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TMI Blog2019 (1) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... and M/s. Teac Consultants Pvt. Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of Share application money by observing that the alleged investor companies M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. are not shell companies without considering the financial statements of these companies. 3. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record. 4. Whether on the facts and circumstances of the case and in law, the CIT (A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. despite the fact that the directors or Principal Officers of these companies were never produced before the AO for examination despite number of opportunities provided by the AO for producing and also ignoring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessment year 2011-12. The AO made the addition under section 68 by treating the share capital and share premium received from these companies as unexplained cash credit on the basis of the report of the Investigation Wing Kolkata. The AO treated these companies as Shell company and held that these companies are controlled by Shri Amit Kedia, & Shri Alok Harlalka who were found to be bogus entry providers by the Investigation Wing Kolkata. On appeal, the ld. CIT (A) has deleted the addition made by the AO by considering the fact that the AO has made the disallowance merely on the basis of information received from Investigation Wing Kolkata and without any material, even the statement of so called bogus entry provider. The ld. CIT (A) has specifically noted that the AO was not having the statement of the alleged entry provider in his possession and, therefore, when the assessee produced all the relevant documentary evidence in support of the claim, the addition made by the AO was not sustainable. 3. Before us, the ld. CIT D/R has submitted that the AO has received the information from Investigation Directorate, Kolkata regarding involvement of the assessee group in obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of entry operators were also recorded, therefore, overwhelming evidences in the possession of the AO indicate bogus nature of transaction of share capital and premium which has been extensively discussed in the assessment order. During the course of assessment proceedings, the assessee was provided a number of opportunities for producing the alleged investors for verification and failure of the assessee in producing the investors in the light of the evidences was enough to invoke the provisions of section 68 of the IT Act. In support of his contention, he has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd., 226 Taxman 190 (Mag.) and submitted that the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (SC). Thus it is evident that the assessee has failed to discharge its onus to rebut the evidence unearthed by the Investigation Wing Kolkata which shows that the transactions of share capital and share premium are nothing but bogus accommodation entries wherein the assessee's own undisclosed income has been routed in the garb of share capital and premium etc. As regards cross exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that the Assessing Officer was not having statements of the alleged entry providers. Further the alleged entry providers who have nowhere stated that cash was given by the assessee. During the course of assessment proceedings, the assessee produced the various documents of share applicants, namely, M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. All the share capital and share premium etc. were received through bank and verifiable from bank statement of the assessee as well as bank statements of the share applicants. The onus under section 68 of the Act is to prove the identity, capacity and genuineness of the transaction which has been discharged by the assessee by producing the documentary evidence as well as the notices issued by the AO were duly responded by the share applicants. The ld. A/R has submitted that the share applicant companies were assessed to tax and there were assessment orders under section 143(3) for the assessment years 2005-06, 06-07, 2007-08, 2012-13, 2013-14 & 2014-15. He has referred to the copies of the assessment orders in case of M/s. Sangam Distributors Pvt. Ltd. and M/s. Teac Consultants Pvt. Ltd. for all these as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share applicant company is a shell company whereas the assessee has produced all the relevant documents to establish the identity, creditworthiness and genuineness of the transaction as well as share applicant. 5. The next objection/contention of the ld. A/R is that the sole basis of addition is the statement of Shri Anand Sharma and others whereas the assessee was not given the opportunity of cross examination despite repeated requests and demands. The AO has violated the principles of natural justice by not providing the copies of material used against the assessee at the assessment stage and further not providing the opportunity of cross examination of the witness during the assessment stage as well as appellate stage. Though the ld. CIT (A) called for a remand report and asked the AO to provide opportunity of cross examination to the assessee, however, after the remand proceedings the AO did not afford an opportunity of cross examination rather the AO has asked the assessee to produce the witness instead of allowing the assessee to cross examine the witness. In support of his contention, the ld. A/R has relied upon the decision of Hon'ble Supreme Court in case of Andaman Tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. A/R supported on the order of the ld. CIT (A). 6. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the assessee received share capital with premium from two companies details of which are as under :- (1) M/s. Sangam Distributors Pvt. Ltd. Rs. 90,00,000/- (2) M/s. Teac Consultants Pvt. Ltd. Rs. 15,00,000/- There is no dispute that during the course of search and seizure no incriminating material was either found or seized disclosing any undisclosed income or indicating any bogus transaction of receipt of share capital and premium by the assessee from these two companies. Further, the AO has also not referred or relied upon any seized document while making the addition of the amount of Rs. 1,05,00,000/- on account of share capital and premium received from these two companies under section 68 of the IT Act. The sole basis of the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited. 475-478 15 Copy of reply in response to summon issued to the company. 479-481 16 Copy of letter for confirmation of source of funds used for applying the shares along with supporting documents 482-485 M/s Sangam Distributors Pvt. Ltd. S. No. Particulars Paper Book Page No. 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 486-487 2 Copy of Balance sheet of AY 2010-11 along with enclosures 488-489 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 490 4 Confirmation of account showing the transaction with Assessee Company. 491 5 Copy of share application form of equity share 492-493 6 Copy of affidavit of Mrs Neelam Gautam director of M/s Birla Arts Pvt Ltd. On behalf of amalgamated company M/s Sangam Distributors Pvt Ltd. 494-497 7 Copy of order dated 19.07.2014 passed by Calcutta High Court regarding amalgamation of other companies in this company 498-524 8 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 525-528 9 Copy of assessment order passed in the case of above named company for AY 2006-07, AY 2007-08 and 2013-14. 529-540 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Assessed Assessment Order u/s 143(3) at PB pg M/s Teac Consultants Pvt. Ltd 2005-06 13,980 451-453 M/s Teac Consultants Pvt. Ltd 2006-07 45,395 454-455 M/s Teac Consultants Pvt. Ltd 2012-13 49,91,290 459-462 M/s Teac Consultants Pvt. Ltd 2014-15 10,14,150 466/ M/s Sangam Distributors Pvt.Ltd 2006-07 Nil 530-531 M/s Sangam Distributors Pvt.Ltd 2007-08 9,600 534-535 M/s Sangam Distributors Pvt.Ltd 2013-14 6,79,400 538 M/s ISIS Mercantile Pvt. Ltd. 2006-07 6,936/- 500-501 M/s ISIS Mercantile Pvt. Ltd 2013-14 21,81,459/- 502-505 M/s ISIS Mercantile Pvt. Ltd 2014-15 Nil (Amalgamated with M/s Magnate Capital Market Pvt. Ltd.) 509-510 Thus it is clear that both the share applicant companies are regularly assessed and assessment orders under section 143(3) were passed wherein the transactions of investment made in the shares of the assessee were not disturbed by the AO. Hence all these documentary evidences as well as the admitted facts clearly established that the assessee has discharged its onus of proving the identity and creditworthiness of the share applicants as well as genuineness of the transactions. The AO has not brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to these companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of Share application and Share premium from M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited amounting to Rs. 1,05,00,000/- is unjustified; firstly, on the ground that no inquiries were made to rebut the evidences filed by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. In part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be concurred. 5.6 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in the account statement of investor, there is corresponding credit entry of equal amount, however, this observation of the AO is itself not sufficient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making investment, funds are required to be arranged by the investor, therefore reflection of such entries in bank statement doesn't lead to draw any adverse inference against the Appellant. Needless to say that Appellant is not required to prove source of the source u/s 68 of the Act in view of the settled judicial precedents. 5.7 In my considered view, mere not believing an explanation cannot lead to a conclusion that the invested amount is the income of the assessee from some undisclosed sources while in the present case, no evidences of any generation of undisclosed income or their utilization in the form of share application and share premium h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 78/25 Taxman 80F (SC) and others on this question of law. 5.10 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income tax authorities only and therefore, in view of the judgment CIT v/s Victor Electrodes Ltd. [2010] 329 ITR 271, the Appellant cannot be fastened upon the burden to produce the investors before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of investor companies and some directors/officer were also produced before the AO. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the present case it is untenable to make any addition for alleged nonappearance by the concerned person before the authorities though they complied with the notices/summon issued to them. 5.11 In the present case in hand, I find that AO asked Assessee to produce investor companies without verifying the facts of investing money from respective jurisdiction assessing officer and without verifying their returns of income and balance sheet wherein these transactions are reported, accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited totalling to Rs. 1,05,00,000/- is not sustainable and hence the same stands deleted. In view of above the ground No. 2, 13 to 18 and 20 of appeal is allowed to the extent mentioned above. " Accordingly, in view of the above discussion as well as facts and circumstances of the case the AO has made the addition based on the report of the Investigation Wing Kolkata whereas the assessee has produced all the relevant documentary evidence to establish the identity, creditworthiness and genuineness of the transactions. Hence in the absence of any discrepancy or otherwise any material or record to show that the assessee's own unaccounted/undisclosed income has routed through the share applicants, the addition made by the AO is not justified. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT (Appeals) in deleting the addition. 7. For the assessment year 2011-12, the addition was made in respect of the share capital and premium of Rs. 90,00,000/- received from M/s. ISIS Mercantile Pvt. Ltd. The other facts regarding this issue remain identical as for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IT Act and, therefore, the availability of the funds as well as the investment made by the said company in the shares of the assessee were not disturbed by the department while completing the scrutiny assessment. Hence in view of our finding on this issue for the assessment year 2010-11 and an identical finding of the ld. CIT (Appeals) for the assessment year under consideration, we do not find any error or illegality in the impugned order of the ld. CIT (A) for the assessment year 2011-12. Ground No. 7 of the department's appeal is regarding deletion of disallowance made by the AO by invoking the provisions of section 14A of the IT Act. 8. This issue is common for both the assessment years though the amount of disallowance varies. 9. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. During the course of assessment proceedings, the AO noted that the assessee company has shown opening and closing stock of the investment in shares at Rs. 15 lac as on 31.03.2011 and Rs. 1,97,53,750/- as on 31.03.2012. The AO has made a disallowance equivalent to 1% of the average investment on account of expenditure incurred for earning the exempt i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions, the assessee has raised the following common grounds for both the assessment years :- " 1. On the facts and in the circumstances of the case and in law the order passed u/s 153A read with section 143(3) of the Income Tax Act, 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The ld. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only. 2. On the facts and in the circumstances of the case and in law the ld. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. It is contended that the ld. AO passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore, the assessment order ought to held as bad in law and deserves to be annulled. The fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the possession/knowledge of the AO during the course of search proceedings. Since the assessments for these four assessment years i.e. 2010-11 and 2011-12 were not pending as on the date of search and there is no incriminating material found or seized during the course of search, then the AO is bound to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality and, therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for otherwise addition can only be made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n passed determining the assessee's total income and, such orders are subsisting at the time when search or requisition is made, there is no question of any abated assessment since no proceedings were pending and, therefore, the addition to the income that has already been assessed will be made on the basis of incriminating material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the ld. A/R has submitted that the AO has made the additions in the assessment under section 153A whereby the completed assessments have been disturbed without even referring to any incriminating material found or seized during the course of search and seizure under section 132 of the Act. The only basis of addition is the statement of third party recorded in the search of the third party that has no connection with the search proceedings of the assessee and, therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act. 13. On the other hand, the ld. D/R submitted that the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in respect of which a person is assessable. The total income will therefore cover not only the income emanating from the declared source or any material omission before AO but from all sources including undisclosed ones or based on unplaced material before the AO. The ld. CIT D/R has thus submitted that the decisions in the case of M/s. All Cargo Global Logistics Ltd. as well as Kabul Chawla (supra) were challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court has admitted the SLP for examination of the issue. Hence the issue is still pending adjudication before the Hon'ble Supreme Court. He has relied upon the orders of the authorities below. 14. We have considered the rival contentions as well as the relevant material on record. In pursuant to the same search and seizure action under section 132 carried on 2nd July, 2015, an identical issue was considered and decided by us in the case of group concern, namely, M/s. Kota Dall Mill in ITA Nos. 997 to 1002/JP/2018 and 1119/JP/2018 and others vide order dated 31st December, 2018 as under :- "6. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessments fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 61. It appears that a number of High Courts have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to subsection (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68. b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evide4nces to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately." The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon'ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :- "3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was also dismissed by the Hon'ble Supreme Court, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted. We order accordingly." Since the facts involved as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor was permitted to cross examine a person on whose statement the AO relied upon, it would amount to deficiency and denial of natural justice. The ld. A/R has then referred to the decision of Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay). Thus the ld. A/R has submitted that once the assessee has already discharged its primary onus to prove the cash credit by furnishing relevant documents, substantiated identity, creditworthiness and genuineness of the transaction, then the burden is shifted on the AO to disprove the documents produced by the assessee in support of the claim. The AO has relied upon the statement of Shri Anand Sharma and others and no material was brought on record to controvert the documentary evidence filed by the assessee. Thus the ld. A/R has stated that the addition made by the AO and sustained by the ld. CIT (A) be deleted. 16. On the other hand, the ld. CIT D/R has submitted that the AO has received the information from Investigation Directorate, Kolkata regarding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O conducted enquiry through Investigation Wing and statements of entry operators were also recorded, therefore, overwhelming evidences in the possession of the AO indicate bogus nature of transaction of loan and partners' capital which has been extensively discussed in the assessment order. During the course of assessment proceedings, the assessee was provided a number of opportunities for producing the alleged creditors for verification and failure of the assessee in producing the creditors in the light of the evidences was enough to invoke the provisions of section 68 of the IT Act. The ld. D/R has further submitted that the repayment of loan for credit entries also does not in itself prove the transactions to be genuine. Shell companies are used to provide accommodation entries and even reversal of an entry does not ipso facto prove the genuineness of the initial credit entry. In support of his contention, he has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd., 226 Taxman 190 (Mag.) and submitted that the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (SC). Thus it is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd both of these were provided bogus loans/advances by Royal Crystal Dealer Pvt. Ltd which is a paper company controlled by him. He further stated that the beneficiary party such i.e, M/s Jalsagar Commerce Pvt. Ltd. gave him cash in lieu of which cheques was given by him for some commission income. He also admitted that some paper companies have sold to beneficiary parties. Though, in the initial report dated 28.11.2017, M/s Jalsagar Commerce Pvt. Ltd. was treated a party in Rajasthan, in later report dated 06.12.2017 the entry operator Shri Anand Sharma was linked with M/s Jalsagar Commerce Pvt. Ltd. as per the data base prepared by Directorate of InvestigationKolkata The relevant part of the said statement as reproduced on page no.57 of the assessment order is as under: - 5.2 However, it is the submission of the Appellant that no notice under Section 131 or 133(6) of the Act was issued to this company, either by the Ld. AO or by the concerned AO or by the DDIT (Inv.) Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riefly highlighted in Para 4.1 above, and armed with several authorities on the issue cited by the AO, I fully agree with the view taken by AO. However, to fortify the finding of the AO and to highlight the guiding principle on adjudicating non-genuine unsecured loans raised through accommodation entry proviers, I place further reliance on few more case laws with underlining the similarity of adverse facts prevailing in the present case as follows:- 5.5 In case of Suman Gupta V/s. Income Tax Officer ITAT, Agra Bench (2012) 138 ITD 0153 held as under:- The AO discussed each and every creditor in the assessment order and the crux of the findings of the AO had been that there were very small bank balances in the bank accounts of the creditors and they were having meager income and as such, they were not men of means to advance any loan to the assessee. It is well settled law that burden is upon the assessee to prove ingredients of section 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions. The assessee has, however, failed to prove the creditworthiness of the creditors who were having only meager income. No details of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision is confirmed by Hon'ble Allahabad High Court vide their judgment in ITA No.680/12 vide judgment dated 07.08.2012 and SLP of assessee was dismissed before the Hon'ble Apex Court as reported in 2013-LL-0122-69 5.6 Hon'ble High Court of Delhi in case of Commissioner of Income Tax V/s. Navodaya Castles Pvt. Ltd. reported at (2014) 367 ITR 0306 involving exactly similar facts observed in Para 2, 3 then Para 2 as under:- 2. The appeal arises out of the impugned order dated 31st October, 2011, passed by the Income Tax Appellate Tribunal, upholding the order passed by the Commissioner of Income Tax (Appeals) deleting addition of Rs. 54,00,000/- made under Section 68 of the Income Tax Act, 1961 (Act, for short), by the Assessing Officer on account of share application. 3. The assessee, a company, had filed their return of income for the assessment year 2002-03 declaring loss of Rs. 1,58,035/- on 20th October, 2002, which was processed under Section 143(1) of the Act. Subsequently, on the basis of a report submitted by the Investigation Wing that the assessee was a recipient of accommodation entries in form of share application money/share capital/share premium, notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .................................................................................................. ........................................................................................................... 11. We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax Vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax Vs. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-II Vs. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., [1994] 205 ITR 98 (FB)(Delhi), CIT Vs. Divine Leasing and Finance Limited [2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the share holder companies were duly incorporated by the Registrar of Companies, their identity stood established, ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 15. Summarizing the legal position in Nova Promoters and Finlease (P) Ltd.(supra), and highlighting the legal effect of section 68 of the Act, the Division Bench has held as under:- "32. The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assesseecompany and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of the unaccounted monies was the coffers of the assessee, we are inclined to think that in the facts of the present case such proof has been brought out by the Assessing Officer. The statements of Mukesh Gupta and RajanJassal, the entry providers, explaining their modus operandi to help assessee's having unaccounted monies convert the same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be said to have discharged the duty. The statements refer to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consideration in the form of commission. As already pointed out, names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share-applicants subscribing to the shares of the assessee-company. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company. The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action and the veracity of the repudiation." 17. Nova Promoters and Finlease (P) Ltd. (supra) after referring to the dismissal of SLP against Divine Leasing case (supra) observed as under:- "...............So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders' attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflect on the genuineness of the transaction and creditworthiness of the creditor. It would be also incorrect to universally state that an Inspector must be sent to verify the shareholders/subscribers at the available addresses, though this might be required in some cases. Similarly, it would be incorrect to state that the Assessing Officer should ascertain and get addresses from the Registrar of Companies' website or search for the addresses of shareholders themselves. Creditworthiness is not proved by showing issue and receipt of a cheque or by furnishing a copy of statement of bank account, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions. 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that thirdpersons or company had filed income tax details incase of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them." 20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced the order of the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,00,000/- was infused from the Directors/family members of the Directors. The remaining share capital had been infused from parties which were completely unrelated either to the Assessee or to any of its Directors. In a private limited company, normally the investment of shares is from parties or persons who are friends or relatives of Promoters/Directors. 34. It is noticed that the shares had face value of Rs. 100 /- and were allotted at a premium of Rs. 100 /- to Rs. 200/- and were then subsequently purchased by the Promoters/Directors, who had originally transferred these shares at Rs. 35 /- per share. 35. It is really surprising that a person who had purchased shares at a premium of Rs. 100 /- to Rs. 200/- per share i.e. at a price of Rs. 200 /- to Rs. 300/- per share, sold the shares at Rs. 35 /- per share i.e at a substantial loss. Another surprising factor is that the entire investment happened during a short span of time and re-transfer of the shares to the four Promoters/Directors of the company at Rs. 35 /- per share by different parties also happened during a short span of few days. The modus operandi and the manner in which cash is deposited in a bank and then util ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share applicants and the genuineness of the transaction. Though, in our considered opinion, none of the above judgments, referred to by the Assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by us hereinabove. 54. In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable. 5.9 Hon'ble Income Tax Appellate Tribunal Delhi Bench: 'B' in case of M/s. Amtrac Automotive India Pvt. Ltd. Versus ACIT, Circle 1(1), involving exactly similar facts in their appellate order ITA No.2920/Del/09 for A.Y. 2005-06 dated 31.12.2009 observed in Para 3 & then Para 2 as under:- 3. The assessee company is engaged in share trading in the year under consideration. In the course of scrutiny, the assessing officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000/- at a share premium of Rs. 1,35,00,000/-......... ....................................................................................... 2.1 The AO asked the appellant to furnish details of such share holders mentioni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the facts that the amount were paid by account payee cheques do not make it satisfactory as held in CIT vs. Precision finance Pvt. Ltd. 208 ITR 465 (Cal.). Even income -tax file particulars, where the share holder is assessed to tax is not sufficient as found in CIT vs. Korlay Trading Co. Ltd. 232 ITR 820 (Cal.) 2.1.2 The AO also referred the enquiry initiated by investigation wing of the Department in August 2003 which culminated into detection of many entry operators who are operating number of accounts in the same bank/branch or in different branches, in the names of companies, firms, proprietary concerns and individuals. For the operations of these bank accounts, filing income tax returns etc. persons are hired. Like any other business it does requires manpower according to the scale of operation. Except for two or three persons who are required regularly to visit banks and do other spade work like collection of cash etc., most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Some of the entry operators have also roped in their own relatives for operation of entry accounts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stence or availability of the respective share applicants. When the identity of the person is required to be proved so as to examine whether in fact they have applied for allotment of shares, the existence itself is not proved. The existence of a person is not merely on paper. Particularly when the AO required the assessee to produce the share applicants and particularly when at the stated address the share applicants do not found to be existing, it cannot be said that the amount received by assessee is proved to be towards share capital. The transaction cannot be proved merely on paper. Neither before AO nor before Ld. CIT (A) the assessee could make the share applicants available. Therefore when the identity of the person itself is not proved, the amount received by assessee cannot be considered to be genuinely received. 6.1. It is also to be noted that the assessee company is stated to have issued shares at premium 9 times its face value. The assessee is a private limited company. It has not issued prospectus for issue of shares nor under the Companies Act 1956, it can invite the public to apply for and allot the shares. The company is prohibited from making any invitation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assesee. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor /subscriber the genuineness of the transaction and the veracity of the repudiation...." 26. In Divine Leasing (supra), on the question of burden of proof, the Court relied upon CIT v. Musaddilal Ram Bharose, (1987) 165 ITR 14, to hold that the initial burden is upon the Assessee to show the absence of fraud and this is not discharged by the Assessee tendering an incredible and fantastic explanation. The Court also held that every explanation given by the Assessee need not be accepted. 27. In Kamdhenu (supra), this Court categorically held that the initial burden lies on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance of the said statement is that the concern M/s Jalsagar Commerce Pvt. Ltd. was engaged in the activities of providing accommodation entries and the appellant happened to be one of such beneficiary of such concern. It is also admitted fact that Shri Anand Sharma had been running the affair of the said company. v. The statement of Shri Anand Sharma in which name of M/s Jalsagar Commerce Pvt. Ltd. cannot be completely ignored solely on the legal grounds raised by the Appellant. 5.12 In view of above discussion, it is clear that the incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkata, during the assessment proceedings and all such material have been shared with the appellant at least during the remand report proceeding. In view of nation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for cross-examination of same accommodation entry providers. Any way in the rejoinder submission to remand report the appellant is absolutely silient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.Royal Crystal Dealers Pvt. Ltd., then even if there is a possibility of bogus accommodation entry routed through another intermediary company M/s.Jalsagar Commerce Pvt. Ltd., it requires a definite link of the transactions from M/s.Royal Crystal Dealers Pvt. Ltd. to M/s.Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the chain of transactions and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank accounts statement of loan creditor, return of income, assessment orders framed under section 143(3), confirmation of the loan creditor, then a proper examination could have very well established the link, if any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan creditor M/s. Jalsagar Commerce Pvt. Ltd. there was no suspicious transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken during the investigation. It is well settled principle as well as the directions of the CBDT issued under the Circulars that during the course of investigation, the department should concentrate and focus on collecting documentary evidence disclosing undisclosed income instead of obtaining the statement and then support of their claim merely on the basis of the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assessee has produced the documentary evidence and particularly the financial statements of the loan creditors, their bank account statement, then in the absence of any discrepancy or fault in these financial statements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and not on any tangible material disclosing the nongenuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of interest which was also subjected to TDS. This shows the genuineness of the transactions and all these transactions have taken place prior to the date of search and duly recorded in the books of accounts and also subjected to assessment under section 143(3) for some of the assessment years. Therefore, even as per the evidence produced by the assessee, the alleged suspicion of the AO was got dispelled and in the absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them". 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said paragraph (g) makes it clear that the revenue had accepted the findings of the Tribunal on facts as also the position that there had been a violation of principles of natural justice. However, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11-2008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is crossexamination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." Thus the Hon'ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied all the three tests. 13. In Kishanchand Chellaram (supra) wherein the Supreme Court observed that the revenue authorities had not recorded the statement of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and disclose material, these were denied to him. In this view of the matter we are inclined to allow the appeal on this very issue." Thus the denial of opportunity to cross examine was considered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- "2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs. 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the asseesse." Further, regarding cross examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wanted to produce in support of its case. The result is that the assessee had not had a fair hearing." The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed." Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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