TMI Blog2021 (2) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... cument marked as BK-2 which was seized by the search party from some other group and there the search took place almost one year before the date of search on the present assessee- Decided in favour of assessee. - IT(SS)A. No.630 & 631/LKW/2019, IT(SS)A. No.633 & 634/LKW/2019, IT(SS)A. No.637 & 638/LKW/2019, IT(SS)A. No.643/LKW/2019, IT(SS)A. No.678/LKW/2019 - - - Dated:- 1-2-2021 - Shri. A. D. Jain, Vice President And Shri. T.S. Kapoor, Accountant Member For the Appellant : Shri Ashwani Kumar, C.A., Shri Sudhindra Kumar Jain, C.A., Smt. Jasleen Sethi, C.A. For the Respondent : Smt. Abha Kala Chanda, CIT (DR) ORDER PER BENCH: These eight appeals have been filed by different assessees belonging to same group for different assessment years against separate orders of learned CIT(A), the detail of which is given below: I.T.A. No. Date of order of learned CIT(A) 633 634/Lkw/2019 22/11/2019 630/Lkw/2019 22/11/2019 631/Lkw/2019 14/10/2019 637/Lkw/2019 22/10/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,thus, the inferences drawn were arbitrary, unilateral and are also illegal unsustainable in law and on facts. I.T.A. No.631/Lkw/2019 1. That the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur has erred in law and on facts in sustaining the addition of ₹ 1,00,00,000/- made by the Ld. AO u/s 68 of the Income Tax Act,1961, on account of alleged share capital amounting to ₹ 40,00,000/- and alleged share premium amounting to ₹ 60,00,000/-, without appreciating that no incriminating material, document(s)/evidence was found from the premises of the appellant (searched person) during the course of search, therefore, firstly, the impugned assessment made u/s 153A of the Income Tax Act, 1961 and secondly the addition for alleged unexplained share capital are illegal, voidab- initio, bad in law and liable to be quashed/deleted. 2. That the learned CIT(A) has erred in law and on facts in sustaining the addition of ₹ 2,50,000/- made by the learned Assessing Officer u/s 69C of the Income Tax Act,1961 on account of alleged unexplained expenditure @ 2.5%, in respect of share capital and share premium, without appreciating that no incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in wholesale trading in cloth amounting to ₹ 3,17,70,338/-, as unexplained cash credit by the Ld. A.O., under section 68 r/w section 115BBE of the Income Tax Act, 1961, without appreciating that no incriminating material, document(s)/evidence, was found from the premises of the appellant (searched person) during the course of search, therefore, firstly, the impugned assessment made u/s 153A of the Income Tax Act, 1961 and secondly the treatment of profit in wholesale trading in cloth, as unexplained cash credit by the Ld. A.O., are illegal, void-ab-initio, bad in law and liable to be quashed/deleted. 4. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the arbitrary addition of ₹ 6,35,407/- made by the A.O., being the alleged commission paid @ 2% on the gross profit from wholesale trading of cloth treated as unexplained expenditure under section 69C of the IT. Act, 1961, merely on surmises and conjectures, without appreciating that no incriminating document(s)/evidence was found in the course of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 8. That t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the impugned assessment made u/s 153A of the Income Tax Act, 1961 and secondly the treatment of profit in wholesale trading in cloth, as unexplained cash credit by the Ld. A.O., are illegal, void-ab-initio, bad in law and liable to be quashed/deleted. 4. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the arbitrary addition of ₹ 18,41,391/- made by the A.O., being the alleged commission paid @ 2% on the gross profit from wholesale trading of cloth treated as unexplained expenditure under section 69C of the IT. Act, 1961, merely on surmises and conjectures, without appreciating that no incriminating document(s)/evidence was found in the course of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 8. That the learned CIT(A) has erred in law and on facts in sustaining the impugned additions made by the Assessing Officer and ignoring the fact that the Assessing Officer has neither confronted any incriminating material/statement nor provided an opportunity to cross examine the persons of the Rich Group, whose statement(s) were relied upon by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustaining the arbitrary addition of ₹ 17,82,880/- made by the A.O., being the alleged commission paid @ 2% on the gross profit from wholesale trading of cloth treated as unexplained expenditure under section 69C of the IT. Act, 1961, merely on surmises and conjectures, without appreciating that no incriminating document(s)/evidence was found in the course of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 8. That the learned CIT(A) has erred in law and on facts in sustaining the impugned additions made by the Assessing Officer and ignoring the fact that the Assessing Officer has neither confronted any incriminating material/statement nor provided an opportunity to cross examine the persons of the Rich Group, whose statement(s) were relied upon by the Assessing Officer thus, the inference drawn were arbitrary, unilateral and are also illegal and unsustainable in law and on facts. I.T.A. No.638/Lkw/2019 1. That the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur has erred in law and on facts in sustaining the addition of ₹ 1,00,00,000/- made by the Ld. AO u/s 68 of the Income Tax Act,1961, on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 8. That the learned CIT(A) has erred in law and on facts in sustaining the impugned additions made by the Assessing Officer and ignoring the fact that the Assessing Officer has neither confronted any incriminating material/statement nor provided an opportunity to cross examine the persons of the Rich Group, whose statement(s) were relied upon by the Assessing Officer thus, the inference drawn were arbitrary, unilateral and are also illegal and unsustainable in law and on facts. I.T.A. No.643/Lkw/2019 1. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the treatment of profit in wholesale trading in cloth amounting to ₹ 2,66,951/-, as unexplained cash credit by the Ld. A.O., under section 68 r/w section 115BBE of the Income Tax Act, 1961, without appreciating that no incriminating material, document(s)/evidence, was found from the premises of the appellant (searched person) during the course of search, therefore, firstly, the impugned assessment made u/s 153A of the Income Tax Act, 1961 and seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating that no incriminating document(s)/evidence was found in the course of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 6. That the learned CIT(A) has erred in law and on facts in sustaining the impugned additions made by the Assessing Officer and ignoring the fact that the Assessing Officer has neither confronted any incriminating material/statement nor provided an opportunity to cross examine the persons of the Rich Group, whose statement(s) were relied upon by the Assessing Officer thus, the inference drawn were arbitrary, unilateral and are also illegal and unsustainable in law and on facts. 3. Learned counsel for the assessee, at the outset, submitted that the appeals in all these years are covered in favour of the assessee by the order of the Tribunal in the case of assessees itself vide order dated 16/12/2020. Learned counsel for the assessee submitted that Hon'ble Tribunal had deleted the additions in some years as the additions were made therein without having found any incriminating material as the assessments in those cases stood completed. It was submitted that in some of the years the Hon'ble T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book and the time for issue of notice u/s 143(2) expired on 30/09/2015 and intimation u/s 143(1) was issued vide order dated 19/12/2014, a copy of which is placed in paper book at pages 42 to 47. Similarly, in respect of appeals in I.T.A. No.630 631, the return for assessment year 2012-13 was filed on 30/09/2012 which is apparent from page No. 18 of the paper book and time for issue of notice u/s 143(2) expired on 30/09/2013 which is before the date of search i.e. 23/08/2016. Similarly, for assessment year 2014-15 the return was filed on 30/11/2014 which is apparent from page No. 37 of the paper book and the date for issue of notice u/s 143(2) expired on 30/09/2015 and intimation u/s 143(1) was issued vide order dated 29/12/2014, a copy of which is placed in paper book at pages 40 to 48. Therefore, for assessment years 2012-13 2014-15 the additions are not sustainable as the additions have not been made on the basis of any seized material which is apparent from the assessment orders itself. 6. We have already held in our order dated 16/12/2020 in the case of the present assessees itself in other assessment years that additions were not made on the basis of any incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y very vividly. The name of Sri Navin Jain and his family members such as his father Sri Naresh Kiunar Jain, Naresh Kumar Jain HUF, his mother Smt. Shrimati Jain and his wife Neetu Jain also figure in this diary. Shri Navin Jain and his aforementioned family members have taken accommodation entries of tax exempt Long Term Capital Gain by the way of pre-arranged and manipulative trading in the shares Cityon Systems (India) Limited. This sale was stage managed by Sh. Shashwat Agarwal and his brothers as all the shares were purchased by the companies controlled by Sh. Shashwat Agarwal. 5.1 The above observations, noted by the Assessing Officer, clearly demonstrate that a diary identified as BK-2 was impounded during search seizure operation on 28/04/2015 in the case of search on the companies belonging to Shri Shashwat Agarwal wherein the name of Shri Navin Jain and his family members were mentioned. The Assessing Officer nowhere noted that the names of the assessees was also mentioned in such diary. Moreover, from the findings of the Assessing Officer, we find that the companies of Shri Shashwat Agarwal were engaged in providing accommodation entries of bogus Long Term Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns conducted in the premises of the FNP group which comprised of various companies, partnerships and proprietorship concerns. The statement of an employee PG was recorded on oath under section 133A. The assessee was a director/partner/shareholder in the group of companies/concerns. She was the proprietor of the concern FNP. On the basis of documents recovered during the search operation, a notice under section 153A was issued to the assessee. Thereafter, a notice and questionnaire under sections 143(2) and 142(1) were also issued. The Assessing Officer passed separate orders in respect of the assessment years 2000-01 to 2003-04. For the assessment year 2004-05, as in the preceding years, the assessee had claimed deduction on account of franchisee commissions paid to various parties. The Assessing Officer held that the addresses of the franchisees were not revealed and that there were discrepancies in the details of the accounts of the franchisees filed by the assessee. Consequently, the franchisee commission payments claimed by the assessee were added back to her income. For the assessment year 2004-05, the Assessing Officer also made an addition on account of stock. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153 A qua each of the assessment year would be justified. 5.2 The above judgment of Hon'ble Delhi High Court has been upheld by Hon'ble Supreme Court as the SLP filed by Revenue has been dismissed which is reported at 96 Taxmann.com 468. Hon'ble Delhi High Court in above case has distinguished the case law of Dayawanti Gupta vs. CIT 390 ITR 496 (Del) which Learned D. R. had heavily relied. The case law of Hon'ble Allahabad High Court in the case of Raj Kumar Arora 367 ITR 517, though supports the contentions of the Revenue but since Hon'ble Supreme Court has decided the issue in favour of the assessee in the case of Meeta Gutgutia therefore, the judgment of jurisdictional High Court will not help the Revenue. The contention of the Revenue that since the Department has not accepted the decision of Hon'ble Supreme Court in the case of Kabul Chawla and Meeta Gutgutia as SLP in the case of CIT vs. Continental Warehousing Corporation 235 Taxman 568 (SC) has been admitted is also of no help to Revenue. Therefore, in view of the above case laws, we hold that in case of completed assessments, the addition can be made only on the basis of incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that adverse material used by Assessing Officer while making additions was not confronted to assessees. In this respect we find that Assessing Officer had made the additions by holding the sale and purchase of cloth as bogus without confronting the same to the assessees inspite of the fact that assessees had specifically requested the Assessing Officer for opportunity to cross examine the witnesses. This is apparent from the paper book pages 53 in I.T.A. No.643 where in reply to show cause notice the assessee had specifically asked for the confrontation of adverse material. 10. For the sake of completeness the reply to show cause notice wherein the assessees had requested for confrontation in I.T.A. No.643, has been made part of this order which is reproduced below: Kanpur Dated:21.12.2018 To The Dy. Commissioner of Income Tax, Central Circle-IJ, Kanpur. Sir, RE: Show Cause Notice 12.12.2018 in the case of M/s. Paras Castings and Alloys Pvt. Ltd. in connection with Assessment Proceedings under section 153A of the I.T. Act for the Assessment Year 2017-18 Explanation Regarding With reference to your Notice referred above, we wish to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed under the Income Tax Law, therefore, all this is non cognizable and cannot be made basis for completion of assessment in the present case. Without prejudice, you are requested to kindly confront all information, documents, orders referred to in your Show Cause Notice relating to any third party to the assessee by providing original or certified true copy for explanation/rebuttal and till then they should not be used to draw any adverse inference in the case of the assessee. 4) Point-wise Explanation i) Shri Ashish Agarwal and Shri Shashwat Agarwal: At the outset, it is explained that the assessee has no dealings either with Shri Ashish Agarwal or Shri Shashwat Agarwal, in their individual capacity. ii) It is a common understanding that an individual is different from a juridical person and vise versa. The assessee company had dealings with certain companies but those companies are different from their shareholders and/or directors, hence the inferences drawn in the initial 2-3 paragraphs of the show cause notice are unfounded and unwarranted. iii) Sales Tax: The assessee company is registered under UPVAT for trading in cloth, hence the inferenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aff Work looked after Designation Salary 1. Mr. Ankur Gupta Accounts Department Manager 35,500 2. Mr. R. S. Chauhan Marketing /Sales Accountant 8,000 3. Mr. Atul Shukla Purchase/Sales Accounts Clerk 7,000 4. Mr. Ram Pratap Singh Godown/stock Accountant 8,000 viii) It is reiterated that a) Wholesale trading in unbranded cloth done by the assessee in financial year 2016-17 relevant to assessment year 2017-18 fully mentioned in the above referred show cause notice is genuine, carried on in the ordinary course of business and full and proper bills, vouchers and books of account are maintained by the assessee and are amenable to complete verification. b) No commission was paid as alleged in the last paragraph of your notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Sigma Castings Ltd. P.B. pages 55 to 61 2. Kundan Castings (P) Ltd. P.B. pages 58 to 63 3. Paras Castings Alloys (P) Ltd. P.B. pages 57 to 69 4. Shri Radhey Radhey Ispat (P) Ltd. P.B. pages 57 to 63 5. Quality India (P) Ltd. P.B. pages 48 to 52 Admittedly, the payments and receipts for all the purchases and sales have been made through banking channels. The Assessing Officer, vide show cause notice dated 12/12/2018, confronted the assessee the following questionnaire: Sub:Show cause notice for assessment proceedings u/s 153A/143(3) of the I.T. Act for the assessment year 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 2017-18 Reg. Please refer to the assessment proceedings pending before the undersigned of the I.T. Act for assessment year 2012-13 to 2017-18. From the perusal of records and the details furnished by you, it is noticed that you have claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for providing/getting accommodation entries in the form of bogus profit. Even a layman can understand that there was no logic for making purchase from one of the Rich Group of companies by the assessee and again selling the same to another companies of Rich Group directly or through its sister concern, when the main business of assessee was of manufacturing and trading in iron steel. Apparently, if one company of Rich Group would have required cloth, it could have purchased directly from its another group company, which in most of the cases are situated in same campus, instead of purchasing and selling the same from/through Sigma Group of companies. During the assessment proceedings assessee has stated that whole sale cloth business done by the assessee was conducted at lower ground floor of the property situated at 122/235, Fazalganj Kanpur. However, during the course of search seizure operation in Sigma Group of cases at the premises 122/235, Fazalganj, Kanpur, Shri Ankur Gupta, employee of M/s Shri Radhey Radhey Isptal Pvt. Ltd. and also its signatory, stated that cloth trading has been conducted in Sigma Casting Ltd. Shree Radhey Radhey Ispat Pvt. Ltd. fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture from undisclosed income u/s 69C of the I.T. Act and accordingly why these deemed incomes u/s 68 be not taxed u/s 115BBE of the I.T. Act. The date fixed for compliance is 22/12/2018. 8. The assessee vide letter dated 21/12/2018 in reply to questions raised in the questionnaire submitted that the Assessing Officer was using the information on the basis of statement of third party without confronting to the assessee which was not in accordance with law. In this respect the assessee had also replied to other queries of the Assessing Officer. For the sake of completeness the reply to the show cause notice placed at pages 120 to 122 of the paper book, is reproduced below: RE: Show Cause Notice dated 12.12.2018 in the case of M/s. Sigma Castings Pvt. Ltd. in connection with Assessment Proceedings under section 153 A of the Income Tax Act, 1961, for the Assessment Year 2013- 14 Explanation regarding. With reference to your Notice referred above, we wish to explain and submit as under: 1)Pre-conceived inferences; A search was conducted on 23.08.2016 (concluding on 25.08.2016) and despite almost 27 months passed from the said date, no enquiry except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfront all information, documents, orders referred to in your Show Cause Notice relating to any third party to the assessee by providing Original or certified true copy for explanation/rebuttal and till then they should not be used to draw any adverse inference in the case of the assessee. 4)Pointwise Explanation: i) Shri Ashish Agarwal arid Shri Shashwat Agarwal: At the outset, it is explained that the assessee has no dealings either with Shri Ashish Agarwal or Shri Shashwat Agarwal, in their individual capacity. ii) It is a common understanding that an individual is different from a juridical person and vise versa. The assessee company had dealings with certain companies but those companies are different from their shareholders and/or directors, hence the inferences drawn in the initial 2-3 paragraphs of the Show Cause Notice are unfounded and unwarranted. iii) Sales Tax: The assessee company is registered under UPVAT for trading in cloth, hence the inference relating to Sales Tax information not received from Sales Tax Department in the case of third party referred to in your Show Cause Notice is neither relevant nor meaningful in the present case. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,500/- 2. Mr. R.S. Chauhan Marketing/Sales Accountant 8,000/- 3. Mr. Atul Shukla Purchase/Sales Accounts Clerk 7,000/- 4. Mr. Ram Pratap Singh Godown/Stock Accountant 8,000/- viii) It is reiterated that a) Whole sale trading in unbranded cloth done by the assessee in F.Y. 2012-13 relevant to A.Y. 2013-14 fully mentioned in the above referred show cause notice is genuine, carried on in the ordinary course of business and full and proper bills, vouchers and books of account are maintained by the assessee and are amenable to complete verification. b) No commission was paid as alleged in the last paragraph of your notice. In view of the facts and circumstances narrated above and detailed explanation given on each point raised in the show cause notice proposing to invoke provision in section 68 and 69C of the Income Tax Act, 1961 and to treat cloth trading as Bogus and alleged commission paid thereon as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f companies denying cloth trading with the assessees and if there was one then same has not been confronted to the assessees for cross examination despite specific request of the assessee. The entries of purchases and sales are supported by invoices and are further supported with the fact that these were reported to VAT authorities. The payments and receipts are through banking channels. 10. The assessee has recorded the entries of sales and purchase in its books of account and has duly disclosed the items of sales and purchase in the profit loss account and has duly disclosed the profit earned on the trading in the profit loss account and has offered the same as business income. The assessee has furnished as much information as possible to justify its claim about the transactions of cloth being genuine. Under these circumstances, Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. [2019] 418 ITR 315 (SC) has decided the issue in favour of assessee by holding as under: 1. Delay condoned. 2. We have perused the review petition and find that the tax effect in this case is above ₹ 1 crore, that is, ₹ 6,59,27,298/-. Ordinarily, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not allowed to cross-examine the dealers whose statements were relied upon by the Adjudicating Authority in passing the orders, the Tribunal rejected its plea in the following manner: 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. Challenging the aforesaid order, the present appeal is preferred by the appellant-assessee. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 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 inasm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause notice. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 12. The Lucknow Bench of the Tribunal in the case of Morning Glory vide order dated 15/03/2019 in I.T.A. No.72/Lkw/2018, has allowed relief to the assessee wherein again the statements of third parties were not made available to assessee for cross verification. The Hon'ble Tribunal had followed the judgment of Hon'ble Supreme Court in the case of Andman Timber Industries (supra) besides noting down the other decisions. Therefore, in view of the above, we allow ground No. 5 in all the appeals. 13. Having allowed ground No. 5, the additions sustained by learned CIT(A) u/s 68 and 69C are not sustainable and hence are deleted. 14. Nothing was argued on other legal grounds taken by the assessee in the grounds of appeals. Therefore, same are dismissed as not pressed. 15. In view of the above, the appeals filed by the assessee are partly allowed. 12. In view of the above, ground No. 6 in I.T.A. No. 64 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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