TMI Blog2021 (4) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of such express satisfaction, the AO of the assessee was not vested with jurisdiction to exercise powers conferred under s.153C - AO of the Assessee was thus ousted from exercise of jurisdiction under S. 153C. In the circumstances, the AO of the Assessee has rightly resorted to S. 147 of the Act on fulfillment of stipulated conditions. The loose papers seized together with cash diary recorded by/ for the searched person are admittedly not belonging to the assessee per se although certain entries showing therein are claimed to be pertaining to / relatable to the assessee. Noticeably, the AO of assessee has explicitly stated in para 4.2 and para 9.4 of the impugned re-assessment order that seized material belongs to searched person i.e. Venus Group. In the backdrop of these facts, the plea canvassed on behalf of the assessee for availability of jurisdiction under s.153C of the Act in supersession to Section 147 of the Act does not merit acceptance. Borrowed satisfaction of the AO merely on the basis of certain information received from other AO - Satisfaction of the AO on the reasons cited suffers from the vice of non-application of mind and a mere borrowed satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss in the entries recorded by AO in regular books did not present to the mind of the AO in the course of original proceedings. The AO simply could not be expected to put blinkers on his eyes and ignore information just for the reason that the transactions through banking channel as recorded in books were earlier subjected to scrutiny. Certain element of subjectivity involved in formation of belief thus cannot overstretched at the threshold stage. Hence, the plea of the assessee that the finality of assessment earlier made under s.143(3) of the Act cannot be disturbed is totally misplaced in the wake of new facts coming to the light of the AO at the time of invoking jurisdiction. Hence, the objection of the assessee canvassed on point of jurisdiction fails on all counts. Thus, we see no error in the action of the CIT(A) in upholding the jurisdiction. Additions towards alleged unexplained cash credit u/s 68 - CIT-A deleted the addition - No doubt, the documents found possessed from the custody of a searched person may possibly operate as an estoppel against that searched person, if the circumstances so warrant, but it is unconceivable to bind a third party for such entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as well as cross objection of assessee arises from the same assessment order and first appellate order and involve connected issues. Hence, all the captioned appeals are disposed off by this common order. 3. To begin with, we shall take up Revenue appeal in ITA No.2295/Ahd/2018 for adjudication purposes. 4. Grounds of appeal raised by the Revenue in ITA No. 2295/Ahd/2018 read as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 4,00,00, 000/- on account of Unexplained Credit u/ s 68 of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition made by the AO ignoring the overwhelming and strong evidences discussed by the AO in the assessment order relating to the impugned unexplained transaction of ₹ 4,00,00,000/- entered into by the assessee. 5. Grounds of appeal raised by the assessee in its cross appeal in ITA No. 2200/Ahd/2018 whereby the jurisdiction assumed by AO under s.147 of the Act was raised, read as under: 1. The Ld. CIT (A) has grossly erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the case of Venus Group of Ahmedabad on 10.03.2015. Documents related to unaccounted cash transaction of the Venus Group were seized on the premises from the premises Terrace of Crystal Arcade , C G Road, Ahmedabad. The building, Terrace of Crystal Arcade was constructed by M/s. Sunderdeep Builders (Prop.-Rajesh Sunderdas Vaswani) during F.Y. 2003-04. After a detailed discussion, the AO broadly observed that the documents were seized and on their co-relation with books of accounts/bank statement of Venus Group, it was found (by the AO of Venus Group) that unaccounted cash transactions of Venus Group were first recorded on cash vouchers and then on the basis of such recording, the entries were recorded on a day cash book . As also observed, it was noted by the AO of the Venus Group that the cash entries in seized documents pertains to the beneficiary, Ganesh Plantation Ltd. (assessee) for F.Y. 2010-11 (A.Y. 2011-12). On receipt of such information, the AO of the assessee herein called for and verified the cash records of the assessee for relevant year vis- - vis information so received. After such verification, reasons were recorded under s.148(2) of the Act and approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and held that credit of ₹ 4 Crore received by the assessee through banking channel during F.Y. 2010-11 from M/s. Sunderdeep Builders lacks in bonafide and nature and source of such credit in books is unsatisfactory. Accordingly, an amount of ₹ 4Crore was added to the income previously assessed and brought within the ambit of taxation in the reopened proceedings under challenge. 7. Aggrieved by the aforesaid addition made under s.68 of the Act by the AO, the assessee preferred appeal before the CIT(A). 7.1 Before the CIT(A), the assessee made two fold challenges (i) wrongful assumption of jurisdiction under s.147 of the Act and (ii) unjustified additions on factual matrix. 7.2 For challenge on jurisdiction, the CIT(A) took note of the reasons recorded as well as the legal objections. However, the CIT(A) found scarce merit in the legal challenge for invocation of jurisdiction under s.147 of the Act. 7.2.1 The reasons recorded by the AO forming the basis for reopening the completed assessment are reproduced hereunder for ready reference: An information was received from ACIT, CC- 1 (1), Ahmedabad on 18.01.2017. 1. A search u/s 132 of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book was found to have been maintained in a highly systematic fashion. 3. On analysis of seized evidences found during the search, it has been noticed that the main persons of the group are engaged in huge land dealings. Upon correlation of cash books/ cash vouchers/day books with the sale deeds of land transactions, it has been noticed that there is huge transaction of unaccounted cash in these land dealings. Such cash transaction are recorded in the name of different entities in the seized cash vouchers. The amount which is legally paid for the purchase/ sale of the land has been paid vide cheque through bank accounts. This figure is shown as the total consideration of deals in the registered sales/purchase deed of the lands. Also, the amount paid through cheque and which is the total consideration of land dealing as shown in sales/purchase deeds, is entered with a noting as Against EC in the seized papers. 4. 'Against EC' transactions: The 'Against EC transactions in the unaccounted day cash book have their relation with the receipt and payment of equivalent amount of RTGS in the bank account. For e.g., if there is cash- receipt against EC, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll finance related transaction. (ii) Some of the names of ' Against EC' parties/ entities along with the concerned person in whose name the ' Against EC' are noted in the seized documents (unaccounted cash book, cash voucher) are also found in the seized material from 901 Sapphire Complex, C. G. Road Ahmedabad and correlate with evidences seized from Terrace of Crystal Arcade C.G. Road Ahmedabad. (iii) It has been found that the names mentioned on these pages are also mentioned on the other seized evidences like cash voucher, summary sheet of Against EC transactions (page number 2 to 9 of Annexure A-129, seized from the Terrace of Crystal Arcade) and cash book related to ' Against EC' transactions (iv) It has been found that ' Against EC' entries are the cash receipt and cash payment to various parties who are in the need of RTGS/ cash. The Venus Group through; its Concerns l ike Sunderdeep Builders (SDB), Sanjeet Motor Finance Private Limited (SMFPL) and Greenstone Agro- Products Infrastructure Private Limited is involved in the business of providing accommodation entries. 8. Correlation of 'Against EC' entries with ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fincorp Services Pvt Ltd for A Y 20H- 12. Further Jayesh Kotak has also taken unsecured loan of ₹ 1 Crore during F.Y. 2009-10 from assessee which was repaid by him during the FY 2010-11. 11. It is important to note here that a search had atea been conducted on J P Iscon group on 25/ 02/ 2017. During the search, it was gathered that directors Jayesh Kotak Pravin Kotak operated the bank account of J P Fincorp Services Pvt Ltd., which is a final beneficiary company of J P Iscon Group for accommodation entries taken by the Group from bogus concerns run by Shrish Chandrakant Shah, Mumbai- based known accommodation entry provider. The cases of JP Isocn Group- related to search? operation are also assessed by this office. Hence, considering the above facts and evidences, I believe that assessee has paid unaccounted cash ₹ 4,00,00. 000/- to Venus group and taken accommodation entry from Venus group. The relation of the Venus Group and J P Iscon group is very well established from above given facts which again leads to believe that Assessee has facilitated accommodation entry of ₹ 4,00,00,000/- further to JP Iscon Group. 12. In view of the above, I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention, the appellant company relied upon the decision of the Hon' ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007 ] 159 Taxman 258 (SC) and following judicial pronouncements of various Income-tax Appellate Tribunals as under:- i) G. KoteswaraRaovs DCIT [ 2015] 64 taxmann.com 159 (Visakhapatnam - Trib.) ii) Income-tax Officer v. Arun Kumar Kapoor [ 2011] 16 taxmann.com 373 (Amritsar) iii) Rajat Shubra Chatterji v. ACIT (ITA No. 2430/ Del/ 2015 dated 20.05. 2016) ITAT Delhi iv) State Bank of India v. Dy CIT [ 2013] 22 ITR (Trib.) 609 v) Jindal Stainless Ltd. v. Assistant Commissioner of Income-tax, Central Circle 6, New Delhi [ 2009] 120 ITD 301 (Delhi) During the course of appeal hearing, the Authorized Representative relied upon the decision of the Hon'ble Jurisdictional Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) vs. Joint Commissioner of Income-tax [ 2008] 307 ITR 1 (Guj) wherein, it has been held that when one considers the entire scheme relating to the procedure for reassessment as laid down in the group of sections from sections 147 to section 153 of the Income-tax Act, 1961 and compares it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group cases. I n the reasons recorded, the AO has made an allegation of accommodation entry transaction and has alleged that the appellant company has made an uncounted cash payment of ₹ 4 Crore against the receipt of outstanding advance of loan of ₹ 4 crore from M/ s. Sunderdeep Builders which was the advance given by the appellant company to M/ s. Sunderdeep Builders in earlier years, which was outstanding as payable on the 1st day of F.Y. 2010-11 relevant to A.Y. 2011 -12 in the books of accounts of M/ s. Sunderdeep Builders. The AO in the assessment order has not identified any of the statement of main persons of Venus Group namely Shri Ashok Vaswani, Shri Deepak Vaswani and Shri Rajesh Vaswani, Proprietor Sunderdeep Builders about their admission that the Venus Group is indulged into any accommodation entry transaction and nothing has been brought on record against the appellant company even from the submissions made by the Venus Group search case assesses in their search case assessment proceedings in respect of seized loose paper pages relied upon by the AO against the appellant company in the reason recorded for reopening of the case and in the reassessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sunderdeep Builders does not arise at all. The appellant company further took a contention that there was no search proceedings in the case of the appellant company and consequent to the search proceedings in the case of Venus Group, there was no cross enquiry with the appellant company in respect of the alleged loose paper vouchers relied upon by the AO in the assessment order by the Investigation Wing and there was no cross enquiry by the Assessing Officer of the Venus Group cases. The appellant company has submitted that the AO has taken a contradictory stand in the assessment order by making an observation about the alleged cash of ₹ 4 crore by the appellant company in lieu of cheque payment and subsequently of making allegation of cash received Against EC from Jayesh Kotak for Ganesh Plantation Ltd. The appellant company has stated that Shri Jayesh Kotak is neither a director of Ganesh Plantations Ltd or a shareholder or an employee of appellant company Ganesh Plantations Ltd. I have also verified the seized scanned copy of loose paper pages reproduced by the AO on page 32 of the assessment order, wherein, nothing has been found to be noted as the word cash and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat those are admissible 17. It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. 26. The Hon'ble Supreme Court further observed :- 17. From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made In a book, that book is a bonk of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as/ relevant evidence, still, the statement mode therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is conclusion. There is no incriminating evidence to show that the assessee has sold the flats at a higher rate. 30. In our understanding of the facts, the impounded loose sheet can at the most be termed as dumb document which did not contain full details about the dates, and its contents were not corroborated by any material and-could not relied upon and made the basis of addition. 31. In the case of CIT vs. Kulwant Rai 291 ITR 36 the ruling given in the case of Dhakeswari Cotton Mills Ltd. 26 ITR 775 by the Hon'ble Supreme Court has been relied upon wherein the Hon'ble Supreme Court has held even though Income Tax Authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all . Considering the discussion made herein above and following the decisions of the Hon' ble Supreme Court, jurisdictional Gujarat High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the transactions carried out and recorded between the Venus Group and the assessee. It was established by the AO after detailed discussion that the assessee has paid ₹ 4Crore in cash (₹ 1Crore on 27.01.2011 ₹ 3 Crore on 25.01.2011) in exchange of corresponding receipt of ₹ 4 Crore through bank channel from M/s. Sunderdeep Builders on 24.01.2011 in settlement of outstanding receivables of the assessee. The credit received by the assessee through banking channel and recorded in its book was not found genuine by AO as a result of underhand cash dealing. The nature and source of credit of ₹ 4 Crores shown to be received by assessee from Sunderdeep Builders was thus rightly found unsatisfactory by the AO. It was contended that the CIT(A) has adjudicated the issue on merits against Revenue on irrelevant and flimsy considerations. The learned DR accordingly urged for reversal of the action of the CIT(A) and restoration of the order of the AO on merits. 12. In support of its cross appeal in ITA No. 2200/Ahd/2018 and in rebuttal to the stand taken on behalf of the Revenue on the point of validity of jurisdiction assumed under s. 147 of the Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so heard the rival submissions on factual aspects towards merits of additions made. We shall deal with the arguments canvassed on behalf of the Revenue to support the order of the AO and defense made on behalf of the assessee of the CIT(A) s order on aspects of merits in succeeding paragraphs. 14. To begin with, before we proceed to deal on aspects of merits, we shall straightway address ourselves on the preliminary objects raised towards assumption of jurisdiction. The main grievances of the assessee on assumption of jurisdiction are three fold; (i) the jurisdiction to the AO would lie under s.153C of the Act, if any and invocation of jurisdiction under s.147 of the Act in the case of assessee, arising from search in Venus Group, is contrary to scheme of the Act and thus devoid of legitimacy; (ii) the satisfaction of the AO on the reasons cited suffers from the vice of non-application of mind and a mere borrowed satisfaction; (iii) the action taken under s.147 of the Act is actuated by re-visiting an opinion already formed on the subject matter of dispute at the time of original assessment and thus vitiated on the grounds of change of opinion / review of assessment. 14.1 W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee for availability of jurisdiction under s.153C of the Act in supersession to Section 147 of the Act does not merit acceptance. 14.2 The second contention of assessee towards borrowed satisfaction of the AO merely on the basis of certain information received from other AO is also apparently without any force. On perusal of the reasons recorded for reopening of the assessment, it becomes crystal clear that certain seized papers were found from the possession of the third party i.e. searched person which alleged certain surreptitious unaccounted cash transactions between the assessee and the searched person. The AO has clearly indicated that the seized documents were duly analyzed by him. Furthermore, from para 10 of the reasons recorded, it is noticed that on receipt of the information from the AO of the searched person, a pre-verification exercise of records of the assessee was also carried out to ascertain the facts indicated in the seized material. It is only after verification of the seized documents qua the records of the assessee, the action was initiated under s.147/ s. 148 of the Act. Thus, these facts clearly suggest that the AO exerted himself on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed not be subjected to sufficiency test at the stage of invoking jurisdiction under s.147 of the Act. Whether the material so gathered would conclusively prove the escapement is not concerned at the stage of assuming jurisdiction under s.147 of the Act. What is paramount is the relevancy of the material collected. A reference in this regard can be made to the decision of the Hon ble Supreme Court in the case of Raymond Woollen Mills Ltd. vs. ITO (1999) 236 ITR 34 (SC) and Dr. Lata Chouhan vs. ITO, (2010) 329 ITR 400 (MP). The fresh information recd. By the AO is authentic and evokes certain disquiet. Certain element of subjectivity involved in formation of belief thus cannot overstretched at the threshold stage. Hence, the plea of the assessee that the finality of assessment earlier made under s.143(3) of the Act cannot be disturbed is totally misplaced in the wake of new facts coming to the light of the AO at the time of invoking jurisdiction. 14.4 Hence, the objection of the assessee canvassed on point of jurisdiction fails on all counts. Thus, we see no error in the action of the CIT(A) in upholding the jurisdiction. Consequently, the cross appeal of the assessee in ITA No.22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t certain unaccounted cash transactions of Venus Group were detected from the premises of the searched person. The unaccounted cash transactions were stated to be first recorded by the searched person on loose paper/ cash vouchers in encrypted form and then on the basis of recording made on these cash vouchers, the entries were recorded on a day cash book not forming part of the regular books of accounts maintained in ordinary course. Notably, the aforesaid unaccounted cash book were found to have transaction recorded in continuous manner without any gap between January 2007 to 07.03.2015. The cash book was also written in coded forms for names, amounts, dates and vouchers and were claimed to be headlined as estimates . The Revenue has contended that such coding was done to alibi and camouflage the real value of unaccounted cash transactions with the assessee and to take a suitable defense in the case of discovery by the Revenue authorities. As further claimed, the transactions were decoded by the Revenue authorities and it was found that a sum of ₹ 4 Crore in aggregate was paid in cash by assessee to Venus Group in lieu of corresponding receipt of equivalent amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 9.4 of the assessment order) cannot, in our view, has any rational basis to crucify a third party and fix tax liability on it. No live link/proximate nexus of alleged dubious transactions between searched person and the assessee has been brought on record. The enquiries made were directionless without quizzing the key persons who needed to be. Nothing of this sort has been done. No acquiescence of receipt of cash by searched person from assessee has been successfully established. Naturally, propriety demanded the cross examination thereon in the event any culpable statement roping the assessee somewhere. The AO has conveniently implicated the assessee without any cogent premise on the basis of some aimless examinations. 15.4 No doubt, the documents found possessed from the custody of a searched person may possibly operate as an estoppel against that searched person, if the circumstances so warrant, but it is unconceivable to bind a third party for such entries/diary without demonstrating cogent nexus. The whole action is in the realm of conjectures and surmises mainly on the basis of some scanty and sketchy statement yielded from the accountant of the searched person. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout corresponding receipt of cash, has to be given primacy and cannot be disturbed. 15.5 In the circumstances, on holistic appreciation of factual position, we see no error in the conclusion drawn by the CIT(A). The CIT(A), in our view, has rightfully deleted the addition made under s.68 of the Act holding the act of AO to be without any rational basis and thus unsustainable in law. We entirely agree with the conclusion drawn by the CIT(A) on the aspects of the merits and hence, we decline to interfere therewith. 16. In the result, appeal of the Revenue as well as cross appeal of the assessee is dismissed. 17. In the cross objection filed by the assessee against the Revenue s appeal, the assessee has merely supported the action of the CIT(A) whereby the additions of ₹ 4 Crore made by the AO as unexplained cash credit under s.68 of the Act stands deleted by the CIT(A). In the absence of any grievance arising out of the order of CIT(A), the cross objection is dismissed as infructuous. 18. In the result, both appeals of Revenue assessee and cross objection of assessee all are dismissed. This Order pronounced on 13/04/2021 - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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