TMI Blog2020 (11) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... h evidence prima facie proves the - (i) identity of the creditor; (ii) the capacity/creditworthiness of the creditor to advance the money; and (iii) the genuineness of the transaction, the onus shifts to the AO to make further inquiries. AO cannot perfunctorily reject the evidence produced and has to state cogent reasons for such rejection. Notice under Section 148 of the Act was issued dated 30th March 2016 and the time available with the AO for the completion of the assessment under Section 147 was up to 31stDecember 2016. In other words the available time with the AO was of 9 months from the date of the issue of notice under Section 148 of the Act for the completion of the assessment under Section 147 - Admittedly, the Department was also aware of the time available with it for the completion of the assessment. Accordingly, it was expected from the Department to Act swiftly for completing the assessment by making necessary enquiries within the time prescribed under the law and not to carry the matter till the fag-end of the assessment. What is transpired is that the revenue has not given enough time to the case on hand despite having the necessary powers and other supporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration has issued 106532 equity shares having face value at ₹ 10 and premium of ₹ 2790/- per share aggregating to ₹ 29,82,89,600/- only. The details of the companies which subscribed the shares of the assessee stand as under: Sr. No. Name of the Party PAN No. of Shares Amount Introduced (Rs.) 1. Vitale Bio Science Ltd. AACV2768D 39784 11,13,95,200 2. Pioneer Mercantile Leasing Ltd. AADCP3995R 42054 11,77,51,200 3. Pooja Green Belt Realty Pvt. Ltd. AAECP4485B 10410 2,91,48,000 4. S.J. Securities Ltd. AAICS9627C 7142 1,99,97,600 5. Incap Financial Services Ltd. AABCI0538B 7142 1,99,97,600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, has requested for the cross-examination of Shri Partik Shah. As per the AO, the assessee is trying to shift its burden upon the Revenue by requesting the cross-examination of Shri Partik Shah which is very vague. 11. The AO further in the assessment proceedings for the Assessment Year 2014- 15 found that all the companies as discussed above have subsequently transferred their shareholdings to a partnership firm namely M/s Atul D. Amin at the face value of ₹ 10 per share despite the fact that these companies have acquired shares in the Assessment Year 2009-10 at a premium of ₹ 2790/- per share. One of the director in the assessee company namely Shri Atul D. Amin is the partner in the firm M/s Atul Dhiraj Amin. Accordingly, the AO was of the opinion that the entire modus operandi adopted by the assessee was to acquire the share capital through the accommodation entries to account for its unaccounted income. Hence, the AO treated the entire amount of share capital of ₹ 29,82,89,600/- as unexplained cash credit under Section 68 of the Act and added to the total income of the assessee. 12. Aggrieved assessee preferred an appeal to the Learned CIT (A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) also held that the first proviso to Section 68 of the Act, applicable to the closely held companies, was brought by the Finance Act 2012 and was made applicable with effect from 1st April to 2013, wherein it was required to offer the explanation about the nature and source of money in the hands of the shareholder for accepting share application money as genuine. However, such amendment was not applicable for the year under consideration as held by the Hon ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd. in Income Tax appeal No. 1613 of 2014 dated 20.03.2017. 19. In view of the above, the Learned CIT (A) deleted the addition made by the AO by observing as under: 3.24. The AO has relied upon the judgment in the case of M/s. Navodaya Castle Pvt. Ltd. (supra), in support of the addition. However, the said decision is not applicable on the facts of the case for the reason that in appellant s case, no such notices and summons were issued though specifically requested by the appellant to the AO. Also, no cash was found to have been deposited in the bank account of the share subscriber companies. Rather there were sources of sources by cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary, the Learned AR before us filed a Paper Book running from pages 1 to 592 and submitted that the copy of the statement of Shri Partik R Shah was not provided to the assessee despite the request made to the AO. As per the Learned AR the entire addition was based on the search materials gathered and the statement recorded during the search proceedings but the same was not provided for cross verification. Therefore, the order itself is bad in law. 23. The Learned AR further submitted that the assessee has duly discharge its onus imposed under Section 68 of the Act by furnishing the details of the identity of the parties, genuineness of the transactions and creditworthiness of the parties which are available in the paper book. 24. Both the Learned DR and the AR vehemently supported the order of the authorities below as favourable to them. 25. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion we note that the entire income escapement proceedings under Section 147 of the Act for the addition of ₹ 29,82,89,600/- as unexplained cash credit under Section 68 of the Act was revolving to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations. 29. The Hon ble Delhi High Court also in case CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi) held that where addition was sought to be made in reassessment proceedings only on the basis of statement, it was held that it was mandatory for the revenue to produce the proprietor for cross-examination by the assessee on its specific demand in that regard. Therefore, the reopening of assessment based on deposition of the third party was not justified. 30. It is also important to note that the onus of ensuring presence of the witness upon which the Revenue is relying, cannot be shifted to assessee. In other words, wherever Revenue wants to rely on the statement of third person for making addition, onus is on the AO to ensure the presence of that third person. That onus cannot be shifted to the assessee as third person is a witness of the AO. In this respect Hon ble Delhi High Court in case of PCIT v. Best Infrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287 (Delhi) held as under: A copy of the statement of 'T' recorded under Section 132(4), wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Partik R Shah during search proceedings but the Tribunal was pleased to delete the addition in the case of Shri Pragnesh Ramanlal Patel Vs. ITO bearing ITA Nos. 2807 2808/AHD/2017 for the Assessment Year 2013-14 and 2014-15 by observing as under: 18.We have noticed that the assessee have provided all the details related to the trading in securities during the course of assessment proceedings to the Assessing Officer. We have further noticed that the assessing officer has not examined/investigated the transactions in order to prove that the transactions were bogus and not genuine. The A.O. has not contradicted the claim of the assessee that there was no prohibition on carrying out off market transactions. The A.O. has referred the statement of Shri Prakik R. Shah that Vitale Biotech Ltd. has provided entries in respect of Amarpali Group but the A.O. has not provided any copy of any material or statement which can demonstrate that accommodating entries were also provided in the case of the assessee as the referred statement pointed out providing of entries in respect of Amarpali Group. The A.O. has not provided any suchcopy of statement or cross-examination to prove that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding, the interference therewith by this Court is not warranted. 35. Yet, the another controversy arises whether not affording opportunity to cross-examine a witness upon whose statement AO sought to rely for making addition is illegality leading to vitiating the assessment or is irregularity leading to setting aside of the assessment for providing opportunity for cross-examination of the witness by the assessee. This controversy has been resolved by the judgment of the Hon'ble Apex Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC), wherein the Hon'ble Apex Court observed 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. From the above judgment it flows that when statements of witnesses are made the basis for the addition but without allowing assessee to cross-examine such witnesses, then the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in support of the transactions are available in the Paper Book. Similarly, there is also no dispute to the fact that all the transactions were carried out through the banking channel. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts is that the assessee has discharged its onus imposed under Section 68 of the Act. The details filed by the assessee was not cross verified by the Revenue from the respective parties despite having the necessary details in its possession. Thus, we are of the view, Revenue cannot go to hold the addition under Section 68 of the Act in the given facts and circumstances. In holding so, we draw support and guidance from the judgment of Hon ble Gujarat High Court in the case of CIT Vs. Chanakya Developers reported in 43 taxmann.com 91 wherein it was held as under: 9. We are in complete agreement with CIT (A) and the Tribunal both, who have concurrently held that the onus which was required to be discharged on the part of the assessee respondent was duly done. Not only the identity of the persons concerned but also the PAN numbers were before the Assessing Officer. In the event of any further inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was held that merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under Section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. From the above it is inferred that the principle, which is made applicable to addition under Section 68 of the Act is that the initial onus in on the assessee to discharge by producing the evidence which is required of him and once the assessee produces the evidence which is in his power and possession and which evidence prima facie proves the - (i) identity of the creditor; (ii) the capacity/creditworthiness of the creditor to advance the money; and (iii) the genuineness of the transaction, the onus shifts to the Assessing Officer to make further inquiries. The Assessing Officer cannot perfunctorily reject the evidence produced and has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1.5 Lakhs. The costs to be paid to the Petitioner within a period of four weeks from today. The costs be apportioned between the officer who is present in Court and the officer who was his predecessor. The amounts shall be in the first instance paid by the Respondents and thereafter they shall be recovered from the salaries of these two officers. Equally, the lapses and errors on their part be noted by taking due cognizance of this order. The superiors should enter in their Annual Confidential Reports these lapses and errors on account of which the Respondents faced this embarrassment in the Court. Once the Respondents could not justify their acts and solely because of the inefficiency of these officials, then, the superiors must initiate the requisite steps and if they include denial of any promotional or monetary benefits to such officials, then, even then such steps and measures be initiated in accordance with law. That is the minimal expectation of this Court. Moving further to the observation made by the AO that the aforesaid companies have transferred the shares in the subsequent year to a firm namely M/s Atul D. Amin in which one of the partner is a director in the ..... 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