TMI Blog2019 (7) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... has not earned any exempt income during the year under consideration has not been disputed by the department and therefore, in view of the settled proposition of law on this point and particularly the decision of Hon ble Delhi High Court in the case of Chemvest Ltd. Vs CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, we uphold the same. Disallowance on account of depreciation - assessee company has not carried out any business activity during the year - HELD THAT:- In the immediate preceding year, the assessee has disclosed substantial amount of turnover and business income and the A.O. has allowed the depreciation. Therefore, merely because there is no turnover during the year under consideration, cannot be a reason for disallowance of deprecation once the asset was already put to use in the preceding years. We find that the disallowance of depreciation on the ground of the asset not to put use can be considered only at the first year of acquisition of asset but once the asset was duly used in the business of the assessee then in the subsequent year if there is no business activity due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having any material in his possession but confirmed the addition in respect of which the statement of the alleged entry provider was with the A.O.. Thus, both the assessee as well as the revenue are aggrieved by the impugned orders of the ld. CIT(A) and filed the cross appeals as well as the cross objections for the respective assessment years. 4. First we take up the assessee s appeal for the A.Y. 2010-11 wherein the assessee has raised following grounds: 1. On the facts and in the circumstances of the case and in law the order passed u/s 153 A 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 Id. 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 Id. CIT (A) erred in not declaring the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nate of receipt Name of alleged entry operator whose statement were relied Jalsagar Commerce Pvt. Ltd 16,10,000 Unsecured loan Shri Anand Sharma Jalsagar Commerce Pvt. Ltd 10,00,000 Share application and share premium Shri Anand Sharma 6. 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. 7. 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. 5. Ground No.1 of the appeal is regarding the addition made by the A.O. without incriminating material and the assessment was completed and not pending on the date of order. 6. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the basis of the information received from the Investigation Wing, Kolkata and not on the basis of any material or information gathered during the course of search and seizure action in the case of the assessee. We find that the assessment framed by the Assessing Officer as well as the orders passed by the ld. CIT(A) in the case of the assessee are identical and based on similar facts and circumstances as in the case of M/s Kola Dall Mill pursuant to the same search and seizure action carried out on 02/7/2015. This Tribunal in the case of Kota Dall Mill Vs DCIT vide order dated 31/12/2018 in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018 has considered and decided this issue in para 6 as under: 6. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessments for the assessment years 2010- 11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 information available with the AO which can be related to the evidence found, it does not mean that the assessment 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 mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue 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 assessment proceedings, which would not abate as they are not pending on the date of initiation of the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 concurred with the decision of this Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 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 that the heading or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded 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 fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: Ans:- I hereby a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of decisions on this issue including the decision of Hon ble Jurisdictional High Court in case of M/s. Jai Steel India vs. ACIT (supra) wherein the Hon ble High Court has held in para 23 to 30 as under:- 23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-section (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 consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while framing the assessment under section 153A of the Act for the assessment years 2010-11 to 13-14. It is appropriate to refer relevant part of the assessment order in para 12 pages 48 to 50, para 19 page 83 and para 22 page 86 as under :- 12. Submissions made on behalf of the assessee firm have been duly considered. However, even the very elaborate and case laws loaded submissions of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 evidences 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, wherein the details of year- wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during search action has been accepted to be bogus by all family members in their respective statements. 19. In view of above facts of the case and in the light of above judicial decision, it is established that genuineness of the transaction has not been proved. Section 68 of the I.T. Act provides for charging to income tax on any sum credited in the books of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The foundation of the assessment order is the information received from the Investigation Wing, Kolkata and statement of Shri Anand Sharma and Shri Ankit Bagri in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands allowed. 7. Ground No.2 of the appeal is regarding the violation of principles of natural justice due to non-allowing the cross examination of the witness, whose statement was relied upon by the assessee. 8. We have heard the ld AR of the assessee as well as the ld CIT-DR and considered the relevant material on record. We note that after considering the detailed arguments of both the parties, the Tribunal in the other group cases have considered and decided this issue including the case of M/s Multimetals Limited Vs DCIT (Supra) in para 14 as under: 14. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee demanded the cross examination of the witnesses, therefore, statements have been relied upon by the Assessing Officer while framing the assessments under consideration. The ld. CIT(A) though while calling the remand report of the Assessing Officer directed to allow the cross examination to the assessee, however, when the Assessing Officer has expressed his inability to produce the witnesses for cross examination, the ld. CIT(A) has finally rejected the objection raised by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles of natural justice for not 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 rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Secondly, in fact, a rectification application 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 crossexamine 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 Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of Patna High Court observed that where the 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the monies were advanced apparently by the 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 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, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O 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 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 assessee. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irness 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is deleted. Ground No. 2 of the appeal is decided in favour of the assessee. Following the earlier orders of this Tribunal, this issue is decided in favour of the assessee and against the revenue. 9. Grounds No. 3 to 5 of the appeal are regarding the addition made U/s 68 of the Act in respect of the unsecured loan and share capital received from M/s Jalsagar Commerce Pvt. Ltd. We have heard the ld AR of the assessee as well as the ld. CIT-DR and considered the relevant material on record. The issue of addition made on account of unsecured loan taken from M/s Jalsagar Commerce Pvt. Ltd. was considered by this Tribunal in the case of Kota Dall Mill Vs DCIT (Supra) vide order dated 31/12/2018 and thereafter in the case of M/s Multimetals Limited Vs. DCIT (supra) vide order dated 29/01/2019 as under: 25. We have heard the ld AR of the assessee as well as the ld. CIT-DR and considered the relevant material on record. The issue of addition made on account of unsecured loan taken from M/s Jalsagar Commerce Pvt. Ltd. was considered by this Tribunal in the case of Kota Dall Mill Vs DCIT (Supra) vide order dated 31/12/2018 and thereafter in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the addition in respect of loan from M/s. Jalsagar Commerce Pvt. Ltd. in para 5.1 to 5.12 as under :- 5.1 In this respect, I find that Shri Anand Sharma whose statement is reproduced at Page 56 of the Assessment Order has clearly accepted that M/s Jalsagar Commerce Pvt. Ltd. is beneficiary company like Kota Dal Mill and 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 Investigation Kolkata 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 noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due respect to authorities cited by the appellant for canvassing his stand point, I am not able to persuade my conscience to agree with appellants arguments. In my considered opinion, under the adverse background of appellant employing modus-operendi of resorting accommodation entry provider to buildup unsecured loans as established in the assessment order as briefly 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 providers, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the authorities below to prove the creditworthiness of the creditors and genuineness of the transactions in the matter. Therefore, the assessee has not satisfied the essential ingredients of section 68 of the IT Act. Conclusion: Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. The above 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 ₹ 54,00,000/- made under Section 68 of the Income Tax Act, 1961 (Act, for short), by the Assessing Officer on account of share ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was further mentioned that these companies were under control of one Mahesh Garg and his group, who were operating various accounts. The Assessing Officer made addition of ₹ 54,00,000/- under Section 68 of the Act and ₹ 1,08,000/- as commission paid for procuring the said shares being 2% of ₹ 54,00,000/-. .................................................................................................................... .. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it 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 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nizes the aforesaid legal position. The view taken by the Tribunal on the duty cast on the Assessing Officer by section 68 is contrary to the law laid down by the Supreme Court in the judgment cited above. Even if one were to hold, albeit erroneously and without being aware of the legal position adumbrated above, that the Assessing Officer is bound to show that 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 Rajan Jassal, 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 shareapplicants subscribing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (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. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain un-served and uncomplied. As a general proposition, it would be improper to universally hold that the assessee 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan, would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. 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 third persons 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in case of Commissioner of Income Tax-II V/s MAF Academy Pvt. Ltd. involving exactly similar facts in ITA 341/2012 dated 28th November, 2013 observed in Para 33 to 36 as under: 33. The Assessee company is a private limited company and had not come out with any public issue nor made any advertisement for issuance of share capital. However, in one year there is infusion of share capital including premium of ₹ 4,35,00,000/-, out of which only ₹ 92,00,000/- 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 ₹ 100 /- and were allotted at a premium of ₹ 100 /- to ₹ 200/- and were then subsequently purchased by the Promoters/Directors, who had originally transferred these shares at ₹ 35 /- per share. 35. It is really surprising that a person who had purchased sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal of the bank statements clearly establishes that these parties were depositing cash and immediately either on the same day or in the near future withdrawing the same through a cheque which was issued in favour of the Assessee. Then Hon ble Delhi High Court held in Para 53 to 54 as under:- 53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e their correct addresses . It appears to be highly improper that in a Private Ltd. Company, the assessee is not in a position to state the exact whereabouts or fail to produce the persons who collectively hold more than 25% of its total share holding. He also observed that mere filing of Asstt. year 2005-06 confirmation letters do not absolve the appellant from its onus to prove the credit entries reflected in its books of accounts as has been held by Hon'ble Calcutta High Court in the case of CIT vs. United Commercial Industrial Co. (P) Ltd.[1991] 187 ITR 596. He further observed 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 compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital to the tune of ₹ 15 lacs and share premium of ₹ 1,00,35,000/- i.e. a share of face value of ₹ 10/- each issued at a premium of ₹ 90/- totaling to ₹ 100/-. When the AO asked the appellant to furnish the details the assessee produced share application forms and other details like bank statement, copy of acknowledgment of return etc. However when the AO conducted inquiry at the stated address, summons were received back unserved with the postal remark no such person in the above address . This fact was Asstt. year 2005-06 brought to the notice of assessee also. Thereafter the assessee except producing the papers could not prove existence 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 towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment. This Court, after analyzing the entire law on the subject in the context of Section 68 of the Act, held as under: ...16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Delhi providing accommodation entry and statements made by several accommodation entry providers have become virtually in public domain. It is no argument that the AO did not provide such statement before the assessement or in any of the notices. These facts were well known to the appellant group and ignorance is mere pretence. ii. Moreover, such statements are so vocal and undeniable that as mentioned in some of the case laws above, cross-examination of such accommodation entry provides by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. iii. It is undisputed fact that in the statement dated 06.02.2014 Shri Anand Sharma had admitted to be one of such accommodation entry providers. The sum and substance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crystal Dealers Pvt. Ltd. to M/s. Jalsagar Commerce Pvt. Ltd. Therefore, there is no allegation or any admission in the statement of Shri Anand Sharma that he has provided bogus loan entry to the assessee or any group concerns of the assessee. Since the name of M/s. Jalsagar Commerce was crepted in his statement, the AO has presumed that the loan provided by M/s. Jalsagar Commerce Pvt. Ltd is nothing but the bogus accommodation entry provided by Shri Anand Sharma through M/s. Royal Crystal Dealers Pvt. Ltd. The AO has tried to establish the nexus of the loan received by the assessee through the statement of Shri Anand Sharma where he has purported to have provided the alleged entry. Since there is no direct allegation or admission of providing loan by Shri Anand Sharma to the assessee through M/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO insisted the assessee to produce the directors of the loan provider company. The assessee produced the affidavit, and the notices issued by the AO under section 131 and 133(6) of the Act were duly complied with by the creditor. The statement of the Director of M/s. Royal Crystal Dealers Pvt. Ltd. was also recorded by the AO wherein the Director has confirmed the transaction of loan. There are various reports of the DDIT Kolkata which are placed at pages 406 to 422 of the paper book. We find that all these reports are based on the statements recorded during the investigation but no documentary evidence was either gathered or has been referred in these reports. Therefore, even if these reports are to be taken into consideration, these are nothing but narration of the statements of various persons 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. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53,05,000 78,95,00,000 1,07,08,434 96,37,591 31,72,80,655 47,85,95,188 Jalsagar Commerce Private Ltd 13-14 47,85,95,188 2,76,31,50,000 0 0 2,97,53,40,000 26,64,05,188 Jalsagar Commerce Private Ltd 14-15 26,64,05,188 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Jalsagar Commerce Private Ltd 15-16 0 1,34,89,00,000 49,00,600 44,10,540 1,34,93,90,060 0 Jalsagar Commerce Private Ltd 16-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd annexure of loans advance of AY 2010-11 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 4 Confirmation of loan given to assessee from books of accounts of party. 5 Confirmation of loan given to assessee from books of accounts of assessee. 6 Copy of affidavit of Sangeeta Somani director of company. 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 8 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 2007-08, AY 2011-12, AY 2012-13 and 2014-15. 9 Copy of ROC master data. 10 Copy of PAN card. The Assessing Officer has not brought any material on record to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue. 10. Ground No. 6 of the assessee s appeal is regarding denial of benefit of telescoping, recycling and rotation of funds by rejecting the peak credit theory. 11. We have considered the ld AR of the assessee as well as the ld CIT- DR and considered the relevant material on record. Since the additions made by the Assessing Officer have been finally deleted by us, therefore, this ground of the assessee s appeal is become infructuous. 12. In the cross appeal for the A.Y. 2010-11, the revenue has raised following grounds of appeal: 1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of ₹ 77,00,000/- made by the AO u/s 68 of the IT Act on account of unexplained share application money allegedly obtained by the assessee from M/s ISIS Mercantile P Ltd., M/s Teac Consultants Pvt. Ltd. and M/s Sangam Distributors 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 unsecured loans by observing that the alleged lender company M/s ISIS Mercantile P Ltd., M/s Teac Consultants Pvt. Ltd. and M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther on the facts and circumstances of the case in law, the CIT(A) was justified in deleting the disallowance of ₹ 8,89,891/- made by the AO on account of depreciation claim. The Appellant 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 . 13. Grounds No. 1 to 6 of the appeal are regarding the additions made by the A.O. in respect of share capital received from three companies namely M/s ISIS Mercantile Pvt. Ltd. and M/s Sangam Distributors Pvt. Ltd., M/s Tech Consultants Pvt. Ltd., which was deleted by the ld. CIT(A) for want of any supporting material as well as statement of alleged entry operator. 14. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record at the outset we note that an identical issue has been considered by this Tribunal in the case of M/s Kota Dall Mill Vs. DCIT (supra) as well as in the case of DCIT Vs. M/s Baran Roller Flour Mills Pvt. Ltd. (supra) while dealing the appeal of the revenue. The Tribunal in the case of DCIT Vs. M/s Baran Roller Flour Mills Pvt. Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Copy of Ack. of ITR of AY 2010-11 along with computation sheet 426-427 2 Copy of Balance sheet of AY 2010-11 along with enclosures 428-433 3 Copy of relevant page of bank statement showing the entry of payment made to assessee. 434 4 Confirmation of account showing the transaction with assessee company along with ledgers from the books of share applicants 435-436 5 Copy of share allotment advice 437 6 Copy of share application form of equity share 438 7 Copy of affidavit of Mr Jitendra Sharma director of company. 439-442 8 Copy of balance sheet of company of 31.03.2010, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 10 Copy of ROC master data. 541-542 11 Copy of PAN card. 543 12 Certificate of Incorporation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed investment in shares of the Appellant and source of providing the said. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators. 5.3 For this investor namely, M/s Sangam Distributors Pvt. Ltd. and M/s Teac Consultants Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of investor companies, which are available at Page no. 292 to 389 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that M/s Sangam Distributors Pvt. Ltd and M/s Teac Consultants Private Limited duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 5.5 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal and appellant are separate legal entity. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant or its total income, this basis of addition adopted by the AO is farfetched cannot be concurred. 5.6 It is further seen that AO has not brought any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel Ramniklal Hirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Incometax- 4 v. G G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/Del/2012 vide its order dated 10.02.2016. Further, Hon ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instance case before me , the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujrat High Court (supra). 5.12 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through Share application and share premium by the Appellant as no evidences as to receipt/payment of cash for receipt of share application and share premium were found during search in case of the Appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of any incriminating material found during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of Share application Share premium u/s 68 of the Act is legally untenable and unjustified. 5.13 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of Share Application and Share premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, along with ledger account from the books of share applicants 455-456 5 Copy of share allotment advice 457 6 Copy of share application form of equity share along with Form 2 458-468 7 Copy of affidavit of Mrs Babita Kriplani director of company. 469-472 8 Copy of order passed by Calcutta High Court regarding amalgamation of other companies in this company 473-495 9 Copy of balance sheet of company of 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 496-499 10 Copy of assessment order passed in the case of above named company for AY 2006-07, AY 2013-14 and 2014-15. 500-513 11 Copy of ROC master data. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deleted by the ld. CIT(A). 16. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The assessee is having investment in shares as on 31/3/2010 of ₹ 53,08,000/-. The A.O. has made disallowance U/s 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short the Rules) being 1% of the average investment which comes to ₹ 1,50,187/-. On appeal, the ld. CIT(A) deleted the addition by considering the fact that the assessee has not earned any exempt income during the year under consideration by holding as under: 9.3 I have considered the rival submissions and perused the material on record. 9.4 In my considered view, the AO has legally erred in directly applying the provision of section 14A of the Act, without recording any satisfaction as to the correctness of the claim made by the Appellant. In the assessment order, there is no satisfaction recorded by the AO as required by section 14A (1) of the Act before proceeding further to make any disallowance u/s 14A of the Act. Further, it is seen that AO has mechanically applied the Rule 8D as amended w.e.f. 02.06.2016, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . disallowed the amount without any basis or pointed out any specific defects. 2. The depreciation is a statutory allowance and it cannot be disallowed. As per provision of section 38(2) read with section 32(1) of I.T. Act, 1961 and also Hon ble I.T.A.T. Jaipur Bench, Jaipur in case of DCIT V/s. Kailashchand Gupta (IIIV) Tax World 36, has held that since depreciation is statutory provisions and even if there is part use for non business purpose, no part of the depreciation can be disallowed. Reliance is also placed on the decision of Hon ble Mumbai Tribunal in the case of Mukesh K Shah Vs ITO 92 TTJ 1060. 3. The company is an artificial judicial person and there cannot be any personal use expenses by the company, therefore no disallowance can be made on a/c of personal use of expenses. Reliance placed on Sayaji Iron Engg. Co. Ltd. Vs CIT (2002) 253 ITR 749 (Guj) /121 Taxman 43. 10.3 I have duly considered the submission made by the appellant and also carefully gone through the assessment order. It is seen that the depreciation was disallowed on the ground that the assessee did not carry any business activities, hence the depreciation is not allowable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender company M/s ISIS Mercantile P Ltd. and M/s Sangam Distributors 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 ISIS Mercantile P Ltd. and M/s Sangam Distributors 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 ISIS Mercantile P Ltd. and M/s Sangam Distributors 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 the fact that the assessee neither expressed its inability in producing the lenders nor produced them either. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these issues. 23. Ground No. 7 of the appeal is regarding the disallowance of ₹ 2,73,868/- made by the A.O. U/s 14A of the Act which was deleted by the ld. CIT(A). This issue is common as in the A.Y. 2010-11. 24. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The ld. CIT(A) has deleted the addition by considering the fact that the assessee has not earned any exempt income during the year under consideration. Accordingly, in view of our finding for the A.Y. 2010-11, this issue is decided against the revenue and in favour of the assessee and the order of the ld. CIT(A) is upheld. 25. Ground No. 8 of the appeal is regarding deleting the disallowance on account of depreciation, which was deleted by the ld. CIT(A). This issue is common as in the A.Y. 2010-11. 26. We have heard the ld CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The ld. CIT(A) has deleted the addition, is common as in the A.Y. 2010-11. Accordingly, in view of our finding for the A.Y. 2010-11, this issue is decided against the revenue and in favour of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
