TMI Blog2020 (10) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... the order Ld. CIT(A)-9, New Delhi, Dated 11.07.2019, for the A.Y. 2015-2016, challenging the addition of ₹ 1.16 crores under section 68 of the Income Tax Act, 1961. 2. We have heard the Learned Representatives of both the parties through video conferencing and perused the material available on record. 3. Briefly the facts of the case are that in this case return of income was filed by the assessee-company on 30.09.2015 declaring loss of ₹ 3,37,043/- for the assessment year under appeal. The case was selected on limited parameters under CASS to examine the following issues (i) Large interest expenses related to exempt income under section 14A. (ii) Mismatch in the amount paid to the related persons under section 40A(2)(b) reported in Audit Report and ITR. 3.1. During the course of assessment proceedings, it was noticed that the assessee has received unsecured loans from the following parties as per the details mentioned below : Name of the lender Address of the lender PAN Amount received [in Rs.] Ambashree Infratech (P) Ltd., 85, Metacalf Street, 2nd Floo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer, Ward-2(2), Ward-1(1) and Ward-6(4), Kolkata. The A.O. in view of report of the Inspector and the concerned A.Os. at Kolkata noted that the assessee failed to prove the identity of the creditors, their creditworthiness and the genuineness of the transaction in the matter and the same appears to be paper company only. The A.O. issued show cause notice to the assessee as to why the aforesaid sum of ₹ 1.16 cross should not be treated as unexplained and added back to the income of the assessee. 3.3 The assessee in response to the notice of the A.O. filed reply dated 14.12.2017 and assessee raised various pleas and relied upon multiple Judgements and the explanation of assessee is summarised by the A.O. in the assessment order as under : (i) The said loan were repaid in the subsequent years and the assessee company is under no obligation to spend money and time to prove their genuineness. (ii) Report of Inspectors are suspect as there are evidences contrary to the same and in support, the assessee has provided copies of assessment orders of the alleged companies in question for different assessment years. (iii) The assessee suo motu vide letter dated 30.11.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The assessee challenged the addition before the Ld. CIT(A). Detailed submissions of the assessee are noted in the impugned order. The assessee also explained that assessee paid interest on the loans and TDS was also deducted which have not been doubted by the A.O. All the creditors are existing assessees at Kolkata which fact is verified by the concerned A.O. No cash has been originated in their accounts. Merely because the creditors did not appear, is no ground to make addition against the assessee. The assessee also relied on the submissions made before the A.O. The Ld. CIT(A) considering the explanation of assessee did not find any merit in the appeal of assessee. It was also noted by the Ld. CIT(A) that it is not an absolute right of the assessee to ask for the enquiry report submitted by the Inspector and the concerned A.Os. of Kolkata. The appeal of assessee was accordingly dismissed and addition was confirmed. 5. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that assessee filed all the documentary evidences in respect of the three creditors before A.O. which consist of copy of their ITR for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport of this submission, he has relied upon the following decisions : 1. DCIT vs., Rohini Builders 256 ITR 360 (Guj.) (HC) in which SLP filed by the Department have been dismissed by the Hon ble Supreme Court in SLP (C) No.515 of 2002 Dated 08.01.2002. 2. CIT vs., Winstral Petrochemicals Pvt. Ltd., 330 ITR 603 (Del.) (HC) 5.1. Learned Counsel for the Assessee, therefore, submitted that the impugned addition is wholly unjustified and the same may be deleted. 6. On the other hand, the Ld. D.R. relied upon the orders of the authorities below and submitted that addresses of the creditor companies are same and it appears that the transactions have been managed by the assessee. It is submitted that letter sent to two parties returned un-served by the postal authorities with the remarks Not Known. He has submitted that in response to Summons/Commission under section 131 of the Income Tax Act, 1961, concerned A.Os. at Kolkata reported against the assessee company that the transaction is not genuine, therefore, addition have been correctly made into the matter. 7. We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack at any stage. It is also established that no right of cross-examination have been given to the assessee to cross-examine the Inspector or to rebut the evidence collected at the back of assessee at Kolkata. Therefore, such material collected at the back of the assessee cannot be read in evidence against the assessee. We rely upon decision of the Hon ble Supreme Court in the case of Kishanchand Chellaram vs., CIT 125 ITR 713 (SC) wherein the Hon ble Supreme Court held that any material collected at the back of the assessee and not confronted and no opportunity given to cross-examine, such material cannot be relied upon against the assessee. The same view have been taken by the Hon ble Supreme Court in its subsequent decision in the case of M/s Andaman Timber Industries 281 CTR 214 (SC). Thus, whatever material have been collected by the concerned A.Os. at Kolkata or the Inspector at Kolkata, which has made the basis to doubt the documentary evidences placed before A.O, could not be read in evidence against the assessee. It is also violation of principles of natural justice and could not be treated as any adverse material against the assessee and such evidence shall have to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We rely upon the following decisions. 7.1. Decision of the Hon ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment Pvt. Ltd., (2011) 330 ITR 298 (Del.) in which it was held that assessee need not to prove source of the source . 7.2. Judgment of the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation (P.) Ltd., (1986) 159 ITR 78 (SC) in which it was held as under : In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee s burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditor. 7.6. Decision of Hon ble Delhi High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., Ors. 361 ITR 220 (Del.) in which it was held as under : Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has created evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 7.7. Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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