingly the ratio of these case laws cannot be applied in the case of appellant. In view of these facts, I hold that the appellant has clearly failed to discharge onus cast upon him by the provisions of sec.68 of the IT. Act and accordingly, addition of ₹ 46,62,471/- is confirmed. This ground of appeal is dismissed. 3.9 During the appellate proceedings the appellant further contended that against the addition made u7s.68 of the IT.Act, benefit of inflated fixed assets should be allowed. It was further contended that such benefits has been allowed by the CIT(A) in first round of appeal. (Appea! No. CIT(A)XIII7254/98-99 dated 31/12 .....

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..... same to these cases, we dismiss the appeals of assessee. 32. Other grounds raised in these appeals are of general nature, which need no adjudication. 33. In the result, all the three appeals of the assessee in ITA No.1811, 1812 1813/Ahd/2012 are dismissed. 34. Now we take up Revenue s appeal in ITA No.1601/Ahd/2013 and assessee s Cross Objection No.203/Ahd/2013 for Asst. Year 1994-95. 35. Briefly stated facts are that for Asst. Year 1994-95 return of income was filed on 30.12.1994 declaring total income at ₹ 46,67,787/-. Assessment u/s 143(3) r.w.s. 144 of the Act was completed on 25/3/1997 and the same was set aside by the Tribunal vide its order in ITA No.912/Ahd/2003 1034/Ahd/2003 dated 31/01/2011 and the issue was restored back to the file of Assessing Officer. Accordingly notice u/s 143(2) of the Act dated 20/07/2011 was issued. After making various additions income was assessed at ₹ 4,36,92,671/- on 27/12/2011. Assessee got part relief from ld. CIT(A). 36. Aggrieved, Revenue is now in appeal before us and the assessee has filed Cross Objection. 37. We take Revenue s appeal in ITA No.1601/Ahd/2013 for Asst. Year 1994-95. Ground No. (i) .....

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..... the considered view that these additions can only be made in the block assessment, which the A.O. had already made. Perusal of records further reveals that the A.O. had failed to bring any evidence on record to prove that the investment of ₹ 30,87,000/- was made by the appellant. In view of above, I hold that addition of ₹ 30,87,000/- in the hands of the appellant is untenable and the same is ordered to be deleted. This ground of appeal is allowed. 42. We further observe that the impugned addition of ₹ 30,80,000/- has been made in the block assessment of the assessee as well as on protective basis in the case of Renco Gears Ltd. Further Assessee has failed to substantiate with any material evidence which could prove that investment did not flow through the funds of assessee. Further we have already quashed the block assessment proceedings in our decision vide IT(SS)A No.15/Ahd/2012 for block period 1.4.1985 to 23.11.1995. In these circumstances, we are of the view that addition of ₹ 30,80,000/- is Justified. This ground of the appeal of Revenue is dismissed. Ground No.(ii) The CIT(A) has erred in law and on facts in deleting the addition of S .....

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..... na Bank, Ambawadi Branch, Ahmedabad. Money in Dena Bank Ambawadi Branch has come from FCNR account of Shri Jashwant Shah. The total amount transferred in this account by Shri Jashwant Shah was $ 6,00,000 approximately. Since investment to the extent of ₹ 1,87,68,750/- stand explained, accordingly, addition to the extent of ₹ 1(87,68,750/- is ordered to be deleted. The appellant will get relief to this extent. 3.3 As far as investment in 8000 shares of Renco Gears Ltd. of ₹ 14,00,000/-, from the address 4, Sushilanagar Society, Memnagar, Ahmedabad and inveslment in 41000 shares of Renco Gears Ltd. of ₹ 7,17,500/- from the address 9, Parvati Apartments, Ankur Road, Naranpura, Ahmedabad is concerned, the appellant has failed to file cogent evidences to prove the identity and existence of the alleged share holders by giving their PA Nos. The appellant had also not filed any evidences to prove the source of these investments. Since the appellant has failed to discharge its onus cast upon him by the provisions of sec.69 of the I.T. Act, 1961, accordingly, addition of ₹ 7,17,500/- and ₹ 14,00,000/-is confirmed. 3.4 As a result, addition of & .....

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..... ered to be deleted. This ground of appeal is allowed. 48. We observe that during the post search operation, all the three persons- Mrudula Shah, Nalini T. Vassa Jaswant J. Shah denied to have made any such share application. 49. During the course of hearing assessee could not place anything new to prove contrary to the view taken by ld. Assessing Officer. Therefore, we are of the view that source of share application money is not explained and there is no iota of evidence which can prove that investment has not been made by the assessee. We are inclined to disagree with the view taken by ld. CIT(A). We hereby confirm the addition of ₹ 40,25,000/-. This ground of Revenue is allowed.. Ground No.(iv) The ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 25,00,000/- on account of investment in machinery. 50. As regards ground no.(iv) in deleting the addition of ₹ 25,00,000/- on account of investment in machinery, the ld. Assessing Officer the addition as he was not convinced by the explanation given by the assessee. Ld. CIT(A) has deleted the impugned addition of ₹ 25,00,000/- by observing as under :- 9.2 / have co .....

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..... record indicate that all the investment in machinery has been made through banking channels. The purchase of machinery is duly evidenced by the vouchers of a public sector undertaking namely HMT Ltd. All these facts has been mentioned by the Ld. CIT(A) in the above mentioned appellant order Respectfully following the ratio of appeal No.ClT(A)-XIII/256/97- 98 dated 31.12.2002, I am inclined to agree with the contentions of Ld. A.R. Accordingly, addition of ₹ 25,00,000/- is ordered to be deleted. This ground of appeal is allowed. 51. We observe that ld. Assessing Officer has completely ignored the facts so much so that all necessary details including purchase bills containing invoice no., date and amount, details of payment, which were made in the Financial Year 1993-94 itself and the sale consideration was received against the sale of these machines only. Therefore, when the source of investment in machines is proved, there cannot be any question mark on the sale consideration received against sale of machinery. Ld. CIT(A) has rightly deleted the addition of ₹ 25,00,000/-. We uphold the same. This ground is also dismissed. 52. Ground nos. (v) (vi) are of genera .....

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..... delete any of the above grounds as well as to submit additional grounds at the time of hearing of the appeal. 54. Cross Objection no.1 of the assessee. While adjudicating ground no.2 of Revenue s appeal we observed that ld. Assessing Officer made an addition of ₹ 2,08,86,250/- out of which we have deleted addition of ₹ 1,87,68,750/-. For the remaining amount of ₹ 21,17,500/- assessee has raised this ground. We observe that this amount relates to Renco Gears Ltd. at ₹ 14 lacs for 8000 shares and ₹ 71,75,000/- for 41000 shares of Renco Gears Ltd. 55. We observe that assessee has completely failed to place on record to explain the investment of ₹ 21,71,500/- as no cogent evidence regarding addresses where the share holders are available. As the assessee has completely failed to discharge its onus cast upon him as per provisions of section 69, no relief can be granted. Addition of ₹ 27,71,500/- is confirmed. This ground of cross objection is dismissed. 56. Ground no.2 of cross objection against confirmation of the addition of ₹ 7,91,000/- made by the AO as unaccounted investment in Renco Gears Ltd. shares. Addition of ₹ 7,9 .....

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..... #8377; 21,11,446/- was made. We have dealt with this issue while dealing with assessee s appeals in ITA Nos.1811, 1812 1813/Ahd/2012 for Asst. Years 1991-92 to 1993-94. We find similarity on the facts in this case also. Ld. Assessing Officer was not convinced with the explanation given towards cash credit of ₹ 21,11,446/- out of which ₹ 20,00,000/- pertained to single party Leo Engineering Works. We observe that in the records shown by the assessee there is a cash deposit of ₹ 20,00,000/- which is pertaining to a/c of Leo Engineering Works but is appearing in the books of Renco Gears Ltd. as loan received by cheque. Both these facts are completely contradictory and assessee has failed to furnish any documentary evidence to prove the identity, creditworthiness and genuineness of cash credit of ₹ 21,11,446/-. As we have earlier held while adjudicating appeals in ITA Nos.1811, 1812 1813/Ahd/2012 for Asst. Years 1991-92 to 1993-94 that assessee used to submit fabricated books of account and financial statements and there remains no authenticity. We are, therefore, of the view that ld. CIT(A) has rightly confirmed the addition of ₹ 21,11,446/-. We upho .....

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