TMI Blog2020 (3) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... em only and there was no cash deposit found. It is true that there were cash deposits at the end of the 5th or 6th layer of the transaction, but as rightly held by the Ld. CIT(A) there was no conclusive evidence to show that the ultimate source of the amount received by the assessee was the cash deposit made in the accounts of the proprietary concerns whose identity was also not established by the AO. Even with regard to the billing trails, it is noted that the AO waunable to bring to our attention, any factual material which corroborated his finding that bogus payments made by these listed companies had come back to the assessee in the form of accommodation entries or that any cash was returned to them. In support of such an allegation no tangible material or evidence such as copies of the Income Tax assessments of the payer companies were furnished. Instead we note that the AO simply made a sweeping remark that some of the entities enlisted in the billing trail were paper/shell companies. In our considered opinion such general statement making sweeping allegation was not sufficient to justify the humongous addition while framing the addition u/s 153A of the Act, which necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Group, on 02-03-2016 (hereinafter referred to as the second search ). As such the assessment for AY 2011-12 completed on 30-03-2015, did not abate consequent to the second search. The AO thereafter initiated proceedings u/s 153A for AY 2011-12 on 05-11-2016 and notices u/s 143(2) 142(1) of the Act were issued calling for details/information. The AO issued SCN dated 07-12-2017 wherein he extensively extracted the financials of the assessee for FYs 2007-08 to 2009-10 and observed that the share capital of ₹ 35.50 crores raised by the assessee in the earlier year/s and its deployment in acquiring shares of other bodies corporate were bogus. The AO mentioned the names of Shri Anand Sharma and Janardan Chokhani in the SCN, who according to him, had provided accommodation entries to the assessee. The AO further observed that the investments allegedly acquired in the years prior to AY 2011/12 were sold by the assessee during the relevant year with the sole purpose to accommodate the unaccounted monies of the assessee, and the sale proceeds were used by the group concerns of the assessee. With these observations, the AO show caused the assessee to explain why the loans and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation entry provider and the identity of these concerns were not proved and the creditworthiness has not been established as during the assessment stage all notices issued to verify the genuineness of transaction returned unserved 4. The Ld. CIT(A) was not justified by not considering facts that E-Mail ID which was used by the assessee to file ROC return was also used by the entry operator to file ROC return of the companies controlled by the entry operator. 5. The Ld. CIT(A) was not justified by not considering facts that the creditworthiness of the companies (shell companies controlled by entry operator) whose names are appearing in the cash trail and billing (fund) trail has not been established. 3. The assessee also filed cross objections challenging the validity of the addition made by the AO as well as the assessment order passed u/s 153A of the Act. The cross objections raised by the assessee are as under: 1. For that on the facts and in the circumstances of the case, the Ld. CIT (A) ought to have held the order passed u/s 153A read with 143(3) to the ab initio void and bad in law. 2. For that on the facts and in the circumstances of the case, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO in the assessment order to show that nowhere had he implicated the assessee or the Bankatesh Group directly or indirectly. He showed that in his statements, Shri Sharma had explained general modus operandi followed by him for providing accommodation entries but nowhere did he name either the assessee or any person belonging to Bankatesh Group or admitted that he had provided accommodation entries to the assessee. He particularly took us through Pages 15 to 29 of the assessment order to show that the Investigating Officer who had recorded statement of Shri Sharma had raised pointed questions regarding accommodation entries allegedly provided by him to several business houses. While answering these questions Mr. Sharma had admitted of providing accommodation entries to the several business houses named therein. However neither any question of the authorized officer nor any answers of Mr. Sharma even remotely suggested that the assessee or for that matter Bankatesh Group was beneficiary of accommodation entries allegedly provided by Shri Sharma. The Ld. AR thus submitted that both the AO s as well as the Ld. CIT, DR s case which rests solely on the alleged statements of Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that though the AO passed a lengthy order he was not able to bring on record any clinching material which showed that the payments made by these well-known companies were treated to be bogus or ficticious in their respective income tax assessments, from which one may draw adverse inference against the assessee. He thus contended that even the billing trails prepared by the AO did not in any manner supported his conclusion that the monies received by the assessee from sale of investments was assessee s own undisclosed income. 7. In support of the cross objections, the Ld. AR submitted that the name of the assessee did not feature in any of panchanamas drawn upon conclusion of the search and therefore in absence of any evidence to show that search u/s 132 was carried out against the assessee the initiation of proceeding/s 153A and consequent order passed u/s 153A/143(3) was bad in law and ab initio void. He further submitted that the none of the documents bearing identification marks BC/1 to BC/6, BUL/1 to BUL/5 and AB/1 which were seized by the Investigating Authorities in the course of search contained any incriminating material which could even remotely be linked to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are being disposed-off together. The facts of the case have been extensively discussed both by the AO and Ld. CIT(A) but at the cost of repetition, we deem it fit to recapitulate the same for better understanding of the issues under our adjudication. The assessee a private limited company, was incorporated in 2006. In AY 2007-08 it raised equity capital of ₹ 35.55 crores. Out of the funds raised from issue of equity shares the assessee acquired shares of other bodies corporate at the cost of ₹ 35.50 crores till 31-03-2007. From the documents placed at Pages 225 to 261 of the paper book, it is noted that the assessee s case for AY 2007-08 was selected for scrutiny. On perusal of the copies of the documents furnished before the AO in the course of assessment proceedings we note that the source monies received from the subscribers to share capital was examined after conducting enquiry from all share subscribers u/s 133(6) of the Act. For such reason in the assessment completed u/s 143(3) of the Act, no adverse inference was drawn in respect of the share capital raised or its deployment in shares of other bodies corporate. Investments in shares were continued to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments u/s 153A of the Act for the specified six assessment years. To this extent, there is no quarrel. However we find that Section 153A itself creates the differentiation amongst specified six assessment years depending whether prior to search, the proceedings are abated or not. We note that the relevant section itself clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending then such appeals or other proceedings do not abate. We therefore find that merely because an assessee is subjected to search u/s 132, such fact by itself does not give carte blanche to the Department to subject such an assessee to the rigors of the assessment afresh for all the six years. It is for this reason that the Parliament in its wisdom has categorically created two classes among the six years, (a) un-abated assessment and (b) abated assessments. Consequent to a search conducted u/s 132 of the Act, the AO is required to issue notices u/s 153A to assess the income of the assessee for six assessment years preceding the date of search. These six assessment years comprise of assessments which are not abated and assessments which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Section 153A 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 Ld 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 material. 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 complete assessment proceedings. 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 Ld AO. Completed assessments can be interfered with by the Ld AO while making the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Kol/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed - We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and statements gathered in the course of search. In the present case the Ld. CIT(A) has nowhere held that the initiation of proceeding u/s 153A for the AY 2011/12 was invalid. He deleted the addition in view of the fact that no worthwhile material or evidence was found and seized in the course of search or was brought on record by the AO which could persuade him to uphold the AO s order. From the order impugned in the appeal we note that nowhere in the assessment order, AO was able to point out that any particular incriminating document or evidence found in the course of search on the basis of which the addition on account of unexplained investment could justifiably be made. We therefore find that the on the facts and the issue involved in the present appeal, the judgment of the Hon ble Kerala High Court was not applicable. (B) In the case of Dayawanti Gupta Vs CIT reported in 390 ITR 496, the additions were made on the basis of the admission made by the assessee s son u/s 132(4) with reference to incriminating material found in the course of search. Assessee s case before the Hon ble Delhi High Court was that the statement admitting additional income was not given by her. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s house. In the statements recorded u/s 133A, these connected persons had admitted of receiving payments in cash which were not found recorded in the books of the assessee. On these facts and evidences the question arose whether any addition was permissible while framing the assessee for the block period. Although the Hon ble Apex Court upheld the addition made, it also held that, It is a cardinal principle of law that in order to add any income in the block assessment, evidence of such must be found in the course of the search under Section 132 of the IT Act or in any proceedings simultaneously conducted in the premises of the assessee, relatives and/or persons who are connected with the assessee and are having transaction/dealings with such assessee. Applying this principle, the Court held that since in the simultaneous proceedings conducted against connected parties, with whom the assessee had transactions, evidence was found regarding undeclared payments, the assessment of undisclosed income was justified. We however note that no proceedings were simultaneously conducted against the so-called entry operator Shri Anand Sharma nor any documentary evidence supporting assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustify the additions made u/s 68 of the Act. As regards the statement of Mr. T, the Hon ble High Court noted that that not only the assessee had denied not knowing the said person but even the Revenue never afforded the opportunity of his cross examination to the assessee. It was further observed that Mr. T had also subsequently retracted his statement. For the reasons aforesaid, the Hon ble High Court held that the statement of Mr. T could not be considered to be incriminating evidence justifying the inference against the assessee in relation to unabated assessment. Applying the ratio laid down in said judgment to the facts of the present case, we find that the assessee s case is on a much better footing. In the first instance we note that no simultaneous search or survey proceedings were carried out against Mr. Anand Sharma when the second search was conducted against the assessee in March 2016. We further find that nowhere in the statements of so-called entry operators they had admitted of providing accommodation entries to the assessee during the relevant year. In fact we find that prior to the completion of assessment u/s 153A on 31-12-2017, the AO himself never personally exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking reference to this document the AO claimed that all the investments were sold through journal entry and that no transactions were conducted through the banking channel which according to him proved that in reality neither the investments existed nor were they actually sold during the year. The relevant document furnished by the AO in his report is reproduced hereunder: 18. In his rebuttal the Ld. AR however submitted that the document referred in the AO s submission was part of the assessee s regular books for the FY 2010-11. He submitted that since the assessee had sold its investments, appropriate entries in its books were routed through journal day book which was part of the assessee s books of account maintained regularly. He further drew our attention to the AO s order to show that nowhere therein the AO at any place had claimed that the document bearing identification mark D:/BC HD1/BANKTESH GR_57_Burtolla St/Prakash/Balance Sheet/Majestic Party was incriminating in nature or that the addition was made with reference to said document. Document, referred by the AO in his report dated 05-02-2020, was never mentioned as incriminating in any of the notices issued u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee having no incriminating contents whatsoever. We further note that even the Ld. CIT, DR was unable to correlate or link as to how the contents of this statement led to unearthing of unexplained investment by the AO. We also note that the investments which were sold during the relevant year and which find mention in the document D:/BC HD1/BANKTESH GR_57_Burtolla St/Prakash/Balance Sheet/Majestic Party reflected in the Investment Schedule appearing in the assessee s balance sheet as on 31-03-2010. In the assessment orders under Section 153C dated 30-03-2015 and 153A dated 31-12-2017 for the AY 2010-11, no finding was recorded either by the AO s predecessor or by the AO himself that the investments held by the assessee as on 31-03-2010 were bogus or fictitious. We therefore find that information contained in the referred document was part of the regular books of the assessee and therefore by no stretch of imagination be construed to be incriminating in nature. Moreover even the AO in his report dated 05-02-2020 has not specified as to how this material was considered by him to be incriminating in nature or as to how this document formed the basis for the addition made u/s 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie prove that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be incriminating in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document is incriminating in nature justifying the additions in unabated assessments. For the reasons already discussed earlier, we thus hold that the seized document identified as D:/BC HD1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on the basis of Bank account found during the course of search and since the said Bank account as well as the transactions reflected therein were duly disclosed by the assessee in its return of income originally filed for the year under consideration, we find ourselves in agreement with the contention of the ld. Counsel for the assessee that the same cannot be treated as incriminating material found during the course of search. 21. We note that similar issue also came up for consideration before the Delhi Bench of this Tribunal in the case of HBN Insurance Agencies Vs ACIT in ITA No. 3783/Del/2014 dated 23.12.2019. In this case the AO had added cash deposits made in bank account in the assessments framed u/s 153A of the Act. On appeal the assessee contended that the additions made u/s 68 were not based on any incriminating material found in the course of search whereas the Revenue claimed that the balance sheet, bank statements etc. found and seized in the course of search constituted incriminating material which justified the impugned addition. The Hon ble Tribunal rejected the Revenue s argument and deleted the addition by observing as under: In our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. I note that in the initial part of the impugned order, the Ld. AO extensively set out the statements of Mr. Anand Sharma Mr. Jnardhan Chowkhani, two alleged entry operators whose services were allegedly availed. According to Ld. AO the appellant was incorporated, operated managed at the behest or at the instance of Mr. Anand Sharma who provided accommodation entries to the appellant since its inception. In his statement Mr. Sharma Mr. Chowkhani had listed out names of several persons claimed to be functioning under their respective control supervision. With reference to statements of Mr. Sharma, Mr. Chowkhani and others which were all recorded in 2013 2014, an inference has been drawn by the Ld. AO that the transactions in the form of accommodation entries for sale of investment in shares were conducted by these entry operators. After taking into account the documents furnished by the Ld. AR, I however find that the conclusions drawn by the Ld. AO are prima facie not borne out from the facts on record. In the first instance it was observed that the investments, which were liquidated during the relevant year, were acquired by the appellant in the years prior to FY 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant was never situated at any of the two addresses. It is also noted that in his statement Mr. Sharma had identified several companies, which were allegedly controlled, managed and operated, by him but the name of the appellant did not appear in the said list. The statement of Mr. Sharma also contained list of several persons / individuals who allegedly functioned under his control, supervision superintendence and through whom Mr. Sharma controlled managed the affairs of the companies and/or the companies who provided accommodation entries. From the list of directors of the appellant since its inception, it was found that none of the persons who discharged the responsibilities as the Directors of the appellant, found mention in the statements of Mr. Sharma. I therefore find that in the impugned order the AO did not bring on record any direct or cogent material or evidence to establish that any of the directors of the appellant at any point in time functioned under the supervision or superintendence of Mr. Sharma. I note that the orders u/s 153C/143(3) for the AYs 2007-08 2011-12 were passed on 30.03.2015 whereas the statements of so-called entry operators, Mr. Anan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. I note that just as the Ld. AO relied on the statements of Mr. Sharma, references were made at different places of the impugned order to the statements recorded by the Investigating Officers, from Mr. J. Chokhani Mr. Neeraj Jain. According to Ld. AO, in the statements recorded both these individuals had identified certain individuals who were controlled, managed and supervised by them. In their statements they had explained the alleged modus operandi employed by them in providing accommodation entries. I find that even though in the impugned order the Ld. AO extensively extracted the statements of these individuals, the assessment order is bereft of specifics and does not address the issue as to whether the admissions by the two individuals implicated the appellant directly. The Ld. AO s order is completely silent bereft of any specific data or information correlating any particular sale of share or investment by the appellant with accommodation entries by any of these individuals nor the Ld. AO has brought on record that part of the admission either by Mr. Sharma or Mr. Chowkhani or Mr. Jain wherein they have admitted of providing accommodation entries to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s own unaccounted income was introduced in the garb of sale proceeds of investments. 25. When confronted with this factual position, even AO in his report dated 05-02-2020 placed before us, admitted that the name of the assessee had not been stated by the entry operator. The relevant extract of the AO s report is as follows: From the above it is absolutely clear that although the name of the assessee has not been stated by the entry operator Shri Anand Sharma but his nature of business, earning commission by providing accommodation entries to the beneficiaries with the use of his 500 companies cannot be ruled out. 26. We further note that the AO in his report dated 05-02-2020 was not able to dispute the Ld. CIT(A) s finding that none of the Directors who held office at any time on the Board of the assessee featured in the list of dummy directors alleged to be controlled and managed by the entry operators. Instead we note that the AO made a generic statement that out of the six directors, two persons viz. Shri Sandeep Singh, who was Director from February 2006 to December 2011, and Somnath Chakraborty, who was Director from February 2006 to May 2012, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, we find that the transactions in question involved receipt of proceeds on sale of investments. It was not a case where any share subscription monies were raised which may lead to an inference that the appellant would have had a continued relationship with the shareholder nor was the money received by way of loans which would result in creation of creditor-debtor relationship on long term basis. Unlike in such cases where share application monies are raised or unsecured loans are received; the appellant cannot be expected to continue with relationship on long-term and be aware of the address of the persons to whom it had sold investments on one-off occasion and that too more than 6-7 years ago. We find that at the point of time when the investments were sold, the sale bills were raised on the purchasers citing the address provided by them at that material time and the issue of invoice was followed with physical delivery of share certificates and in lieu the payments were received. Except for the foregoing acts, no other act was performed either by the seller or the purchaser. It was therefore a case where two unrelated persons conducted a trading transaction and the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,34,500/-which were deposited in the appellant s Bank. In this factual background it is beyond comprehension as to how the investments acquired in earlier years and whose source of acquisition was accepted to be genuine was considered by the Ld. AO to be unexplained in AY 2011-12 being the year of sale. I therefore find fundamental infirmity in the Ld. AO s logic of making addition on account of unexplained investments in AY 2011-12 being the year in which the investments were transferred and not acquired. 30. Before us, neither the Ld. CIT, DR nor the AO in his report dated 05-02-2020, was able to controvert this finding of the Ld. CIT(A). It is noted that the Ld. CIT(A) also examined the facts and circumstances concerning the amounts deposited in the assessee s bank account by way of proceeds realized from sale of investments and whether such sale proceeds could be assessed as income under the provisions of the Act. The Ld. CIT(A) also examined the cash flow charts and billing flow charts prepared by the AO, based on which the Ld. CIT(A) repelled the AO s conclusion that the true source of sale proceeds of the investments was the unaccounted monies of the assessee. The rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit, the transaction in the present case involved exchange of one asset against receipt of sum equivalent. In exchange of the asset parted with, the appellant was paid its equivalent price by the third party and therefore unlike provisions of Section 68, the onus was not on the appellant to prove the source of source. By selling its existing investments the appellant merely realized the price of the asset parted with. On scrutiny of the Ld. AO s order particularly the flow chart at Pages 78 to 83, it is noted that the immediate source for payments received on sale of shares has always been the funds available in the bank accounts of the purchasers. From these charts I find that in each every case the Ld. AO was able to identify the purchaser with its name, PAN particulars of its bank accounts. In other words, the Ld. AO was satisfied about the identity of the persons who had acquired the shares from the appellant against which price was paid. It is also noted from the flow chart that not only the Ld. AO was able to identify the person who paid the price but the Ld. AO was further able to trace the person from whom the requisite funds were received by the share purchaser out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant or that money received by the appellant was in fact the same cash as was deposited in some account which did not have direct nexus with appellant s transactions. Even though in the flow charts extracted at Pages 78 to 83 of assessment order, the Ld. AO listed out names of few proprietary concerns in whose accounts the cash was allegedly deposited; I find that nowhere in the assessment order the Ld. AO was able to identify the persons to whom these proprietary concerns belonged. I also find that that no statements of any of the so-called proprietors of bank accounts was recorded by the Ld. AO or by any officer of the Department admitting the fact that the cash deposited in the bank accounts was provided to them by the appellant or that the cash was deposited for the ultimate benefit of the appellant. In fact the close analysis of the fund flow chart shows that it does not even conclusively prove that the cash deposited in several accounts by itself constituted the sole source for the amount which the appellant ultimately received as proceeds for sale of shares. 11. To illustrate, one may take example of ₹ 50,00,000/- which the appellant received from M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to examine the source of funds from which the purchaser of the shares had raised the requisite sum. Moreover even the facts brought on record by the Ld. AO did not conclusively prove that it was only the cash deposited in the account of Shree Ganpati Investment was the actual source for the amount paid by M/s J.M. Merchants Pvt Ltd to the appellant. It is also apparent from the impugned order that no material is discussed by the Ld. AO which in any manner showed that either the Investigating Authorities or any other officer of the Department had identified the individuals to whom the proprietary concerns belonged and in whose accounts the cash was allegedly deposited. The assessment order also shows that before drawing inference against the appellant the Ld. AO himself neither identified the persons to whom such concerns belonged nor any of them were personally examined by the Ld. AO to verify the true correct facts of the case. Merely because while tracing the successive layers of transactions, the Ld. AO found certain cash deposits in the accounts of unrelated parties; on such fact alone the Ld. AO could not record a conclusive finding that the cash so deposited represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn by the Ld. AO is not only far-fetched but bordering almost on the fantasy. Both M/s ABCIPL PACL India Ltd are reputed operating companies carrying on substantial business in their own right. The Ld. AO has not brought on record any material let alone cogent material which in any manner showed that either ABCIPL or PACL India Ltd were paper companies controlled by alleged entry providers. No evidence has been discussed or brought on record by the Ld. AO which in any manner proves that before the allegation of accounting of bogus billing is leveled against PACL Group or ABCI Group; any enquiry was carried out by the Investigation Wing of the Department or by the Ld. AO from either of the two companies or whether any of Directors or officials of the said companies had admitted of availing services of entry providers for accounting of bogus bills. It also appeared from the assessment order that before drawing such conclusion the Ld. AO himself did not examine any of the companies or intermediate companies or their Directors to ascertain the true correct facts. It appeared that the appellant having furnished the transactional documents including the source of payments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on suspicion and conjectures and not based on any irrefutable and clinching evidence. 13. I find that the entire assessment substantially proceeded on the Ld. AO s suspicion that the appellant had indulged in laundering his unaccounted income during the relevant year. As held by the Supreme Court in the case of Uma Charan Shaw Bros Vs CIT (37 ITR 271), howsoever grave the suspicion the Ld. AO may entertain, the suspicion cannot take place of the evidence or finding. The suspicion on the Ld. AO s part can certainly prompt him to conduct enquiry investigation but ultimate finding of the authority must be based on the material evidences gathered and which have live direct nexus with the finding recorded by the authority after objective consideration of facts evidences gathered. If the material or evidence gathered does not have any proximate cause with the finding ultimately reached then the finding of the authority has to be held to be perverse and unsustainable. In the present case even though the Ld. AO has labored hard and brought on record the statements of several alleged entry operators, I find that he was unable to pin point any specific correlation between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling trail are paper/shell companies, which showed that they had no existence at all. As regards the alleged cash trails, we find that the AO himself had traced the source of the monies credited to the assessee s account. From the charts extracted at Pages 78 to 83 of assessment order, we note that the AO himself was not only able to identify the names of the payer companies but was also able to identify and establish the bank accounts of the source as well as source of source from which payments were received by the assessee. Both the source as well as the source of source was within the banking system only and there was no cash deposit found. It is true that there were cash deposits at the end of the 5th or 6th layer of the transaction, but as rightly held by the Ld. CIT(A) there was no conclusive evidence to show that the ultimate source of the amount received by the assessee was the cash deposit made in the accounts of the proprietary concerns whose identity was also not established by the AO. Even with regard to the billing trails, it is noted that the AO waunable to bring to our attention, any factual material which corroborated his finding that bogus payments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
