TMI Blog2019 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... -17 are pari material, respectfully following the order of the Tribunal in the group cases, we do not find any merit in the addition so made in respect of loan taken from M/s Jalsagar Commerce Pvt. Ltd. We found that the Coordinate Bench in the case of group concern namely M/s Kota Dall Mill (supra) vide its order 31/12/2018 deleted the similar addition made in the assessment year 2015-16 and 2016-17. We had also gone through the findings recorded by the ld. CIT(A) in deleting the addition and found that no clinching evidence was brought on record by the Assessing Officer for holding that the loan given by the M/s Competent Securities Pvt. Ltd. was bogus. The assessee proved the identity the company. The company was assessed by Income Tax Department u/s 143(3) of ITax Act. - ITA No. 1121/JP/2018, 1189/JP/2018, 1052/JP/2018 - - - Dated:- 27-3-2019 - SHRI RAMESH C SHARMA, AM SHRI VIJAY PAL RAO, JM Assessee by: Shri Vijay Goyal (CA) Shri Gulshan Agarwal (CA) Revenue by: Shri Varinder Mehta (CIT-DR) ORDER PER: R.C. SHARMA, A.M. These are the appeals and cross appeals by the assessee and the revenue for the A.Y. 2015-16 and 2016-17 respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- made by Id. AO u/s 68 of Income Tax Act, 1961 on account of unsecured loans taken from following parties and erroneously held that the identity, creditworthiness and genuineness of the under mentioned company is doubtful: - Name of the company from whom loan received Addition during the year Amount Name of alleged entry operator whose statement were relied Jalsagar Commerce Pvt. Ltd 1,50,50,000 Shri Anand Sharma 5. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds. 6. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. Grounds of revenue s appeal for the A.Y. 2016-17 On the facts and in the circumstances of the case, I am directed to file an appeal in the above mentioned case before the Hon ble 1TAT, Jaipur on the following grounds. 1. Whether on the facts and circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. Grounds of assessee s appeal for the A.Y. 2016-17 1. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. The findings of ld. CIT(A) in this regard are perverse and erroneous. It is contended that the Id. 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. 2. That the order of the Id CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case. The addition confirmed by ld.CIT (A) deserves to be deleted. 3. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out at the business premises of the assessee from 02.07.2015 to 04.07.2015. In compliance to notice U/s 153A of the Act, the assessee filed return of income on 16/7/2016 for the A.Y. 2015-16 declaring total return loss of ₹ 2,83,866/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee had received unsecured loan from registered NBFC and other companies. The AO issued show cause notice to assessee, contents of which were reproduced by AO in Assessment order at page 5-17/AY 2015-16. The assessee filed detailed reply of the show cause notice of the ld AO, contents of which was reproduced by ld AO in assessment order at page 17-31/AY 2015-16. While completing assessment and making the impugned addition under Section-68 of the Act, the Ld. AO has relied upon some of the documents/information/details/third party information/statement recorded behind the back of the Assessee. However, the said information/documents/statements recorded were not confronted with the assessee and opportunity of cross-examination of witnesses was not given despite of repeated request of the assessee. Ld. AO chose to pass the impugned assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and procedure to be followed by him for conducting of cross examination. 7. By the impugned order, the ld. CIT(A) has partly allowed the appeal as under: Assessment year Nature of Addition Description of addition Addition Made by AO Amount Addition Deleted by CIT(A) Addition sustained by CIT(A) 2015-16 Unsecured loan M/s Jalsagar Commerce P. Ltd. 1,50,50,000 1,50,50,000 2016-17 Unsecured loan M/s Jalsagar Commerce P. Ltd 4,55,00,000 4,55,00,000 Unsecured loan M/s Competent Securities P. Ltd 1,40,00,000 1,40,00,000 8. Against the above order of the ld. CIT(A), the assessee is in appeal before us for the A.Y. 2015-19 whereas for the A.Y. 2016-17 both the revenue and the assessee are in appeals before us. 9. In the ground No. 1 of the assessee s appeal, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss-examination of witness. The AO vide letter dated 12-04-2018 provided copy of various inquiry reports and asked the assessee to intimate the name of persons required for cross examination and flexible time frame. The assessee vide letter dated 20/04/2018 filed on 24/04/2018 intimated the name of persons required for cross-examination. The assessee further submitted that the assessee is always and instantly available for cross-examination subject to prior information of one week. 12. The AO submitted the remand report to ld CIT(A) vide letter dated 21/05/2018, copy of which was forwarded to assessee by ld CIT(A) vide letter dated 28/05/2018 for A.Y 2016-17. However, at this stage also, opportunity of cross-examination of witness was not given to the assessee and the relevant report of the AO on this point asking Ld CIT(A) to issue detailed guidelines and procedure to be followed by him for conduct of cross-examination. Thus, it is clear that neither the Assessing Officer has given opportunity to cross examine the witnesses nor the ld. CIT(A) has given the same. The issue with regard to finalizing the assessment without giving the opportunity to cross examine have been elaborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon by the Ld. AO, which was explained by the ld A.R. as under: (i) Dhakeswari Cotton Mills Ltd V. Commissioner of Income Tax, West Bengal (1954) 26 ITR 775 (SC): Ld. AO has proceeded with to pass the assessment order in violation of the principles and ratio laid down by the Hon ble Apex Court in the aforesaid judgment. While placing reliance upon the judgment of Hon ble Apex Court in case Dhakeswari (supra), Ld. AO declined access to the documents, relied upon by him and did not afford opportunity for cross-examination of witnesses, statements of which were recorded behind the back of Assessee on the pretext that Income Tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law. However, ld. AO failed to appreciate that Hon ble Apex Court in the case of Dakeshari (supra) has held that in making the assessment the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material and also that material relied upon by the Income Tax Officer should be disclosed to the Assessee, which in the case of Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Apex Court in Roshan Di Hatti case (ibid), which is reproduced below: the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding. We accordingly allow the appeal, set aside the order of the High Court and answer the question referred by the Tribunal in negative. The Commissioner will pay the costs of the appeal to the assessee . The case of Assessee is squarely covered under the aforesaid finding of Hon ble Apex Court. The Judgment of Kale Khan Mohammed Hanif (ibid) is distinct from the case of Assessee and has no applicability to the Assessee. The observations of Hon ble Apex Court are reproduced below: It was open to the assessee to raise the question that the finding that those amounts were income received from undisclosed sources was not based on any evidence or was, for other reasons, perverse . And also The assessee accepted the decision of the Tribunal and did not move the High Court to direct a reference in regard to those questions under Section 66(2). Those questions, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments include documents filed with ROC, bank statements, assessment carried out by the Income Tax Department and so on. The ld. AO did not point out any defects in such documents. It is further most importantly relevant to mention here that the Income Tax department carried out intensive search over the assessee group, however, as a result of search no evidence was found to prove that the assessee was having some undisclosed income which was routed in books of accounts in the shape of unsecured loans. Thus, the Ld. AO must have considered apparent as real as Ld. AO failed to establish and also to show any reason to believe that the apparent is not the real. Unless and until there was any reason to disbelieve the truthfulness of documentary evidences, there was no case and basis with the Ld. AO to treat the apparent as not real only on the basis of guess, assumptions, presumptions and surmises, which is not permissible under the law. Furthermore, it was the onus of the Ld. AO to prove that apparent was not the real, for which he was at liberty to call upon any further clarification and subsequent documents. Since, it is not proved that the documents furnished were not the true, no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions filed in this regard is placed on record. 21. With regard to various documentary evidences placed on record, the ld AR has relied on the decision of the Coordinate Bench in the case of M/s Kota Dall Mill A.Y 2010-11, AY 2011-12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17 Assessee's appeal (ITA No. 997 to 1002 and 1119/JPR/2018) and departmental appeal (ITA No. 1057 to 1062 and 1210/JPR/2018), wherein the unsecured loan taken by assessee from various companies was deleted by Hon'ble ITAT by passing order dated 31/12/2018. In view of the findings of Hon'ble ITAT in the main group case M/s Kota Dall Mill, it was submitted that impugned addition made by Ld. AO and confirmed by ld CIT(A) is not legally tenable. 22. As per ld. AR, so as to discharging of the burden u/s 68 of the Act, the following cash creditor are covered by submission for other group case of the assessee tabulated as under:- Name of Cash Creditors Covered by M/s Jalsagar Commerce Pvt. Ltd. Covered Kota Dall Mill AY 2010-11, 2012-13, 2013-14 23. The ld AR also submitted that the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Copy of Ledger from the books of accounts of assessee 445 6 Copy of affidavit of Mrs Sangeeta Somani director of company. 446-449 7 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 450-456 8 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 200708, AY 2011-12. 2012-13 and 2014-15. 457-499 9 Copy of ROC master data. 500-501 10 Copy of PAN card. 502 11 Certificate of Incorporation. 503 12 Copy of Certificate of NBFC Registration. 504 A.Y 2016-17 S. No. Particulars of Documents S. No. of PB where documents annexed AY 2016-17/VOL- II 1 Copy of Ack. of ITR o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 14,36,430 472-473/PB-II) M/s Jalsagar Commerce Pvt. Ltd 2011-12 40,17,339 476-480/PB-II) M/s Jalsagar Commerce Pvt. Ltd 2012-13 9,64,69,110 484-491/PB-II) M/s Jalsagar Commerce Pvt. Ltd 2014-15 38,20,430 497/PB-II) Copy of Master Data of ROC Name of Company Status of Company PB pg M/s Jalsagar Commerce Pvt. Ltd Active 500/Vol-II/A.Y 2015-16 Further by filing the confirmation, their ITR, Bank statement and balance sheets, the identity of the cash creditor is proved. 24. Reliance was placed by the ld AR on the decision of the Hon ble Rajasthan High Court in the case of Aravali Trading Co V/s ITO (2008) 8 DTR (Raj) 199 wherein it was held that once the existence of the creditors is proved and such persons own the credits, the assessee s onus stands discharged and the assessee is not required to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 476-480/PB-II) 2012-13 1,96,00,000 484-491/PB-II) 2014-15 11,05,00,000 497/PB-II) 2015-16 7,71,29,500 There is sufficient source of funds with the company to give the Unsecured Loan to the assessee. The chart showing the amount given on Unsecured Loan to the assessee viz a viz own funds with the companies are as under: - AY 2015-16 Name of the lender company Unsecured Loan Received Share capital, application and reserve surplus Lender company as on 31.03.2015 Share capital, application and reserve surplus Lender company as on 31.03.2014 Jalsagar Commerce Pvt Ltd 1,50,50,000/- 38,10,50,840/- 27,44,00,650/- AY 2016-17 Name of the Investor company Amount given to assessee (Maximum Balance) Source of funds with Investor companies as on 31.03.2016 Source of funds with Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,50,000 16-17 1,50,50,000 11,93,00,000 41,30,597 12,98,50,000 45,00,000 d) Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against unsecured loan was own undisclosed money of the company. No any entry in books of account or document was found showing payment of cash to these investor company in lieu of receipt of cheques from these company against unsecured loan. Therefore the genuineness of the transactions cannot be doubted. Further, the transactions are reflecting in the bank accounts of respective Investor Company as well as bank account of Assessee. Thus, the genuineness of the transactions cannot be doubted merely on the basis of guess, assumptions and presumptions, without having any other corroborative evidences. e) As regard the alleged discrepancy on account of statement of Shri Anand Sharma who said that accommodation entry was given to M/s Jalsagar Commerce Pvt Ltd by Royal Crustal Dealers Private Ltd, the necessary addition has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unsecured loans . There is no any deposit of cash or suspicious funds in account of investor companies. The entire unsecured loan was invested by the investor company out of funds owned by it which is supported by the bank statements of the respective company, affidavits of their directors etc. The bank statements of the investor company clearly demonstrate that there is no cash deposit in bank a/c of lender Company. The investor company were incorporated much prior to investment made in assessee company and having their sufficient net worth. Thus in the case of search assessments no additions can be made without having corroborative material and evidences as a result of search. Allegation of shell companies without material In the light of submission, as aforesaid, it was submitted that the allegation pertaining to that the investments were received from shell companies is without basis, material, evidence and purely based on surmises, conjectures, irrelevant material. No any positive material was brought on record to show that these Investor Companies are shell company. The company is registered company under the Companies Act and is having an independent identity under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the parties which are not any way concerned with the assessee. However, before embarking on the allegation of the Ld. AO, the ld. AR submitted his submissions on merits in case of the lender company in respect of whom addition was made, which reads as follows: a) M/s Jalsagar Commerce Pvt. Ltd. As we understand and on the basis of details/information available with assessee no summon/notice under Section 131 or 133 (6) of the Act was issued to M/s Jalsagar Commerce Pvt. Ltd., either by the Ld. AO or by the concerned AO or by the DDIT (Inv.) Kolkata, which shows that Ld. AO had no doubt regarding the veracity of the documents furnished by the Assessee as nothing had been done by the Ld. AO. Thus, addition of unsecured loan, provided by M/s Jalsagar Commerce Pvt. Ltd. is unreasonable, untenable, without any basis and bad in law on this count itself. 26. After considering the rival contentions, we found that on the following three reasons, the Assessing Officer has not accepted the unsecured loans received by the assessee as genuine. i) Personal non attendance of directors of the companies from whom the assessee received loan. ii) Report of the Investigation Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court in CIT V Fair Finvest Ltd. 357 ITR 146. c) Information of Investigation Directorate:- On bare perusal of the documents relied upon and provided by the Ld. AO, it is needless to say that Ld. AO only reproduced the information of Investigation Directorate without conducting any independent enquiry and drawing any conclusion on the same and even the information obtained under the aforesaid letters have not been appreciated in the right perspective and in toto, which shows distorted approach of Ld. AO towards the aforesaid documents as well. Thus, without having any documents in support of the contents of documents, relied upon by Ld. AO, as aforesaid, are not acceptable and not tenable at all. d) Reports of the Investigation Directorate: - (i) Sharing of information letter of ACIT/CC-2(1)/Sharing of Information/Kol/2016-17 dated 09.03.2017: (PB-I pg 385- 386/A.Y 2015-16) This report is totally irrelevant for the assessee as nothing has been said in the report about the assessee company. Under the aforesaid letter, a copy of the ledger is stated to have been enclosed wherein two entries of ₹ 37,53,50,000 for the FY 2010-11 and ₹ 10,05,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of assessee. (iv) Investigation report of the DDIT (Inv.), Unit-1(3) Kolkata vide letter number DDIT (Inv)/ Unit-1(3)/ KOl/ Jaipur/ Commission/ 2017-18/1867 dated 28.11.2017. (PB pg 391-399/Vol-I/A.Y 2015-16). Submission: Silent features of the report are as under:- Admitted in the report that no notice remained unserved. It is humbly submitted that DDIT (Inv) in the aforesaid letter has admitted that no notice returned unserved by the postal authorities i.e. all the notices, issued by the DDIT (Inv) were duly served upon the respective creditors/investors companies, which proves their identity. Admitted that all details filed -Tab I It is also admitted fact that all the creditors/investors companies duly responded to the notices of DDIT (Inv) by submitting all the requisite documents to prove identity, creditworthiness and genuineness of the transactions. Tab -II held paper company based on statement, neither copy of these statements except 4 was provided to the assessee nor opportunity of cross examination/confrontation was given to assessee. Tab -II (PB-I pg 394/A.Y 2015-16) No name of entry operator/dummy directors mentioned agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively He has no where stated that M/s Jalsagar Commerce Pvt. Ltd has provided accommodation entry to the assessee company. The statement of Mr. Anand Sharma is totally irrelevant for the case of assessee. Further the opportunity for cross examination was not given to the assessee, therefore, the statement of Shri Anand Sharma cannot be used against the assessee. b) Mr. Hanish Toshniwal The statements were recorded on 11.05.2015, wherein a list of 207 Companies has been given. Name of M/s Jalsagar Commerce Pvt.Ltd is not appearing in the list. The statement of Shri Hanish Toshniwal is totally irrelevant for the case of assessee. However, data-base by the Directorate of Investigation Wing, Kolkata is itself contradictory. Furthermore, the statements were not recorded in the case of assessee. Further the opportunity for cross examination was not given to the assessee, therefore, the statement of Shri Hanish Toshniwal cannot be used against the assessee. c) Mr. Shiv Shanker Banka The statement of Mr. Shiv Shankar Banka was recorded on 15.07.2014, in which he indicated company M/s VSG Leasing and Finance Co. Pvt Ltd. It is pertinent to mention that no transaction ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured loan invested by NBFC to the Assessee Company through RTGS/Account Payee Cheque. The payments credited in the Bank account of the Assessee Company. Therefore, the Assessee has explained the nature and source of the credit entry and discharged the onus to prove the genuineness of the transactions. The aforesaid contention of the Assessee finds support from the following judicial pronouncements: i) CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB HARYANA) Where assessee received and returned amount in question by way of account payee cheques and transaction was reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated as assessee's income when department failed to prove to contrary. ii) CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180 Where it was apparent from material on record that lenders had granted loan to assessee through account payee cheques and they had got sufficient balance in their account before issuing those cheques, loan amount could not be added to assessee's taxable income under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s Kota Dall Mill. The assessee relies upon findings of Hon'ble Tribunal in the case of M/s Kota Dall Mill which is at Pg 76-87 of the order of Hon'ble ITAT. 11. From the record we also found that the assessee made repeated requests for cross examination of witnesses. The Ld AO did not provide the opportunity of cross examination of witnesses. The Assessee raised this issue before ld CIT(A). Ld CIT(A) called remand report from AO and directed to provide the assessee opportunity of cross examination. Ld AO during the remand proceeding asked the assessee the name of persons to whom the assessee wants to cross examine and to give assurance to bear the expenses of witnesses. The assessee provided the name of persons to whom it wants to cross examine and gave assurance to bear all the cost relating to cross examination of witness. However the ld AO did not provide the opportunity of the cross examination and ld CIT (A) also held that there was no need to give the opportunity of cross examination. Thus, the lower authorities violated the principle of natural justice, which tenders the assessment void ab-initio. 12. In support of the above proposition, reliance was plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. iii) H.R. Mehta V. Assistant Commissioner of Income Tax 387 ITR 561(Bombay); In our view in the light of the fact that the monies were advanced apparently account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CIT (A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th Februar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested the same to the Assessing officer. 2.10 In this regard, the Hon ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812-818 filed in case of M/s Kota Dall Mill) has held that The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under subsection (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it. It was held in that case that In this case we are of the opinion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 2.11 In light of above proposition i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that Hon ble Apex Court in the case of Dakeshari (supra) has held that in making the assessment the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material and also that material relied upon by the Income Tax Officer should be disclosed to the Assessee, which in the case of Assessee, Ld. AO failed to do. The relevant para of the above judgment is reproduced below: In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produced in support of his case. The result is that the assessee had not had a fair hearing . in the result we allow this appeal, set aside the order of the Tribunal and remand the case to it with directions that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee or respective Lenders. Thus, the reliance placed by the Ld. AO is not only misconceived but also misinterpretation of the law laid down by Hon ble Apex Court. Furthermore, the Ld. AO did not appreciate the ratio decided by the Hon ble Apex Court in Roshan Di Hatti case (ibid), which is reproduced below: the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding. We accordingly allow the appeal, set aside the order of the High Court and answer the question referred by the Tribunal in negative. The Commissioner will pay the costs of the appeal to the assessee . The case of Assessee is squarely covered under the aforesaid finding of Hon ble Apex Court as the finding of the Ld. AO is unreasonable and any person acting judiciously and properly instructed as to the relevant law would not have come to such a finding. The non-appreciating of facts properly and non-appreciation of record by Ld. AO and as also not adopting judicious approach has resulted in unreasonable and arbitrary assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linkers while looking at the documents produced before them. However, it is humbly submitted that while interpreting the aforesaid judgment, the Ld. AO failed to consider the finding of Hon ble Apex Court that it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real . In the case of the assessee, all the documentary evidences were produced before Ld. AO both by the assessee and by the respective lenders as well and the documents produced are the public documents which are available on public domain itself. These documents include documents filed with ROC, bank statements, assessment carried out by the Income Tax Department and so on. The ld. AO did not point out any defects in such documents. It is further most importantly relevant to mention here that the Income Tax department carried out intensive search over the assessee group and as a result of search no evidence was found to prove that the assessee was having some undisclosed income which was routed in books of accounts in the shape of unsecured loans. Thus, the Ld. AO must have considered apparent as real as Ld. AO failed to establish and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld. AO is not in accordance with the law, the Ld. AO failed to appreciate the ratio laid down by Hon ble Court while carrying out assessment proceedings in the instant case of Assessee. It is humbly submitted that ratio of the aforesaid judgment rather supports the contention of the Assessee and proves its case and not the case made out by the Ld. AO. (vi) A. Govindarajulu Mudaliar Vs. CIT [1958] 34 ITR 807 (SC): The facts and circumstances of case of Assessee has no relevancy, even remotely, with the judgment of Hon ble Apex Court, as relied upon by the Ld. AO. In that case the Assessee did not prove his version that the gift was alleged to have been made by the Assessee to his aunt and by her to him. More so, the conclusion to which the Appellate Tribunal came amply warranted by the facts of the case. Furthermore, in that case it was held that But seeing that in this case the Assessee had moved the High Court and a decision has been pronounced adverse to him and this has become final obviously it would not be open to him to question the correctness of the decision of the Tribunal on grounds which might have taken in an appeal against the judgment of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the ratio laid down by the Hon ble Court the invoking of Section-68 by the Ld. AO is unlawful. (ix) P.V. Raghava Reddy V. CIT (1956) 29 ITR 942 and M.M. A.K. Mohindeen Thambay Co. V. CIT (1959) 36 ITR 481: The aforesaid cases, relied upon by the Ld. AO have no relevancy to the case of Assessee. In this case the Hon ble Court held that the question of burden of proof cannot be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the ITO under certain circumstances. In the instant case of the Assessee, the Assessee discharged its onus and burden of proof, in respect of unsecured loan obtained by it by submitting documentary evidences of the respective Lenders before the Ld. AO for substantiating identity, creditworthiness and genuineness of the transactions. The documentary evidences produced by the Assessee remained un-rebutted, therefore, onus remained shifted to the Ld. AO, which was not discharged by Ld. AO. There is clear distinction between two types of matters (1) where the explanation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made in respect of loan taken from M/s Competent Securities Pvt. Ltd. 16. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that during the assessment year 2015-16 and 2016-17 the assessee has taken unsecured loan of ₹ 1,50,500/- and ₹ 4,55,00,000 respectively from M/s Jalsagar Commerce Pvt. Ltd.. In A.Y. 2016-17, the assessee has taken unsecured loan of ₹ 1.40 crores from M/s Competent Securities Pvt. Ltd.. The loan so taken was paid within the same financial year alongwith interest. However, the A.O. has allowed the interest expenditure but the added the amount of loan taken from M/s Competent Securities Pvt. Ltd. which has been deleted by the ld. CIT(A) after giving detailed finding. So far as the amount of loan taken from M/s Jalsagar Commerce Pvt. Ltd. is concerned, we found that the Coordinate Bench in its decision dated 31/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transaction of receiving any entry or any deposit of an equal amount prior to giving the loan to the assessee. The assessee has paid interest to the creditor, which was duly accepted by the AO as business expenditure. Undisputedly, the assessee has produced the income-tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed 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 non-genuineness of the transactions. The AO has not disputed the transactions routed through banking channel having sufficient funds which is also supported by the financial statements and further the assessments of the loan creditor were completed under section 143(3). The details of loans t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commerce Pvt. Ltd. and the entire loan was already repaid by the assessee. We further note that it is not the case of repayment of loan after the search action on 2nd July, 2015 but there is a regular repayment of loan for each year as it is evident from the details reproduced above. Therefore, the transactions of taking loan and repayment cannot be treated as bogus once the assessee has been regularly repaying the loan amount and small balance was there at the end of the year. Once there was no balance at the end of the year on the loan account, then the addition cannot be made by treating the loan taken and repaid as bogus transaction. Apart from these facts, the assessee has also made the payment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held in para 6 to 9 as under :- 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation being MA 264/Delhi/2008 under section 254(2) of the Income-tax Act, 1961 had been filed by the revenue before the said Tribunal. In that also, in paragraph (g) of the Miscellaneous Application, the revenue had submitted as under:- (g) Because, although findings of the Tribunal are factually correct but the decision of the Tribunal is not acceptable because violation of the canons of natural justice in itself is not fatal enough so as to jeopardize the entire proceedings. In the interest of justice, the Tribunal could have set aside the assessment order with the limited purpose of offering assessee an opportunity to cross-examine Shri Manoj Aggarwal before completing the proceedings. [Emphasis supplied] 6. A reading of the 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee upon whom the initial burden lies, produces bank certificate to establish that the transaction was carried out through account payee cheques thus disclosing the identity of the creditors as also the source of income, the burden shifts on to the department and the department cannot add the cash credits to his income from undisclosed source. 12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the instant case by virtue of the fact that the transaction was completed by cheque payments, the appellant has contended that it had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CIT (A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statement 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 Coordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and provide an opportunity to the assessee to cross examine such persons. However, the AO didn t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it. It was held in that case that In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee 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 collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 2.11 In light of above proposition in law and especially taking into consideration the decision of the Hon ble Supreme Court in case of C. Vasantlal Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce Pvt. Ltd.. As the facts and circumstances during the both the assessment year under consideration i.e. A.Y. 2015-16 and 2016-17 are pari material, respectfully following the order of the Tribunal in the group cases, we do not find any merit in the addition so made in respect of loan taken from M/s Jalsagar Commerce Pvt. Ltd. 18. In the result, appeals of the assessee in both the years are allowed. 19. In the appeal for the A.Y. 2016-17, the revenue is aggrieved for deleting the addition made on account of unexplained unsecured loan taken from M/s Competent Securities Pvt. Ltd.. 20. We have considered the rival contentions and carefully gone through the orders of the authorities below and found that during the year under consideration, the assessee has also taken loan from M/s Competent Securities Pvt. Ltd. amounting to ₹ 1.40 crores. We found that the loan was repaid in full to the lender during the same financial year. We also found that the A.O. has allowed the interest expenditure claimed by the assessee in respect of the loan taken from M/s Competent Securities Pvt. Ltd. which was repaid by 02/3/2016 with interest. The books of account of the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 balance addition in respect of unsecured loans company namely M/s Competent securities Private Limited totalling to ₹ 1,40,00,000/- 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 particular, none of the material or statements have been provided in the Assessment Order wherein names of the said companies are mentioned. Notably, the transactions with the said company is duly verifiable from confirmation placed at page no. 405 of PB with supporting bank statements placed at page no. 402-404 of PB and have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 5.3 Furthermore, from the perusal of documentary evidences submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the lender, 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. 5.6 In my considered view, mere not believing an explanation cannot lead to a conclusion that the unsecured loan received by the assessee 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 unsecured loan has been found and brought on record. 5.7 Similarly, I find that various observations of the AO on balance sheet / ITR of the companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations / observations of the AO are misconceived and premature only and in view the appellant s submission made in para 10 ii) 14 as reproduced in Para No. 3.2 of this order, the same does not lead any where to draw any adverse inference against the Appellant. Further, the various case laws relied upon by the AO are distinguishable from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 5.10 In the present case in hand, I find that AO asked Assessee to produce lender companies without verifying the facts of lending money from respective jurisdiction assessing officer and without verifying their returns of income and balance sheet wherein these transactions are reported, accordingly the AO has not followed the principles laid down under section 68 of the Act. The Hon ble Gujrat High Court in the case of Commissioner of Income-tax v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) has held that:- Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l matrix of the case. We found that the Coordinate Bench in the case of group concern namely M/s Kota Dall Mill (supra) vide its order 31/12/2018 deleted the similar addition made in the assessment year 2015-16 and 2016-17. The pr cised observation of the Tribunal was as under: 30. In the Revenue s cross appeal the issue on account of unsecured loans from two partners, namely, M/s. Competent Securities and M/s. Intellectual Builders for the assessment years 2015-16 and 16-17 were deleted by the ld. CIT (A) on the ground that the AO has not brought any material or documentary evidence to establish that the transactions are bogus accommodation entries as there was no statement of any person of alleged entry operator having control over these companies or managing these companies. 31. An identical issue was involved in all the assessment years of the revenue wherein the ld. CIT (A) has deleted the additions for want of any documentary evidence or any other material in support of the finding of the AO. Therefore, in view of our finding on this issue in assessment year 2010-11, the finding of the ld. CIT (A) is upheld. 23. We had also gone through the findings recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the company has raised share capital in various years which was assessed by Income Tax department in scrutiny assessment u/s 143(3) of ITax Act, shown as under:- M/s Competent Securities Pvt. Ltd. Assessment Year Financial Year Share capital raised Assessment Order u/s 143(3) at PB pg 1994-95 1993-94 3,00,000 - 2000-01 1999-00 24,50,000 - 2009-10 2008-09 98,36,50,000 538-539/Vol-II/AY 2016-17 There is sufficient source of funds with the company to give the unsecured loan to the assessee. The chart showing the amount given on unsecured loan to the assessee viz a viz own funds with the companies are as under: - Name of the Investor company Amount given to assessee (Maximum Balance) Source of funds with Investor companies as on 31.03.2016 Source of funds with Investor companies as on 31.03.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, assumptions and presumptions, without having any other corroborative evidences. The following documents were furnished by the respective Investor Company to the DDIT (Inv.) Unit-1(3), Kolkata: (i) Copy of Certificate of Incorporation, PAN Card (ii) Assessment Order passed under Section 143(3). (iii) Copy of acknowledgement of Income Tax Returns and Audited Accounts for the period from Assessment year 2010-11 to Assessment year 2016-17 (iv) Details pertaining to the transactions carried out with M/s KDM Group concerns along with copies of Ledger account, Share allotment advice and Loan confirmation, share sale letter along with share transfer form pertaining to the aforesaid transactions. (v) Sheet showing details regarding sources of fund along with highlighted bank statement reflecting the transactions with KDM Group. Source of source was explained by submitting the bank statement of creditors:- We also observe that investor is corporate entity and is maintaining proper books of accounts, which are subjected to Statutory Audit by Independent Auditors and audited balance sheet, and profit and loss account along with the income tax returns were filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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