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2016 (6) TMI 1295

welve Kolkata based companies deleted by the Ld. CIT(A) holding that their identity and creditworthiness and the genuineness of the transactions was established. - Decided against revenue - Reopening of assessment - Held that:- Where transaction itself, on the basis of subsequent information, is found to be bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the 'true' and 'full' facts in the case and ITO would have jurisdiction to reopen even concluded assessment in such a case. The case of the assessee is still weaker as no assessment has been made in his case. - The contention of the assessee that the AO had no definite material or information before invoking provisions of sect ion 147 is not tenable. It is an admit ted fact that the original return of the assessee was processed u/s 143(1)(a) only at ministerial staff level and no finding had be en o r e v en can be recorded, by the AO during such processing, about the genuineness of loan transactions constituting the reasons for issue of notice u/s 148. The AO was therefore, fully justified in invoking provisions of section 147, as h .....

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ng the legal position, we hold that the CIT(A) has rightly allowed the said claim - Addition on account of conveyance expenses and repair and maintenance expenses - Held that:- AO has not given any specific instance where the expenses are not supported by vouchers or bills, but at the same time, the assessee has also not produced any complete vouchers/bills to prove that the same are completely and properly maintained. The assessee maintained regular books of accounts and are subjected to audit, but personal element in incurring these expenditure have to be ruled out. Therefore, the ld. CIT(A) has restricted to ₹ 25,000/- each for conveyance and repairs & maintenance expenditure. The CIT(A) has partly allowed the appeal. Therefore, our interference is not required. - I.T.A.Nos. 202 & 294/Ind/2012, C.O.No.63/Ind/2012 (Arising out of I.T.A.No. 202/Ind/2012), I.T.A.Nos. 389/Ind/2012, 807 & 808/Ind/2014 - Dated:- 27-6-2016 - Shri D.T. Garasia, Judicial Member And Shri B.C.Meena, Accountant Member Department by : Shri Rajeev Varshaney and Shri R. A. Verma, DRs Assessee by : Shri Ajay Vohra, Advocate Shri Ajay Tulsiyan, Shri Rohit Jain and Shri Kapil Shah, CAs ORDER D.T.Garasia .....

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after the AO has reproduced contents of Commission issued u/s 131 (d) in the case of the appellant and also in other cases which were simultaneously being examined by him on page 7 of the assessment order abstracted here under: "On the perusal of the case records during assessment proceedings of the Companies for A. Yr. 2008-09 mentioned as under, it is observed that heavy amounts have been reflected in their Balance Sheets towards Share Application Money received. These names are mentioned in the five lists enclosed with the letter as Annexure A to E. The Notices issued to the persons/Companies applying for Shares of the Companies as mentioned in column 3 above, under section 133(6) of the Act have been returned by the Postal Authorities, generally with comments as "Refused/ No such Building No., hence returned to Sender/Not known", etc. In this backdrop, it is requested to issue Summons u/s l31 to the said persons/ Companies, and enquire; record their Statements &submit a Report in this matter at the earliest, the matter being getting barred by limitation of time on 31.12.2010. Besides seeking other necessary relevant information, these persons may be particul .....

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ange again for further enquiry on 16.12.2010 in continuation of their first visit on 3.12.2010 and has reproduced the second report submitted by IT Inspectors dated 23.12.2010.The AO, thereafter, has drawn conclusion from such enquiry report in para 2.11 to 2.12 hereunder: 2.11 A perusal of huge inflow-outflow of fund without any business rational in the accounts of the companies (claimed share applicant) clearly lead to the conclusion that such company was being used as conduit for floating of unaccounted funds and mere existence on paper and filing of return do not establish that a genuine company engaged in the business as claimed was in existence. Further still, in case of enough material on record to establish that it was not a genuine existing company. 2.12 Further it was noted from the confirmation produced by assessee that one Shri Ramchandra Kedia has signed the confirmation for M/s. Chamak Trexim P. Ltd, Kolkata. During the enquiry conducted by the inspectors, they visited the address of the claimed lender of Kolkata where they found one Shri Ravin Umretiya (who was working as accountant since last three months only) and whose statement was taken. The letter issued u/s 13 .....

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ppellant borrowed substantial funds during the year under consideration. The AO has taken note of the enquiry report submitted by DDIT (Inv. Wing) and on page 8 of the assessment order it will be worthwhile to reproduce the report submitted by DDIT (Inv. Wing)-13, Kolkata to appreciate the fact surrounding the transactions i.e. identity of such creditors and further genuineness and creditworthiness of such transactions. 4.1.1 The Inspectors in their enquiry report have noted that two companies M/S. Aereo Deal Comm. Pvt. Ltd. and Chamak Trexim Pvt. Ltd, were in existence on the given addresses and some other companies were also operating on the same addresses but they have expressed doubt about their creditworthiness. Further they have noted that six other Pvt. Ltd. Companies viz. Panchanan Vanijya Pvt.Ltd.,(in short Panchanan), Kamalnayan Commercial Pvt.Ltd.( in short Kamal Nayan), Khatu Vanijya Pvt.Ltd.,(in short Khatu), Ranchhod Agencies Pvt. Ltd. (in short Ranchhod), ,Prathmesh Vanijya Pvt. Ltd. (in short Prathmesh) and Lambodhar Barter Pvt. Ltd. (in short Lambodhar) were merged with M/s. Middlton Goods Pvt. Ltd. w.e.f 01.04.2008 and hence were not operating or did not exist as .....

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therefore, these transactions with the assessee Company M/s.Agrawal Coal Corporation Pvt. Ltd. appear to be genuine. 4.1.2 The Inspectors in their second report submitted after subsequent visit reported that M/s. Savera Distribution Pvt.Ltd. could not be located at the given address and neither any Sign Board was there and the liftman of the building expressed his ignorance about company's name and thus the Inspectors concluded that identity of such company appeared to be doubtful. The AO based on Inspectors and DDIT's reports and other material gathered concluded that there were huge rotation of funds in the accounts of such companies for which there was no business rational and such companies were being used as conduit in floating unaccounted funds and were mere paper companies. The AO has further noted in para 2.12 that earlier account confirmation of the company M/s. Chamak was signed by one Shri Ramchandra Kedia but the latter confirmation was signed by the accountant Shri Ravin Umarethiya. 4.1.3 The appellant when confronted on 23.12.2010 submitted before AO that the confirmations letters have been filed from all such companies along with their PAN and six of such co .....

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e observed here that much of case laws and the discussions made by AO on page 25 to 34 are more relevant and directly related to share capital contribution in the case of Purvi Finvest Pvt. Ltd. and by other Pvt. Ltd. companies for which separate additions have been made by AO at ₹ 1.55 crores as per discussion in para 4 of the assessment order referring to such detailed legal discussion. The same would be accordingly considered in deciding the ground relating to said addition of ₹ 1.55 crores. 4.1.7 In the aforesaid factual background it has to be now decided whether the appellant has been able to discharge the onus cast u/s 68 and whether the addition made u/s 68 was, justified on the facts of this case. It should be appreciated that degree of onus to explain the cash credit transaction cannot be uniform and rigid in all the situations. Degree of onus regarding genuineness of transaction in respect of receipt of share capital at huge premium in unlisted companies otherwise through public issue cannot be viewed but with suspicion and the appellant may be required to justify such receipt of money on huge premium as such transaction would defy normal financial prudence a .....

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en duly confirmed by these lender companies in response to the AO's notices u/s 133(6), before the ITIs and before DDIT (Inv.), Kolkata also against issue of summons u/s 131 compliances were made by filing of copies of audited annual accounts, photocopy of Bank statement and confirmation letters. It has to be necessarily concluded that the appellant had fully discharged the onus to establish the identity and creditworthiness of these six companies and genuineness of loan transactions and accordingly the AO's action in treating such loans as unexplained is unsustainable both in facts and in law. 4.3 Now the issue of loan taken from AEREO DEALCOMN PVT LTD. at ₹ 3.26crores is taken up for consideration. The appellant had an opening balance appearing in the name of said company at ₹ 98,73,663/- and an amount of ₹ 42,93,663/- was repaid during the year under consideration the interest paid being ₹ 33,04,583/-. 4.3.1 The AR present pointing out the repayment chart in paper book D at page 837 submitted that the loan received from these company stand fully repaid in Feb 2010. The Inspectors in their report as noted on page 3 of assessment order has confirmed .....

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same here under for ready reference: " It also appeared from the said documents that the assessee company had infused fresh share capital for ₹ 47,75,OOO/-. Again assessee company had received total share premium of ₹ 4,29,75,OOO/- on account of share allotment. Thus total 'Share Capital' was raised to the tune of ₹ 4,77,5O,OOO/-. Assessee company was asked to provide list of new 'Share holders' from whom such fresh share capital was raised. The AR had submitted the list of Shareholders to whom shares were allotted during the relevant previous year. Notices u/s 133(6) of the I'T Act were issued to some of those new Share-holders on test-check basis for the purpose of verification of the claim made by the assessee Company in this connection. Replies were received from those Shareholders and those were considered in the light of their capabilities to invest such huge sum to pay Share prices including premium. Copies of Bank accounts of those Shareholders have also been verified to cross-check the transactions they had entered with the assessee Company. In this connection Inspector was entrusted with independent inquiries. From the report sub .....

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is company are concerned, the same are filed in the compilation from page 201 to 245. In this company also the main source of income is interest and gross amount is reflected at ₹ 85.30 lacs and net prof it is in excess of ₹ 14 lacs and loan in the name of appellant company is duly reflected including opening balance of repayment is at ₹ 3.84 crores. 4.4.1 The AO of this company for Asstt. Year 2004-05 in assessment order passed u/s 143(3) on 31.01.2006 has verified the source of owners fund being share capital , share premium received which were invested by way of loans and advances. In the intimation issued u/s 143(1) for AY 2009-10 at page 849 of paper book D, the returned income has been stated at ₹ 11.66 lacs and a refund of ₹ 11.27 lacs has been issued to this company. Thus in view of detailed findings arrived in the case of Aereo Dealcomm Pvt. Ltd. above, the said loan of ₹ 25 lacs from this company is also held to be explained. 4.5 Proceedings next to the loan of ₹ 50 lacs received from PUSHPAK TRADING & CONSULTANCY the Inspectors in their report have stated that existence of the company at the given address is not established. .....

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23 which also reflect that the company was having regular AGM and latest Balance sheets for financial year 2010-11 was also filed with ROC. Thus it was contended that the enquiry report on being confronted to the appellant at the fag end of limitation period, the appellant could not clarify the present address which the AO could have very well obtained by apprising the site of Ministry of Corporate Affairs as has been now done by the appellant. Reference was also made to the decision of the Calcutta High Court in the case of Dataware (P) Ltd. (Supra) to impress that if AO had any doubt about the existence and genuineness of such company the AO should have approached the concerned AO having jurisdiction over the creditor through the department network based on PAN given in conformation letters which has not been doubted by the AO. 4.5.2 Thus on consideration, of the facts and documents available on record it has to be concluded that the appellant has been able to discharge the onus cast on it u/s 68 in respect of fresh loan of ₹ 50 lacs received from this company also. Accordingly this loan is also held to be explained. 4.6 Proceedings next to loan of ₹ 50 lacs from SAVE .....

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continued its operation or changed its address thereafter no adverse inference can be drawn against the appellant in respect of loan transactions done through banking channel on which due taxes were deducted at appropriate rate of interest payment made. The E- ITR acknowledgement enclosed in compilation for AY 2007-08 reveals that the company had shown gross total income at a nominal amount of ₹ 31,318/- and has claimed a refund of ₹ 4.73 lacs on account of excess TDS deducted. It was further pointed out that the creditor company was engaged as NBFC during the year under consideration and engaged in share trading and other another activities. Its shareholders funds is at ₹ 13.66 crores, investments stand at ₹ 7.87 crores and earned gross interest of ₹ 18.72 lacs and achieved turnover of ₹ 2.34 crores and had given a loan of ₹ 1.33 crores to various par ties including the appellant, besides other advances at ₹ 6.57 crores as per amount reflected in Balance sheet. It was emphasized that the appellant was handicap in obtaining further information about the company as the amount having been repaid earlier as there was no contact left from .....

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istence about a year back from the period of their visit in December, 2011. The AR present emphasized that in the concluding para of the report of the ITIs reproduced in the assessment order on page 6, just below the findings given in respect of this company have categorical lystated that al l the locations were visited and only two companies namely Reward and Pushpak could not be located and thus have doubted the identity of these two companies and not of Paradise. It was also emphasized that overwhelming evidences given by appellant clearly established that all such loan transactions were genuine loan transactions and loans granted by Kolkata based companies on the basis of strong financials of the appellant company and therefore, because of some doubts expressed by inspectors in their report which were based on a very vague enquiry no adverse view against the appellant should be taken. In view of above discussion the loan of ₹ 25 lacs from Paradise is held to be explained. 4.8 Now the loan from REWARD CONSULTANCY at ₹ 12 lacs is taken up for consideration. In this case there was an opening balance of ₹ 16,39,608/- and an amount of ₹ 1,39,608/- was repaid .....

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mained uncontroverted and AO has mainly banked on ITIS and DDIT'S report, which were in no way conclusive. 4.10 To sum up the entire cash loan taken during the year under consideration from 12 companies aggregating at ₹ 6.69 crores is held to be explained and accordingly the addition made by AO in this behalf is directed to be deleted. 4.11 Ground No. 2, in the matter of disallowance of interest at ₹ 1,03,20,567/- on aforesaid loans held to be unexplained. The appellant has claimed that such interest having properly expended and claimed u/s 36(1)(iii), after due TD$ in respect of amounts borrowed and utilized for the purpose of its business should not have been disallowed. In view of the findings arrived above in respect of ground No l whereby all such loans have been held to be explained, the disallowance of interest paid after due deduction of tax thereon is directed to be deleted being consequential to the findings arrived in respect of ground No.1 above. 6. The Ld. DR submitted that in this case the assessee had taken unsecured loan from twelve companies, which have been stated in the assessment order and to verify the genuineness of the unsecured loan, the insp .....

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ore this Tribunal and when once the Tribunal has decided the issue in favour of the Department, the Tribunal is bound to follow the order of the Tribunal and the present appeal deserves to be dismissed. Those appeals relate to assessment years 2005-06 and 2006-07 and in the years under consideration i.e assessment year 2008-09, the same assessee has not provided any information. Therefore, the appeal may be dismissed. Similarly, the ld. Departmental Representative also relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt.Ltd., 367 ITR 306 (Del) and submitted that as per this decision of Hon'ble Delhi High Court, wherein it is held that as per the information and details collected by AO, he observed that there were genuine concerns about identity, creditworthiness of the shareholders as well as genuineness of the transaction. Therefore, the Hon'ble High Court has referred this matter back to the file of Tribunal. Similarly, the decision of Full Bench in the case of CIT vs. Sophia Finance Limited, 205 ITR 98 (Del), wherein it is held that u/s 68, the ITO has jurisdiction to make the enquiry with regard to nature and source of su .....

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entative for the assessee contended that there is no merit in the present appeal filed by the Revenue. Extensive enquiries were conducted by the AO to verify the loan transactions which may broadly be categorized in five stages. The notices were directly issued under section 133(6) of the Act in December, 2010 to the lenders calling for documentary evidences in support of the amounts advanced. In response thereto, various documents in the form of confirmations, income tax return, bank statements, etc., were directly received from various parties. In the meanwhile, Income-tax Inspectors were deputed by the assessing officer to personally visit and make enquiries at Kolkata, who vide report dated 10.12.2010 confirmed existence of most of the lenders and the transactions entered into with the assessee. Commission was also issued to DDIT, Inv., Kolkata under section 131 of the Act, who independently conducted investigation and sent his report dated 20.12.2010. Pertinently, most of the parties appeared and filed documentary evidences as required by DDIT(Inv), Kolkata, thereby confirming the transaction with the assessee. Later, Income-tax Inspectors were again deputed to personally visi .....

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see and once the initial burden is discharged and there is nothing to controvert the evidences placed on record by the assessee, addition cannot be made by the assessing officer under that section. 10. In this regard, it was further submitted that there is no dispute that the initial burden lies on the assessee to prove the identity and creditworthiness of the creditor. However, as stated above, it is equally well settled that once such initial burden is discharged by the assessee, then, the onus shifts on the Revenue to bring evidence on record to contradict/controvert the same, before making any addition under section 68 of the Act. 11. It is further submitted that the onus of the assessee is to merely establish the source of the credit and not source of source. The assessee has clearly established the source by placing on record uncontroverted documentary evidences that the loan had, in fact, been advanced by the creditors and is duly reflected in their regular books of accounts. It is not for the assessee to establish the source of the source. 12. The ld.Authorized Representative for the assessee further placed reliance in this regard on the following decisions: (a) S.K. Bothra .....

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rther establishes the identity and creditworthiness. Opening balance from the company was accepted since no addition was made in A.Y. 2007-08; Company had shown interest income of ₹ 85.30 lacs and profit of ₹ 14 lacs in A.Y. 2008-09, thus, reflecting a healthy financial position Entire loan repaid in February, 2010; Company registered as NBFC; Creditor responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata. In respect of the aforesaid two parties, the assessing officer has, in para 3.17 of the assessment order, referred to information being received on 30.12.2010, i.e., on the date on which order was passed (without confronting the said information to the assessee) that bank accounts of the two companies were introduced by the assessee and has observed that the said fact established relation and nexus between the parties and the assessee. In rebuttal, it is submitted that the assessing officer failed to appreciate that mere fact that bank account of the creditor had been introduced by the assessee nowhere established that the transaction was not genuine. In f .....

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vt. Ltd. in the year 2007. Thus, existence of the creditor cannot be disputed; Opening balance from the company stands accepted, since no addition was made in A.Y. 2007-08; Entire loan repaid in September, 2010; Creditor responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata; Company had shown turnover of ₹ 1.66 cr, gross interest of ₹ 32.54 lacs and net profit of ₹ 9.43 lacs in A.Y. 2008-09, thus, reflecting a healthy financial position. No specific finding has been recorded by the assessing officer in respect of the above creditor and therefore, addition in respect of amount received therefrom is legally unsustainable and rightly deleted by the CIT(A). Pushpak Trading & Consultancy (P) Ltd. Documentary evidences like confirmations, bank statement, income-tax return, audited accounts, TDS certificate, Master data of company with ROC, Memorandum of Association, have been placed on record; Entire loan repaid in March, 2009; Company registered as NBFC; Creditor responded to notices issued under section 133(6) by the assessing officer and also in respo .....

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with ROC, Memorandum of Association, have been placed on record; On enquiry, Inspectors were informed by the current occupant of the premises that the company was in existence at the given address a year back and was now shifted to some other place. Thus, existence of the creditor cannot be disputed; Entire loan repaid in February, 2011; Company had shown a turnover of ₹ 1.14 crores, interest income of ₹ 59.29 lacs and taxable income of ₹ 18.50 lacs in A.Y 2008-09. The company had shareholders fund of ₹ 7.62 crores as on 31.03.2008; Creditor responded to notices issued under section 133(6) by the assessing officer and also in response to notice under section 131 of the Act issued by the DDIT(Inv.). Kolkata. In the assessment, the assessing officer has not specifically referred to any material to doubt the identity of company. Reference to report of Inspector that he could not locate the company is misplaced since the Inspectors reported that current occupant of the premises stated that the company was in existence at the given address a year back and has shifted to some other place. 15. The ld. Authorized Representative for the assessee placed specific reli .....

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he directors of the creditor companies. 20. We have heard the rival contentions of both the parties. We have gone through the assessment order and also the order of the CIT(A). We have also perused the case laws cited by the Ld. Departmental Representative as well as the Ld. Authorized Representative for the assessee. 21. We find that during the year under consideration the assessee has received unsecured loan aggregating to ₹ 6,69,00,000/- from 12 Kolkata based companies, the details of which are as under :- S.No. Name Opening Balance Loan Taken Interest paid TDS on interest Amount Repaid Balance 1. Aereo Dealcomm. Pvt Ltd. 98,73,663 3,26,00,000 33,04,583 6,80,745 42,93,663 4,08,03,838 2. Chamak Trexim Pvt Ltd. 3,91,86,415 25,00,000 59,19,345 12,19,384 78,86,415 384,99,961 3. Reward Consultants Pvt. Ltd. 16,39,608 12,00,000 3,76,804 77,622 1,39,608 29,99,182 4. Pushpak Trading & Consultancy Pvt. Ltd - 50,00,000 2,41,803 49,881 - 51,91,922 5. Savera Distribution Pvt. Ltd. - 50,00,000 3,10,656 63,995 - 52,46,661 6. Paradise Garments P. Ltd. - 25,00,000 31,762 6,543 - 25,25,219 7. Khatu Vanijya Pvt Ltd. - 50,00,000 34,631 7,134 - 50,27,497 8. Panchnan Vanijya Pvt. Ltd. - 35 .....

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from Aereo Dealcomm. Private Limited. The assessee has submitted documentary evidence like confirmation, bank statement, income tax return, audited accounts, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was inspected by the Inspector on 10.12.2010 and the AO has not disputed about the existence. During the course of investigation, statement of accountant was recorded by the Inspector, wherein he has confirmed the loan transaction in assessment year 2002-03. The source of fund of Creditor Company was examined. The AO has also examined the opening balance, which stands accepted, since no addition was made in the assessment year 2007-08. The Company has also shown the interest income of ₹ 47.83 lacs and profit of ₹ 11.20 lacs in assessment year 2008-09 reflecting a healthy financial position. 24. During the course of hearing, the ld.Authorized Representative for the assessee submitted that in assessment year 2007-08, the opening balance of the company was ₹ 98,73,663/- which has been accepted by the department as no addition was made in that year and this year interest was paid of  .....

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Middleton Good Private Limited in April, 2009. In respect of these six companies, the assessee has filed documentary evidence like confirmations, bank statements, income tax returns, audited reports, TDS certificates, Master data of the Company with Registrar of Companies, Memorandum of Association, the copy of merger order passed by the Hon ble Calcutta High Court, which have been also placed on record. The existence of these companies have been accepted by the Inspector in his report dated 10.12.2010. The AO has also not disputed the existence of this company. The Inspector recorded statement of brother of the Director, wherein he confirmed the loan transaction with the assessee. The inspector also reported that loan transactions are genuine. The fact that the companies were merged pursuant to the order of the Hon'ble High Court after all regulatory compliances, establishes the identity and existence of the erstwhile creditors. Similarly, in all the other cases, namely, Reward Consultants Private Limited, Pushpak Trading & Consultancy (P) Limited, Savera Distribution Private Limited and Paradise Garments Private Limited, the assessee has filed documentary evidence like c .....

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hich were required by the AO. Section 68 of the Income-tax Act, 1961, which is reproduced as under :- 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 27. In terms of the aforesaid provisions of section 68 of the Act the primary onus to explain the nature and source of the amount so found to be credited is on the assessee. The expression nature encompasses bringing on record, evidence about nature of the receipt, be it loan, advance, share application money, etc. The expression source envisages establishing the identity and creditworthiness of the source/ person from whom the amount is received. However, once reasonable explanation is furnished by the assessee, the onus, shifts to the Revenue. 28. We find that in the case of Orissa Corporation (P) Limited, 159 ITR 78, in the context of requirement of the assessee to discharge primary onus under section 68 of the Ac .....

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the present case, the Assessing Officer did not feel satisfied with the explanation given by the assessee and, accordingly, assessed all the three credit entries to the account of the assessee as the income. The Hon'ble Court further held that once satisfactory explanation is adduced by the assessee, then, addition cannot be made and the amount may be taxed in the hands of the person who has deposited the amount. The relevant observations of the Court are as under: 5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be income of the firm for the purposes of income-tax. It is open for the Assessing Officer to take appropriate action under section 69 of the Act against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner (Appeals) .....

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not straightway arrive at the conclusion that the transactions were not genuine without giving further opportunity to the appellant to explain the alleged information disclosed by the Inspector to the Assessing Officer. ………. 31. We also find that in the case of CIT v. Kishori Lal Construction Ltd.: 191 Taxman 194, Hon'ble Delhi High Court has observed as under: After considering the arguments of both the sides, we find ourselves in favour of the submission made by learned counsel for the respondent. As mentioned above, the assessee had produced the following which would clearly demonstrate it has discharged its initial burden:- (a) The identity of M/s. Yadav and Company, by filing their confirmation and their assessment particulars. (b) Genuineness of the transaction by pointing out that the assessee had sold shares to M/s. Yadav and Company in the immediately preceding year (which has been accepted by the Department) and that the payment received during the relevant previous year was against the debt due from M/s. Yadav and Company. (c) Creditworthiness of the creditor by pointing out that the amount was received by way of cheques drawn on the bank account .....

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was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but instead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejecte .....

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most of them were also found existing by the Inspectors and most of them also presented before the DDIT (Investigation) Kolkata. Therefore, the facts are clearly distinguishable. Moreover, in the case of CIT vs. Navodaya Castles Pvt. Ltd., also the party was not present and the summons issued u/s 131 returned unserved. In that case, the assessee was asked to produce the shareholders to substantiate the claim of genuineness but the assessee was unable to produce them. But, in the instant case, we have gone through the case records and we found that the AO has made the various enquiries himself. Moreover, he has also deputed the Inspector and in most of the cases, the Inspectors confirmed the existence of the creditors. Thereafter, if the AO had any doubt, he should have issued show cause notice to the assessee to produce the creditors before him. The AO did not require the assessee to produce the creditors. Therefore, we have to decide the matter as per the facts available on record. 37. The entire addition under section 68 of the Act is, thus, without any basis and is legally unsustainable. 38. The view of the ld. CIT(A) that the loan taken by the assessee from twelve companies ag .....

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se three companies were considered to be a part of the Lunkad group by the AO, he made addition of the unsecured loan amount received by the assessee from these three companies in assessment year 2003-04 and on the basis of the assessment order of assessment year 2003-04, he made addition of the share capital and share premium received from these three companies in assessment year 2008-09. 43. The matter carried to the ld. CIT(A) and the ld. CIT(A) deleted the addition made in both the years. 44. The ld. Departmental Representative relied on the order of the AO of assessment year 2003-04. 45. The ld.Authorized Representative for the assessee submitted the written submission, which is on record, the relevant portion of his reply reads as under :- It is submitted that the addition made under section 68 of the Act in A.Y 2003-04 was on account of unsecured loans and not on account of share capital as alleged by the assessing officer in the present proceedings. It is further respectfully submitted that in A.Y 2003-04, the assessment proceedings were reopened in the assessee s case, purportedly on the basis of survey conducted on Lunkad Group of companies on 02.05.2006. It was held that .....

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out citing any detail and instances, the AO has proceeded to hold that they were entangled in financial transactions with Lunkad Group of Companies as per survey findings of Lunkad Group. It is not clear how the AO has proceeded to conclude that the loan transactions of the appellant with such companies were not genuine. Then the AO has proceeded to examine such transactions from the point of view of a colorable device and in this respect has placed reliance on the decision of Hon ble Supreme Court in the case of CIT Vs. Durgaprasad More, (1971) 540 ITR page 545 (SC) and further in the case of Mc.Dowell & Co. Ltd. vs. CTO (1985) 154 ITR 148 (SC), CWT vs. Arvind Narottamdas (1988) 173 ITR 479 (SC) and Union of India Vs. Playworld Electronics Pvt. Ltd. (1990) 184 ITR 308 (SC) (supra). The three aforesaid decisions related to tax evasion by tax planning whereas in appellant s case these were plain and simple loan transactions. Thus it emerges that the AO has not properly appreciated the facts and details surrounding such transactions and has considered them to be in-genuine transactions without bringing any definite details and evidences on record. 4.2.2 In the course of appeal pr .....

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ellant's case it has to be necessarily held that the appellant has discharged his onus of establishing all the three ingredients as required by Section 68 of Income-tax Act i.e. establishing identity and genuineness of transaction and creditworthiness. It should be appreciated that degree of onus to explain the cash credit transaction cannot be uniform and rigid in all the situations. Degree of onus regarding genuineness of transaction in respect of receipt of share capital at huge premium in unlisted companies otherwise through public issue cannot be viewed but with suspicion and the appellant may be required to justify such receipt of money on huge premium as such transaction would defy normal financial prudence and logic. But the same degree of onus cannot be cast on the appellant to explain the loan transaction which have been repaid in a span of 1 ½ years or so when the appellant is able to discharge his onus to establish the identity of the creditors, receipt of money through banking channel and existence and apparent financial worth of creditors as reflected from the audited accounts and I.T. returns. It may be also observed that onus to establish all the three in .....

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is partly allowed. 46. The ld.Authorized Representative for the assessee further submitted that identity of the above companies cannot be disputed since these companies were earlier assessed at Indore and subsequent to the transfer of their jurisdiction vide order passed under section 127 by the CIT, Indore in 2008, are currently being assessed at Bilaspur. Copies of the assessment orders for the assessment year 2008-09 in the case of three companies were also enclosed at pages 729-800 of the paper book. Transfer order u/s 127 was passed much after the survey proceedings in the case of Lunkad Group of cases. 47. The ld.Authorized Representative for the assessee further contended that had the aforesaid three companies been closely associated with Lunkad Group, their request for transfer of cases to Bilaspur would not have been accepted. This fact also confirms that these companies are not related to Lunkad Group. Further, regular assessment u/s 143(3) of the above three companies for assessment year 2008-09 were carried out at Bilaspur, which also establish the existence and creditworthiness of these companies. The list of Directors of the three companies, as available on the websit .....

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icient to hold them and club them in the same category as Lunkad group of companies. The CIT(A) has held that on facts of the case it has to be necessarily held that the assessee has discharged his onus of establishing all the three ingredients as required by section 68 i e. establishing the identity and creditworthiness and also the genuineness of the transactions. The CIT(A) has also drawn support from the fact that the assessee had transactions with these three companies even in earlier / later years and in the scrutiny assessments of the assessee such loan transactions were accepted as proper and genuine and there was absolutely no reason for the AO to have taken a different view for the year under consideration with the same set of companies. 53. On careful consideration of the factual and the legal premises as relied upon by AO and also the assessee it has to be observed that it has been broadly a set t led preposition in law that whether in a given case identity credit worthiness and genuineness has been established is broadly a finding of facts which has to be arrived on appreciation of cumulative facts available on records. In the instant case the identity of the three Com .....

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entities at the same price which are not even remotely connected with the promoter/ director of the company and continued to be held as such. Thus in the facts and the circumstances of the case even genuineness of the transaction is very difficult to doubt. Nevertheless, as already noted above the AO has done precisely nothing to bring on record any adverse material to even raise doubt about the three ingredients of section 68 as discussed above. 54. The Ld. Departmental Representative could not bring anything contrary to the findings of the Ld. CIT(A). We find that in assessment year 2003-04 the AO has added back the loan amount received from these three companies u/s 68 but has not disallowed the interest payment claimed by the assessee as deduction on such loans during the year under consideration. Hence on over all consideration of the facts and circumstances of the case the addition made by the AO treating the share capital contribution as unexplained is not found to be at all justified more so when such contribution in the immediate preceding year stood undisturbed in scrutiny assessment completed u/s 143(3) . Therefore the addition of ₹ 1.55 crore is rightly deleted b .....

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been done. The AR present in the course of discussion explained that so far the appellant has not received any fresh notice u/s 148, subsequent to such assessment order being passed in the case of the appellant, for earlier assessment year(s). Thus without going further into merit of the findings arrived by AO in disallowing such interest , disallowance deserves to be quashed. But since the AO has referred to findings in other cases these findings are also examined to the extent considered necessary on the basis of available material in this office record. 4.1.1 The AO has disallowed interest amount of ₹ 10,48,155/ - in respect of interest paid to three companies of one group viz. Trimurti Finvest P. Ltd., Purvi Finvest P. Ltd. and East West Finvest (I) Ltd. referring to the assessment order in the case of Agarwal Coal Corporat ion for Asstt . Year 2003-04. In simultaneously decided appeals in the case of M/s Agarwal Coal Corporation, the findings arrived by the AO have been held to be not justified and it has been held that the appellant has discharged its onus cast u/s 68 in respect of such loans. Thus the very basis of disallowance of such interest do not survive in view .....

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Tribunal has deleted similar disallowance of interest paid to the aforesaid companies. As regards Norflox Vincon P. Ltd (S.No.5), it was stated that the said interest disallowance has been made without any discussion in the assessment order. 60. In view of the aforesaid submissions, it was stated that the CIT(A) has rightly deleted the disallowance of interest. 61. We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the AO has disallowed interest amount o f ₹ 20,34,246/- in respect of interest paid to three companies of one group viz. Trimurti Finvest P. Ltd., Purvi Finvest P. Ltd. and East West Finvest (I) Ltd. referring to the assessment order in the case of Agarwal Coal Corporation for Asstt. Year 2003-04. In the preceding part of this order the findings arrived by the AO have been held to be not justified and it has been held that the assessee has discharged its onus cast u/s 68 in respect of such loans. Thus, the very basis of disallowance of such interest of ₹ 20,34,246/- do not survive in view of our finding given in respect of ground no 5 above. 62. Regarding interest disallowance of ₹ .....

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le 8D of the Rules in the following manner: On further appeal, the CIT(A) deleted the disallowance of interest of ₹ 3,23,640/- attributed by the assessing S.No. Particulars Amount (in Rs.) 1 Direct expenditure Nil 2 Interest expenditure incurred during the year (Rs.4.35 crores) attributed in the ratio of average value of investments resulting in exempt income to average value of total assets 3,23,640 3 ½ % of average value of investments 1,71,633 Total 4,95,273 officer as per Rule 8D(2)(ii) of the Rules. As regards administrative expenses, the CIT(A) directed the assessing officer to re-compute disallowance after excluding investment in overseas companies. 65. The matter carried to the ld. CIT(A) and the ld. CIT(A) partly allowed the ground by observing as under :- 7. Next ground No. 5.1 and 5.2 are di r e c ted against disallowance of interest u/s 14A as per amount worked out in accordance with provisions of Rule 8D of 1962. The AO has discussed this issue on page 37 to 42 of the assessment order and working of disallowable interest and proportionate other expenses in para 6.9 on page 42 as already extracted above. The AO has made such disallowance ignoring appellant .....

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further subject to tax and this amount could very well be otherwise utilized for earning higher interest income or in other high returning yield avenues . It was also emphasized that had the appellant not made any fixed deposits, its borrowings would have also been nil and on the contrary it would have surplus funds and would not have incur red any interest cost and thus it was summed up that in the factual peculiar facts of the appellant 's case, which the AO not cared to appreciate , there was absolutely no case for making any disallowance u/s 14A. It was also pointed out by the AR that out of the total investment of ₹ 463.38 crore at the year end the amount of Rs .8 9.61 la c s was invested in equity shares of Overseas Associate Company, in the same business line, the dividend income from which as and when received could not be exempt in the hands of the appellant company and hence AO's act ion in considering such amount of investment in working out disallowance under Rule 8D was no way justified and was against the provisions of section 14A of the Act. 7.2 The appellant 's contention and carefully considered facts available on r e cord are found to carry suffi .....

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ents held by the assessee as on 31.03.2007 were made out of own funds/ non-interest bearing funds of the assessee. The ld. Authorized Representative further contended that out of total opening investment of ₹ 2.28 crores, investment of ₹ 2.22 cr was in overseas entity and investment of ₹ 5 lac in redeemable bonds, which cannot be considered for the purpose of disallowance under section 14A of the Act. The balance investment amounted to ₹ 38,400 only, which was made out of own funds of the assesse. The ld. Authorized Representative relied on the following decisions wherein it has been held that where no portion of borrowed funds had been attributed to investments held as at the beginning of the relevant previous year, no part of the interest expenditure could be disallowed during the relevant year by reference to such investments: (i) CIT v. Sridev Enterprises: 192 ITR 165 (Kar.) (ii) CIT v. Givo Ltd.: ITA No. 941/2010 (Del) (iii) Punjab Woolcombers Ltd. v. ACIT: (2004) 1 SOT 114 (Chand) (iv) Motor and General Finance Ltd. v. DCIT: 90 ITD 449 (Del.) (v) Meenakshi Synthetics v. CIT: 84 ITD 563 (Lucknow) (vi) GR Agencies v. ITO; 79 TTJ 496 (Lucknow) (vii) Malwa .....

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219 (Cal.) - approved by Supreme Court in the case of East India Pharmaceutical Works Ltd. v. CIT: 224 ITR 627 CIT v. Reliance Utilities and Power Ltd.: 313 ITR 340 (Bom.) CIT vs. M/s. Ashok Commercial Enterprises: ITA No. No.2985 of 2009 (Bom) 72. While following the ratio emanating from the aforesaid decisions, it has been held in the following cases, that interest expenditure cannot be disallowed under section 14A of the Act, where the assessee had sufficient surplus funds and there was no finding by the assessing officer of any direct nexus of borrowed funds with investments: 1. Gurdas Garg v. CIT: ITA No.413 of 2014 (P&H) 2. Bright Enterprises Pvt Ltd. v. CIT: ITA No. 224 of 2014 (P&H) 3. Lubi Submersibles Ltd.: ITA No.868 of 2010 (Guj.) 4. CIT v. K. Raheja Corporation Pvt. Ltd: Incometax Act, 1961No.1260 of 2009 (Bom.) 5. CIT v. Gujarat Power Corporation Ltd.: 352 ITR 583 (Guj) 6. Gujarat State Fertilizers and Chemicals Ltd : Tax Appeal No. 82 of 2013 (Guj HC). 7. CIT v. Torrent Power Ltd.: 363 ITR 474 (Guj) 8. CIT vs. Suzlon Energy Ltd.: 215 Taxman 272 (Guj) 9. CIT vs. UTI Bank Ltd: 215 Taxman 8 (Guj) (Mag.). 10. M/s.Agrovet Ltd. v. ACIT: ITA No. 1629/Mum/09 (Mum.) 1 .....

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. 4761/Mum/2013 (Mum. Trib.); Everest Kanto Cylinders Ltd. (ITA No. 7073/Mum/2012)]. 76. It was also submitted that the assessing officer erred in considering the entire investments and not investments which actually resulted in any exempt income, as has been held in the following decisions: CIT v Winsome Textile Industries Ltd.: 319 ITR 204 (P&H) Corrtech Energy Pvt. Ltd.: 223 Taxman 130 (Guj.) CIT v. M/s. Shivam Motors (P) Ltd.: 272 CTR 277 (All). CIT v. M/s Lakhani Marketing: 272 CTR 265 (P&H) CIT V. Holcim India (P) Limited: 272 CTR 282 (Del) ACB India Ltd. v. ACIT : 374 ITR 108 (Del.) REI Agro Ltd vs. DCIT: 144 ITD 141 (Kol. Trib.) For the aforesaid cumulative reasons, the CITA) rightly deleted the disallowance made under section 14A of the Act. 77. We have heard the rival contentions of both the parties. The Ld. Departmental Representative could not bring anything contrary to the findings of the Ld. CIT(A). Our interference is not called for. Ground Nos. 7 and 7.1 are rejected. 78. Ground no. 8 reads as under :- On the facts and in the circumstances of the case, the ld. CIA(A) erred, the ld. CIT(A) erred in deleting the disallowance of ₹ 6,50,000/- out of collie .....

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d Agarwal v. ITO: 52 ITD 239 (Cal) Mahendra Oil Cake Industries Pvt. Ltd. v ACIT: 55 TTJ 711 Rattah Mechanical Works Ltd. v ITO: 87 Taxman 288 (Mag) (Chand. Shriram Pistons and Rings Ltd. v IAC: 39 TTJ 132 (Del.) Nodi Exports v. ACIT: 24 SOT 526 (Del.) ACIT v. Amtek Auto Ltd.: 112 TTJ 455(Del.) Roger Enterprises Pvt. Ltd. v. ITA : 52 TTJ 198 (Del.) Ramji Das Modi v. DCIT: 110 Taxman 107 (JP) (Mag) Continental Seeds &Chemicals Ltd. v. ACIT: (2003) SOT 393(Del.) Agarwal Trading Co. vs. ITO 108 TTJ 589 (Del.) Sterling Motors v. Addl. CIT: ITA No. 3217 to 3219/Mum/2009 (Mum.) Asstt. CIT v. Amrik Singh: ITA No. 987/2010 (Kol.) Rajni Combustion P. Ltd. v. DCIT: ITA No. 1779/Ahd./2009 (Ahd.) 84. The ld.Authorized Representative for the assessee concluded his arguments by submitting that the aforesaid disallowance has been rightly deleted by the CIT(A). 85. We have heard the rival contentions of both the parties. We find that the disal lowance made was dele ted ful ly in appeal order by the CIT(A) . We find that the Ld. CIT(A) has observed that while making the disallowance the AO has ignored the fact that there was nearly fivefold increase in net taxable income from ₹ 7.3 crores .....

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Accordingly, this departmental appeal is dismissed. 89. In the result the departmental appeal No. 202/Ind/2012 for assessment year 2003-04 is dismissed. C.O.No. 63/Ind/2012 : Assessment year 2003-04 (Agrawal Coal Corporation Pvt. Ltd.) : 90. The assessee has raised the following ground in the cross objection:- That the LD. CIT(A) erred in upholding the action of the AO in re-opening the assessment and issuing notice u/s 148. That on the facts and in the circumstances of the case and as per law, the notice issued u/s 148 as well as the subsequent reassessment proceedings are unwarranted, invalid and void ab-initio. It is therefore prayed that these proceedings and the assessment order may kindly be quashed. 91. In respect of C.O., the ld.Authorized Representative for the assessee has filed the written submission, which reads as under :- The assessee (Respondent herein) is a private limited company engaged, inter alia, in the business of coal trading and power generation. For the previous year, relevant to the assessment year 2003-04, the year under consideration, the assessee filed return of income, declaring income of ₹ 90,73,770. The return was processed under section 143(1) .....

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sess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his not ice subsequent ly in the course of the proceedings under this sect ion, or re-compute the loss or the depreciat ion al lowance or any other al lowance, as the case may be, for the assessment year concerned (hereafter in this sect ion and in sect ions 148 to 153 refer red to as the relevant assessment year ) : Section 147 of the Act empowers the assessing officer to initiate proceedings under that section to assess or reassess any income of the assessee that escaped assessment. The powers to initiate proceedings under section 147 of the Act are, however, not unfettered and unrestricted. In order to initiate proceedings under section 147, the assessing officer has to comply with the provisions of sections 148 to 153 of the Act. Under the scheme of the Act, the assessing officer can initiate proceedings under section 147 of the Act only if he has reason to believe that any income of the assessee has escaped assessment. Such belief has to be arrived at by the assessing officer on the basis of tangible/ reliable information in the possession of the assessing o .....

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ust reflect application of mind on the part of the assessing officer and the process of reasoning by virtue of which the conclusion as to escapement of income by the assessee was arrived at. Applying legal position to facts of present case In the present case, proceedings under section 147 were initiated on the basis of the following reasons reproduced in the order dated 24.9.2010 rejecting the legal objections of the assessee : During the course of a survey u/s 133A conducted by the department on 02.05.2006 in the Lunkad group of cases it had been noticed that the assessee through companies of Lunkad group bringing back its unaccounted income in the books of account by way of accommodation entries. During the year under consideration (AY 2003-04) assessee has received ₹ 70,00,000/- as unsecured loans from the companies of Lunkad group. A report dated 15.02.2007 of the said transactions has been received from the Addl. Commissioner of Income Tax, Range - 3 from which it is revealed that the assessee is routing its own money through the companies of Lunkad group. On the basis of above discussion, I have reason to believe that income chargeable to tax to the extent of ₹ 7 .....

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f the companies of the Lunkad group is reproduced at page 15 of the order of the Tribunal dated 30.12.2011, copy whereof is placed at pages 74-129 of paper book of case laws of Volume B. On perusal of the list of companies at page 88-89 of the case law paper book Volume B, it will kindly be noticed by the Hon ble Tribunal that none of the aforesaid three companies referred by the assessing officer are part of the Lunkad Group. As a necessary corollary, it will kindly be appreciated that the assessing officer while recording reasons for initiating proceedings under section 147/148 of the Act proceeded on a factually incorrect premise that the aforesaid three companies from whom the assessee had received unsecured loans were part of the Lunkad Group. It will kindly be appreciated that the very foundation of reopening of assessment of the assessee was that the assessee had received unsecured accommodation entries in the form of unsecured loans from the companies of the Lunkad Group. However, as a matter of fact, none of the three companies are part of the said Group and, therefore, for this reason alone, the reopening of assessment by the assessing officer is without any tangible mate .....

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on 147 of the Act is, in fact, a step subsequent to conduct of initial investigation to arrive at such satisfaction. Investigation, it has consistently been held, must precede recording of satisfaction and not the other way round. Reference, in this regard, may be made to the following decisions :- Chhugamal Rajpal vs. S.P. Chaliha: 79 ITR 603. Amity Hotels Pvt. Ltd. v. CIT: 272 ITR 75 (Del.). Smt. Maniben Galji Shah: 283 ITR 453 (Bom.). Bakulbhai Ramanlal Patel v. ITO: 56 DTR 212 (Guj). Chunnilal Surajmal V. CIT: 160 ITR 141 @ 148, 151 (Pat). ACIT V. Heera Lal: [2007] 14 SOT 4 (Jp.). RRB Securities Limited V. JCIT: 91 TTJ 883 (Del.) ACIT V. Star Ferro Alloys (P) Limited: 90 ITD 63 (Del.) (TM). CIT vs. Raymond Woolens Mills: 236 ITR 34 (SC) ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd: 291 ITR 500 (SC). In rebuttal, it is respectfully submitted, that there is no dispute with the aforesaid settled proposition of law that at the stage of initiation, the assessing officer has to form prima facie belief/ opinion that any income of the assessee had escaped assessment. It will, however, kindly be appreciated that in the present case, the assessing officer has simply proceeded on conjec .....

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essment. In the absence of fresh information/ material coming to the possession of the assessing officer, reopening by reappraising the existing material on record is not permissible, being based on a mere change of opinion. Reference, in this regard, may be made to the decision of the Full Bench of this Hon ble Court in the case of CIT v. Kelvinator of India Ltd.: 256 ITR 1 (FB) which has been affirmed by the apex Court in the case reported as CIT v. Kelvinator India Ltd.: 320 ITR 561 (SC). The relevant observations of the apex Court are as under: Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept o .....

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e reasons noted in the said form to be the actual reasons for the issuance of the notice under section 148. If we were to accept this argument, we would have to ignore the directions given by the Supreme Court in GKN Driveshafts (India) Ltd.'s case that the Assessing Officer is bound to furnish reasons within a reasonable time. The notice under section 148 was issued on 29-3-2004. The petitioner filed the return and sought reasons by its letter dated 11-5-2004. If the date of filing of the counter-affidavit in this writ petition is taken as the date of communication of the reasons which forms part of the said form, a copy of which is Annexure-A to the counter-affidavit, then the date of supply of reasons, based on this argument, would be 5-11-2007. This immediately makes it clear that the Assessing Officer, who was bound to furnish his reasons within a reasonable time, did not do so. The period which elapsed between 11-5-2004, when the petitioner made the request for communicating the reasons, and 5-11-2007, the date when the counter-affidavit was filed, can certainly not be regarded as a reasonable period of time. Apart from this, we must not forget the provisions of section 1 .....

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, civil or criminal, if a summon is issued to the defendant /respondent, is not accompanied with the copy of plaint or complaint then it is to be construed that no valid service of notice has been effected upon the defendant or the respondents whichever may be the case. The notice could be served at any point of time before the expiry of 6 years, if AO has reasons to believe that income has escaped assessment but, such reasons are also to be communicated to the assessee before the expiry of the limitation otherwise validity of such notice could not be sustainable. Being a subordinate authority to the Hon ble High Court, we are bound to follow the authoritative exposition of law at the end of Hon ble High Court. In view of the above discussion, we allow ground No. 2 of the assessee wherein he has pleaded that notice u/s 148 has not been served within the period of limitation upon the assessee. The assessment is not sustainable. It is quashed. The aforesaid decision of the Delhi High Court and the Delhi Bench of the Tribunal are squarely applicable to the facts of the present case. 92. The ld. Departmental Representative submitted that the assessee has filed the return of income, but .....

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. This information was obtained by the Revenue in a subsequent year's assessment proceedings. The commencement of reassessment proceedings was valid." 94. The AO's action is further found to be justified in view of discussion made hereinafter. It may be, however, observed that what happened in other group cases is broadly is of no consequence as that was a subjective decision of the AO after being satisfied on the facts of the case wherefrom no addition was called for and that cannot be cited as a ground or reason to argue that the reassessment proceedings were not validly initiated in the case of the assessee. 95. It is an admitted fact that the return filed by the assessee was processed u/s 143(1)(a) and no assessment was made thereon. Action u/s 147 can be initiated in the case of escapement of income chargeable to tax. As per Explanation 2 to section 147, following cases shall be deemed to be cases where income chargeable to tax has escaped assessment. - where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded t .....

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pre-amended section. 147(a) and the Assessing Officer can, under the amended provisions, legitimately re-open the assessment in respect of income which had escaped assessment. Viewed in that angle, power to re-assessment is much wider under the amended provisions and can be exercised even after assessee has disclosed fully and truly all material facts. Reasons which may weigh with the Assessing Off icer may be the result of his own. Investigation and may also come from any source that he considers rel iable. Forming of this bel ief is an administrative decision to be arrived at in judicial manner. The Assessing Officer is required to act fairly and judiciously. His belief must have substance and must not be a Shadow. There is no dispute to the wel l settled legal proposition that such belief should be bona fide and should not be based on vague, arbitrary and nonspecific information. 99. In the case of Rajesh Jhaveri (supra) , Hon'ble Supreme Court categorical ly dealt with reopening of assessment with regard to mode under which assessment has been done, either by way of the int imat ion u/s 143(1) or by way of scrut iny assessment order u/s 143(3) . It was observed that there .....

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ocessed u/s 143(1) and no assessment was framed b y i s sue o f no t i c e u/ s 1 4 3 ( 2 ) . Und e r the s e f a c t s and circumstances, the proposition of law laid down by the Hon ble Supreme Cour t in the cas e o f Raj e sh Jhav e r i i s c l e ar l y appl icable. It is pert inent to ment ion here that Sect ion 147 authorizes the AO to assess or reassess income chargeable to tax, when, he has reason to be l ie ve that income for any assessment year has escaped assessment. In the instant case, the observation of the AO to the ef fect that by claiming the returned income under wrong head, the assessee has claimed excess depreciation, which is not permissible in case of income is assessable under the head " Income from House property". This is sufficient reason to bel ieve that income of the assessee has escaped assessment, which is sufficient to empower the AO to reopen the assessment by issue of not ice u/s 148. Hon'ble Supreme Court in the case of Rajesh Jhaveri has further observed that under the earlier provisions of Section 147(a), two conditions were required to be satisfied, firstly, the AO must have reason to bel ieve that income, prof its or gains chargeabl .....

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decision cited. 102. We found that the case of the assessee is covered by the decision of ACIT vs. Rajesh Jhaveri Stock Brokers Private Limited, 291 ITR 500. Therefore, we are of the view that the case relied upon by the assessee in that case the facts are different and when the facts are different, this judgment will not helpful to the assessee. In case of Hon'ble Delhi High Court in the case of Haryana Acrylic Mfg. Co. vs. CIT, 308 ITR 38, this judgment pertains to writ petition. Therefore, this will not helpful to the assessee. Similarly, Hon'ble Delhi High Court in the case of Amity Hotel, 272 ITR 75, has decided the appeal in the context of provisions of Section 158 BD, therefore, this will also not be helpful to the assessee. Moreover, if case has to be decided on its own facts, therefore, we are of the view that the judgment relied upon by the assessee will not be helpful to the assessee. 103. In the result, the cross objection filed by the assessee is dismissed. ITA NO. 389/Ind/2012 for Assessment Year 2008-09 (Admanum Finance Ltd. Indore) : 104. The revenue has taken following grounds of appeal. 1. On the facts and in the circumstances of the case, the order of th .....

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as rightly deleted the addition of ₹ 6,08,94,415/- made by the AO in this case also. Accordingly, this ground of appeal of the departmental appeal is dismissed. 107. Ground no. 3 has been raised by the Revenue against the deletion by CIT(A) of disallowance of interest of ₹ 23,40,000/- made by the AO. In the similar fashion as made in Agrawal Coal Corporation Pvt. Ltd. in assessment year 2008-09. 108. This issue has already been considered by us while deciding ground nos. 2 to 4 in ITA No. 294/Ind/2012 for the assessment year 2008-09 in the case of M/s Agrawal Coal Corporation Pvt. Ltd., wherein we have dealt with this issue in detail. The disallowance made by the AO in respect of interest paid by the assessee was deleted by the Ld. CIT(A) holding that the stand alone disallowance of interest without establishing such loans to be unexplained and in-genuine in assessee own case, does not have sanctity and approval of law. We have upheld the decision of the Ld. CIT(A) and dismissed the said ground of Revenue in that appeal. Following the same reasoning, we hold that the CIT(A) has rightly deleted the disallowance of ₹ 23,40,000/- made by the AO in this case also. Acc .....

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worked out at ₹ 19,970/- @ 0.5% of the average investments maintained. 112. We have heard the rival contentions of both the parties. From the order of CIT(A) we find that CIT(A) has held that the interest receipts in this case were much higher than interest paid and since the interest was mainly received on FDR which are required to be made for obtaining overdraft facility, the interest receipts are inextricably linked to interest payments and therefore interest received should be netted off against interest payments. The CIT(A) has given a finding that the investments made by the assessee were made out of own funds and not out of interest bearing borrowed funds. Thus in the peculiar facts of the case, the CIT(A) deleted the disallowance u/s 14A of ₹ 2,59,473/- made in respect of interest paid and restricted the disallowance in respect of expenses to ₹ 19,970/- @ .5% of the average investments. The above findings of the CIT(A) remained uncontroverted and the Ld. Departmental Representative could not bring anything contrary on record. Accordingly, we uphold the order of CIT(A) on this issue and this ground of Departmental appeal is dismissed. 113. Ground No. 5 & .....

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the jurisdictional ITAT in the case of Agrawal Coal Corporation Ltd. in Appeal No. ITA - 151/Ind/2009 for the AY 05-06 held that the production of directors of the company from whom credits have been received shall be one of the important criteria for accepting the transaction and in the instant case directors of the company from whom credits were claimed were not produced / appeared. (iii) erred in deleting the addition of ₹ 3,32,954/- made u/s 14A and restricted to 0.5% of average investment at ₹ 18,696/- without appreciating the fact that the AO has made the calculation by applying the rule 8D and without considering the fact that the assessee could not prove that the investment were not made out of interest being funds and as such provision of rule 8D is clearly applicable to the case of the assessee. (iv) erred in deleting the disallowance of deduction of ₹ 11,90,575/- on account of bad debts where the assessee has not filed revised return but filed only revised computation and CIT(A) has not followed the settled law described by Apex Court in the case of Goetz India. (v) erred in deleting the addition made by the AO on account of conveyance expenses and repa .....

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ing that the AO has made addition on the basis of verification of books accounts and found that supporting bills / vouchers for some of the expenses were missing. 119. We find that in both the above appeals the revenue has raised the identical grounds except the change in figures. 120. Ground no. (i) and (ii) relate to deletion by CIT(A) of disallowance of interest made by the AO in respect of loan creditors which were held to be in-genuine in assessment year 2008-09. Since in assessment year 2008-09 the AO made the addition u/s 68 as a consequence he disallowed the interest paid by the assessee to these parties in assessment year 2010- 11 and 2011-12. Thus, the disallowance of interest in these years was consequential to the addition made u/s 68 in assessment year 2008-09. Since we have already upheld the order of CIT(A) deleting the addition made u/s 68 in assessment year 2008-09 in the assessee s own case in ITA No. 389/Ind/2012, we uphold the order of the CIT(A) in the instant case also for assessment year 2010-11 and 2011-12 deleting the disallowance of interest. 121. Accordingly, ground nos. (i) and (ii) in both the appeals are decided against the Revenue. 122. Ground No. (ii .....

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It was submitted before me that as soon as the mistake became known to the assessee a revised computation of income was filed during the course of assessment proceedings bringing all the relevant facts to the notice of the AO and requesting that this figure of ₹ 11,90,575/- be allowed as deduction as bad debts actually written off in the books of accounts in this year and be reduced from the income to arrive at correct taxable profit for the year and the return be treated as revised to this extent. Details of bad debts actually written off, provision made and copies of ledger accounts of all the debtors reflecting the actual write off in the books of accounts, as were filed before the AO, has also been filed in the paper book in these appellate proceedings. Copies of income tax returns of earlier years have also been filed to substantiate that NPA provisions were disallowed by the appellant in the respective years. 4.4 The AO rejected this claim of the assessee simply on the premise that claims made through a revised return could only be entertained. He relied on the decision of the Hon ble Supreme Court in the case of Goetze India Ltd. 4.5 On the other hand the Ld. AR veheme .....

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urpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. It has been time and again held by various courts that legitimate claims of the assessee should be allowed even if raised during the assessment proceedings. In the case of CIT vs. Ramco International in (2011) 332 ITR 306. The Hon'ble Punjab and Haryana High Court has held that:- Deduction under section 80-IB-Allowability-Claim not made in return - Assessee having duly furnished the documents and submitted Form No. 10CCB during the assessment proceedings, claim for deduction under section 80-IB by way of an application was admissible - There was no requirement for filing any revised return - No substantial question of law arises - Goetze India Ltd. Vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) distinguished. 4.9 In view of the above discussion and also considering the fact that the similar claim of bad debts made by filing the revised return for immediately succeeding year i.e. AY 2011-2012 has been accepted in the assessment proceedings and also considering the legal position the said claim of ₹ 11,90,575/- is therefore directed to be allow .....

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tten off from the debtors account in this year, the claim made by the appellant is a legitimate claim and is allowable. The AO is bound to assess the correct income and for this purpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. It has been time and again held by various courts that legitimate claims of the assessee should be allowed even if raised during the assessment proceedings. In the case of Commissioner of Income vs. Ramco International in (2011) 332 ITR 306. The Hon'ble Punjab and Haryana High Court has held that:- Deduction under section 80-IB-Allowability- Claim not made in return - Assessee having duly furnished the documents and submitted Form No. 10CCB during the assessment proceedings, claim for deduction under section 80-IB by way of an application was admissible - There was no requirement for filing any revised return - No substantial question of law arises - Goetze India Ltd. Vs. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) distinguished. 4.9 In view of the above discussion and also considering the fact that the similar claim of bad debts made by filing the revised return for immedi .....

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debts are actually written off in the books of accounts as irrecoverable the said claim is allowable to the appellant u/s 36(1)(vii) read with section 36(2). Since the amount of ₹ 11,90,575/- was actually written off from the debtors account in this year, the claim made by the appellant is a legitimate claim and is allowable. The AO is bound to assess the correct income and for this purpose the AO may grant relief suo-motu or on being pointed out by the assessee in the course of assessment proceedings. 129. We find that it has been time and again held by various courts that legitimate claims of the assessee should be allowed even if raised during the assessment proceedings. In the case of CIT vs. Ramco International in (2011) 332 ITR 306. The Hon'ble Punjab and Haryana High Court has held that:- Deduction under section 80-IB-Allowability-Claim not made in return - Assessee having duly furnished the documents and submitted Form No. 10CCB during the assessment proceedings, claim for deduction under section 80-IB by way of an application was admissible - There was no requirement for filing any revised return - No substantial question of law arises - Goetze India Ltd. Vs. CI .....

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