TMI Blog2019 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... PAWAN SINGH (JUDICIAL MEMBER). - 1. This group of five appeals/cross-appeals are directed against the separate order of the Commissioner of Income-tax (Appeals)-2, Udaipur out of which three appeals by the Revenue for the assessment years 2011-12, 2014-15 and 2015-16 in M/s. Pacific Leasing and Research Ltd. and one cross-appeal by the assessee therein for the assessment year 2011-12. For the assessment year 2011-12, only the Revenue's appeal in M/s. Pacific Industrial Ltd. All appeals are related with the same group and the parties have raised certain common grounds of appeal, therefore, with the consent of parties all appeals were heard together and are decided by the common order for the sake of brevity and convenience. 2. First, we are taking the appeals for the assessment year 2011-12 in M/s. Pacific Leasing and Research Ltd. The Revenue in its appeal in I. T. A. No. 331/Jodh/2018, has raised the following grounds of appeal : 1. Whether on the facts and in the circumstances of the case and in taw the Commissioner of Income-tax (Appeals) was justified in deleting the addition of ₹ 7,00,00,000 out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic limited company engaged in the business of leasing and finance. For the assessment year 2011-12, the assessee filed its return of income on September 30, 2011 declaring a total income at ₹ 1,18,580. A search and seizure action under section 132 was carried out on August 26, 2015 at the residential and business premises of the assessee including other business group, viz., M/s. Pacific Industry, Pacific Export, Kapil Agarwal, Smt. Kariika Agarwal, J. P. Agarwal, Gitanjali Investech Holding India Pvt. Ltd. (all the assessee's group). During the search action, Shri J. P. Agarwal in his statement recorded under section 132(4) of the Act admitted of taking accommodation entries in the form of long-term capital gain (LTCG). Consequent of the search, a notice under section 153A was issued to the assessee on March 22, 2016. In response to the notice, the assessee filed its return of income declaring an income of ₹ 1,18,580 on March 26, 2016, declaring the same income as declared while filing the original return of income under section 139. The assessment was completed under section 153A read with section 143(3) on December 29, 2017. The Assessing Officer while passing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d creditworthiness of the creditor despite giving sufficient opportunity. On appeal before the learned Commissioner of Income-tax (Appeals), the addition of ₹ 7 crores out of the total addition of ₹ 8.24 crores was deleted, and the remaining addition of ₹ 1.24 crores in respect of five creditors namely (i) Bankebihari Commercial Pvt. Ltd., (ii) Desire Vincom Pvt. Ltd., (iii) Silverlake Traders Pvt. Ltd., (iv) Trend Tradecom Pvt. Ltd., (v) Zigma Commtrade Pvt. Ltd. Therefore, aggrieved by the order of the learned Commissioner of Income-tax (Appeals), both the parties have filed their respective appeals raising the grounds of appeal as referred to above. 6. We have heard the submissions of the learned authorised representative of the assessee and the learned Departmental representative for the Revenue and perused the material available on record. Ground No. 1 in the assessee's appeal relates to the validity of the assessment order. The learned authorised representative of the assessee submits that reassessment was made by the Assessing Officer pursuant to the search action carried out on August 26, 2015 under section 132 of the Act at the entire assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised representative submits that they have produced all requisite details documents, like ; PAN, balance-sheet, confirmation of account to substantiate the identity, creditworthiness and genuineness of lender company. All the transactions were done through banking channel and there is no cash deposit. The statement recorded at the back of the assessee, which were never share with the assessee and no opportunity of cross-examination were provided, thus such statement cannot be used against the assessee, thus the additions made on the basis of third party information is liable to be deleted. 8. In other alternative submission, the learned authorised representative supported the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition on account of unsecured loan. The learned authorised representative submits that the requisite details were furnished by the assessee which was properly appreciated by the learned Commissioner of Income-tax (Appeals), the transactions were channelised through banking transaction. The lender company duly complied. The learned authorised representative submits that the entire addition made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where recorded that in the search action any incriminating material related with the share application money was recovered or seized. The Assessing Officer has referred to that statement of Shri J. P. Agarwal was recorded who had admitted to have obtained accommodation entry in the form of long-term capital gains in his individual capacity only. There is no reference in the entire assessment order that Shri J. P. Agarwal ever admitted about the receipt of share application money. The impugned assessment year under consideration is 2011-12 and the period for completion of assessment has already expired when the search was conducted. The Assessing Officer made the addition of the alleged share application money in the assessment year 2011-12, which is beyond his jurisdiction in the absence of incriminating material found during the search. 12. The hon'ble Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) held that once the assessment has attained finality for a particular year, i. e., not pending when the same cannot be a subject to tax in proceeding under section 153A. The hon'ble court held that no addition can be made in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under section 153A was served upon the assessee on March 22, 2016 to file the return of income for the assessment year 2014-15. The assessee filed its return of income on March 26, 2016 declaring nil income. The assessee filed its original return under section 139 on October 22, 2014 declaring nil income. The Assessing Officer during the reassessment proceedings under section 153A noted that Shri J. P. Aggarwal voluntary surrendered the accommodation entries in his end in the form of long-term capital gains as unaccounted income. The Assessing Officer further noted that the assessee has received unsecured loan from the entities who are engaged in providing accommodation entries in form of long-term capital gains, share premium and unsecured loan. The assessee has shown the unsecured loan from four of such parties aggregating of ₹ 1.75 crores, i. e., ₹ 25 lakhs from Glaze Construction Pvt. Ltd., ₹ 50 lakhs from Grow Supplier Pvt. Ltd., ₹ 50 lakhs from Nihon Commodities Pvt. Ltd. and ₹ 50 lakhs from VSG Leasing and Finance Pvt. Ltd. The assessee was asked to furnish confirmation of party to prove identity, genuineness of transaction and creditworth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent appeal before us. 18. We have heard the learned Departmental representative for the Revenue and the learned authorised representative of the assessee and gone through the orders of the authorities below. Though the Revenue has raised as many as three grounds of appeal, however, in our view, the sole ground of appeal is the deletion of the addition under section 68. The learned Departmental representative for the Revenue supported the order of the Assessing Officer. The learned Departmental representative further submits that the assessee failed to discharge his onus to prove the identity, creditworthy and genuineness of transaction. 19. On the other hand, the learned authorised representative of the assessee submits that he adopts his submission, put forth in appeal for the assessment year 2011-12 as the addition in the impugned year under consideration is also not based on incriminating material found during the search, the assessment for the relevant assessment year, i. e., 2014-15 was already completed as regular assessment. The Assessing Officer has nowhere referred that addition is based on any incriminating material found during the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 68 on taking view that in order to verify the genuineness of creditors issued a commission under section 131(1)(d) was issued to the Deputy Director of Income-tax, Kolkata with the request to issue summons to the principal officer of the creditors company and to furnish spot verification through inspector. The Assessing Officer received the enquiry report from the Deputy Director of Income-tax, Kolkata wherein it was disclosed that some of the entry operators are controlling and managing all affairs of the business activities of the lender companies which are engaged in providing accommodation entries. The Assessing Officer on the basis of the report of the Deputy Director of Income-tax, Kolkata made an addition of ₹ 1.75 crores. Before the learned Commissioner of Income-tax (Appeals), the assessee urged that the assessee has discharged his burden/onus by filing confirmation, Income-tax return, balance-sheet and bank statement and other document. The assessee further urged that the Assessing Officer merely relied upon the statement of third party without providing opportunity of cross-exam-ination. The assessee also submits that the spot verification was cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged its burden casted upon under section 68 of the Act to explain the nature and source of the transactions by proving the identity, creditworthiness of the creditor and the genuineness of the transaction. Notably, the transaction is duly verifiable from the confirmation of accounts with supporting bank statements filed in the paper book and has been carried out through banking channel only and thus, the appellant has duly proved the identity, creditworthiness and genuineness of the trans action. 4.3.4 Further, it is seen that the appellant during assessment submitted substantiating evidences as referred to in para No. 3.19 of its submission above which include balance-sheet, Income-tax return, copy of the relevant bank statement, AOA/MOA, confirmation of accounts, etc., (paper book Nos. 56-230). From the perusal of these documentary evidences, it is seen that the transactions have been done through banking channels and on the date of making of loans, there is balance available in the account of the borrower, which proves its creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of the creditor at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. and others and thus support the direct evidences brought on record by the appellant which remained uncontroverted by the Assessing Officer. It is further seen that the Assessing Officer has not brought any specific defect I discrepancies in the direct evidence brought on record by the appellant. The Assessing Officer has observed that on the date of debit in the account statement of creditor, there is corresponding credit entry of equal amount, however, this observation of the Assessing Officer is itself not sufficient to prove beyond doubt that the 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 loans to party, funds are required to be arranged 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 under section 68 of the Act in view of the settled judicial precedents. 4.3.7 In my considered view of the undersigned, mere not believing an explanation cannot lead to a conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR 195 (SC), CIT v. Rock Fort Metal and Minerals Ltd. [2011] 198 Taxman 497 (Delhi), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC); 25 Taxman 80F (SC) and others on this question of law. 4.3.10 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. Victor Electrodes Ltd. [2010] 329 ITR 271 (Delhi), the appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instant case, the appellant has co-operated in assessment by showing his willing to produce the directors of the lender companies and some directors/officer were also produced before the Assessing Officer. Thus, in view of the judicial precedents referred to above, under the facts and circumstances of the present case it is untenable to make an addition for the alleged non-appearance by the concerned person before the authorities though they complied with the notices/ summon issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax (Investigation), Unit-4(2), Kolkata. Moreover, with the abundant evidences discussed above and all concerns, subjected to verification by issuing commission under section 131(1)(d), found existing, the blame of shell company on depositors is not justified. 4.3.13 It is noted that no clinching evidence has been brought on record that any unaccounted income was routed through unsecured loans by the appellant company as no evidences as to receipt/ payment of cash for receipt of unsecured loans were found during search in the case of the appellant. Further, the Assessing Officer has relied on the third party statement without proving any nexus with the person whose statement was recorded with the appellant-company. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of an incriminating material found during search to rebut the evidences filed by the appellant, the impugned addition made in respect of unsecured loan under section 68 of the Act is legally untanable and unjustified. 4.3.14 In view of the above discussion of the relevant facts and following the several ratios on the subject from the hon'ble apex cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Commissioner of Income-tax (Appeals), thus, following the principle of consistency, these grounds of appeal are also dismissed with similar observation. 28. Ground No. 4 relates to deleting the consequential interest expenses on the corresponding addition/deletion of ₹ 3.75 crores. As we have already affirmed the finding of the learned Commissioner of Income-tax (Appeals) on ground Nos. 1 to 3, therefore, this ground of appeal being consequential to the addition of unsecured loan are also dismissed. 29. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 321/Jodh/2018 by the Revenue for the assessment year 2011-12 (Pacific industrial Limited, Mumbai). The Revenue has raised the following grounds of appeal : 1. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the addition of ₹ 7,00,00,000 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was not accepted by the Assessing Officer, the Assessing Officer on his observation as we have already noted in the assessee's group case (supra) made addition under section 68 of ₹ 7 crores on the basis of report of the Deputy Director of Income-tax, Kolkata. 31. On appeal before the learned Commissioner of Income-tax (Appeals), the entire addition was deleted. The learned Commissioner of Income-tax (Appeals) deleted the addition on his observation that there is no evidence on record that any unaccounted money was routed through the unsecured loans by the assessee-company as no evidence as to receipt/payment of cash for receipt of unsecured loan were found during the course of search on the assessee. The learned Commissioner of Income-tax (Appeals) also conclude that mere suspicious however, strong may be cannot take place of evidence. Thus, aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue has filed the present appeal before us. 32. We have heard the learned authorised representative of the assessee and the learned Departmental representative for the Revenue and perused the material available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was instilled in deleting the additions when the creditworthiness of the alleged creditor was not established before the Assessing Officer. 36. We have noted that the ground of appeal raised by the Revenue is identical to the ground of appeal raised in I. T. A. No. 321/Jodh/2018. The facts of the year under consideration are almost identical except variation of figure. As we have already dismissed the appeal of the Revenue and confirmed the order of the learned Commissioner of Income-tax (Appeals) on identical facts, therefore, this appeal is also dismissed with the similar observation. 37. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 323/Jodh/2018 by the Revenue for the assessment year 2015-16 (Pacific industrial Limited, Mumbai). The Revenue has raised the following grounds of appeal : 1. Ground Nos. 1 to 3 relates to deleting the addition of ₹ 5.15 crores under section 68 of the Act on account of unsecured loan. 2. Ground No. 4 relates to deleting the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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