TMI Blog2011 (9) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2011 has explained the reason for such delay and prayed for condonation of the same. After considering the same and hearing the parties, we find that the department was prevented by sufficient and reasonable cause in filing the appeal belatedly by one day beyond the stipulated date. We, therefore, condone the said delay and admit the appeal for disposal on merit. 3. The relevant facts giving rise to this appeal are that there was a search seizure operation conducted u/s. 132 of the Act on 08/12/2006 in the case of Agarwal group of companies and office premises of one Sri Arun Kr. Khemka were also covered by the said search operation. The assessee is the Managing Director of M/s. R.S. Ispat Ltd., which is one of the companies of Agarwal group. During search operation, some papers and documents relating to loan transaction with the assessee were found with the possession of Sri Khemka and seized. The A.O. observed that the seized documents contained unsecured loan transactions amounting to ₹ 10 lakhs made with the assessee during the financial year relevant to assessment year under consideration. This unsecured loan was given in the form of cheque by M/s. Globe Stocks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s afforded to cross-examine Sri Khemka or the Director of the lender company either during search or during assessment proceedings by the A.O. before their statements were used. The assessee was confronted for the first time with the said statement and letter of lender company only at the fag end of time barring assessment It was further contended by the assessee that evidences heavily relied upon by the A.O. for making addition were never provided to the assessee for his examination. It was also contended before the ld. C.I.T.(A) that it was only when the assessee was shown the statement of Sri Khemka and letter of the lender company dated 16/1/2007 in course of assessment proceedings that the assessee took immediate steps to ascertain the facts from them and then the assessee was informed about the sworn Affidavit of Sri Khemka and letter of M/s. Globe Stocks Securities Ltd. Sri Khemka and M/s. Globe Stocks Securities Ltd. also provided the assessee with confirmation of account, copy of relevant bank statement, copy of I.T. acknowledgement etc. to establish and confirm the assessee s loan transaction with the said M/s. Globe Stocks securities Ltd., which were in turn filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the presence of the assessee nor examined personally, nor allowed to be cross-examined by the department at any stage. 4.1. The ld. C.I.T.(A) sought remand report from the A.O. on the submissions of the assessee and the A.O. in his remand report justified the addition u/s. 68 of the Act by stating as under :- Regarding the allegation of violation of the principles of natural justice, it is to be submitted that as described in the assessment order itself, the assessee was afforded an opportunity to examine the contents of the statement given u/s. 132(4) by Sri Anil Kumar Khemka on 09.12.2006 wherein it was stated that cash was received from the assessee and cheques were issued towards share capital in lieu thereof along with the contents of the letters dated 16.01.2007 written by M/s Globe Stocks Securities Ltd. It is also pertinent to point out that after the assessee was shown and confronted with the said statement and letter, the assessee did not ask for furnishing copies of the same at any point of time. Hence, the assessee cannot take this ground when it was never aggrieved on this account during the course of assessment proceedings. It may also be remarked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee from M/s. Globe Stocks Securities Ltd. The addition was primarily made on the basis of statement of Sri Arun Kumar Khemka recorded u/s 132(4) of the Act dtd. 9th December 2006 wherein it was stated that the loan transactions were only accommodation entries wherein cash was received and the cheques were issued in lieu thereof. During the post-search investigation the loan creditor i.e. Globe Stocks Securities Ltd submitted letter dated 16.01.2007 signed by it s director wherein it was admitted that unsecured loans were in fact accommodation entries. The statement of Sri Khemka and the letter of the loan creditor were shown to the A/R of the assessee in response to which the appellant furnished copy of Affidavit dated 26.02.2007 of Sri Arun Kumar Khemka, Director of Globe Stocks Securities Ltd. retracting statements earlier made on 16.01.2007. The A.O. refused to accept the retraction affidavit on the ground that there was considerable time gap between two statements and the retraction statement was never furnished before the DDIT (Inv.). The retraction affidavit was filed before the A.O. only at the fag end of assessment proceedings. In A.O s opinion the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support the addition made. In the circumstances, not only the AO was required to provide copies of the full statements for enabling the assessee to rebut the same but also to allow the opportunity of cross examining the departmental witnesses before these statements were used in evidence for making addition u/s 68 of the Act. 10. It is admitted by AO that after the copy of the statement was shown to the assessee, retraction affidavit was filed wherein Sri Khemka retracted his earlier statement made before the DDIT (Inv.). In the retraction affidavit the creditor had admitted the loan transaction with the assessee was genuine. The AO however rejected the retraction affidavit on the ground that there was considerable time difference between the original statement and retraction affidavit and the later affidavit was never filed before the DDIT (Inv.). I however find that the assessee was never made aware about the first affidavit or later affidavit at the time of search or during post-search enquiry. It was only in November 2008 the assessee was made aware about the statements made before the DDIT (Inv.) and also that of the retraction affidavit. In the circumstances, no fault c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced documents requisitioned in the notice u/s 133(6); for the reasons known to AO; he omitted to take note of or deal with any of the documents in the assessment order. It appeared that the AO simply brushed aside the evidences which he himself gathered by issue of statutory notice u/s 133(6) of the Act. The omission on the part of the AO to deal with evidences gathered through issue of notice u/s 133(6); is glaring and inexplicable to say the least. Both in the assessment order as also in the remand report emphasize is placed on the statement recorded from Sri Khemka in the course of search. However, I find that the statement recorded at the time of search was bereft of any supporting documents. Although the statement contained allegation of availing accommodation entries, the statement was not backed by any cogent material. I also find that the AO himself did not find the said statement to be sufficient and therefore conducted his independent enquiries by issue of notice u/s 133(6). However, when in response to notice u/s 133(6) the loan creditor filed confirmation of transactions and substantiated the confirmation with supporting documents such as Bank statements, audited acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed crossexamination to the assessee. In the circumstances, the only conclusion that can be drawn is that the AO did not have any adverse material in his possession to counter the documentary evidences placed on record by the loan creditor. 14. The ITAT Delhi Bench in its recent decision in the case of Mobile Communication Pvt. Ltd. Vs DCIT (125 ITD 309) considered somewhat similar situation. In this case, assessee had paid commission which was disallowed by the AO even though the recipient of the commission had confirmed the transaction in response to the notice u/s 133(6). Before the AO the recipients of the commission not only confirmed the transactions but also filed evidences, such as copy of Invoice, I.T. acknowledgement, PAN Card, Bank statement, etc. Even though the AO had received confirmations from the parties the AO disallowed the commission without examining the concerned parties u/s 131 of the Act. The Tribunal held that when the recipients of the commission had confirmed the transactions in response to notices u/s 133(6) it was highly unjustifiable on the AO s part to make the disallowance without issuing notices u/s 131 of the Act. The Delhi High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmation, bank statement and balance-sheet. The bank statement showed that the cheques in the name of the assessee were debited to the Bank Account of the loan creditor. As such the genuineness of the transaction was established. The loan creditor also filed its balance-sheet as of 31 March 2006 which showed that creditor company s own capital was in excess of Rs.l0 Crores which was 100 times more than the loan amount. The balance-sheet of the creditor proves creditworthiness of the loan creditor. On the facts and circumstances of the case, I am therefore convinced that the criterias laid down by the Gujarat High Court in the case of DCIT Vs Rohini Builders (256 ITR 360) and the Gauhati High Court in the case of Nemichand Kothari Vs CIT (264 ITR 254) were satisfied in the assessee s case. Having regard to the facts and documents on record, I am fully satisfied that the assessee proved identity and creditworthiness of the loan creditor and also proved the genuineness of the loan transaction and therefore, the AO was not justified in making addition u/s 68 amounting to ₹ 10 Lacs. The addition as made in the impugned order is ordered to be deleted. Hence the department is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the unsecured loan are placed at pages 1 to 13 of the paper book. He further submitted that the A.O. did not deal with any of the evidence/documents/explanation furnished by the loan creditor and made the addition only on the basis of statement allegedly recorded u/s. 132(4) of the Act and letter of M/s. Glove Stocks securities Ltd. dated 16/1/2007. The ld. A/R submitted that the ld. C.I.T.(A) has not relied only the retracted statements while deleting the addition made by the A.O. but also considered the copies of the documents filed by the assessee in support of taking unsecured loan and also considered the remand report of the A.O. In respect of admissibility of confessional statement, the ld. A/R referred the decision of Hon ble Apex Court in the case of Vinod Solanki vs. Union of India Another in Civil Appeal No. 740 of 2008 dated 18/12/2008 and in particular paras 14, 22 34 of the said judgment and submitted that the entire burden to prove that the confession was voluntary in nature is on the department. He submitted that the said decision of Hon ble Apex Court was followed by the Hon ble Bombay High Court in the case of CIT vs. Uttam Chand Jain in Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was provided accommodation entries by them in lieu of cash receipt. Except these statements of Sri Khemka and M/s. Globe Stocks Securities Ltd., no other corroborative or specific evidence could be brought on record by the A.O. to justify the depth of authenticity of such statements and subsequent action thereupon as per law, which were subsequently retracted by those persons by filing Affidavit stating therein that the searching team recorded the statement of Sri Aurn Kr. Khemka, who is also Director of M/s. Globe Stocks Securities Ltd., by using coercion and threat and further it was due to undue influence, pressure and threat of dire consequences by the searching team that he was compelled to make statements, which were beyond the correct state of affairs. We observe that the ld. C.I.T.(A) not only considered the retracted statement but also considered the evidences filed in support of payments made towards advancing unsecured loan to the assessee in response to notice u/s. 133(6) of the Act. We observe from the assessment order that the A.O. did not examine Sri Khemka, Director of the lender company on his retraction from the earlier statement to establish that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination of the departmental witnesses to the assessee. Despite this clear instructions by the ld. C.I.T.(A) in this regard, we observe that in the remand proceedings also the A.O. was not able to bring on record any material establishing the alleged trail of cash which allegedly originated from the assessee and culminated in the form of receipt of cheque towards payment of unsecured loan. The failure on the part of the A.O. to conduct any enquiry of his own and his further failure to prove any infirmity or falsity in the evidences filed before him by the loan creditor in response to notice u/s. 133(6) of the Act is nothing but glaring. Even before us, the department was not able to bring on record any material to disprove the genuineness the documentary evidences filed before the A.O. by the loan creditor in support of its advancing unsecured loan to the assessee. 7.2. In the above background of the case, now let us examine whether addition of ₹ 10 lakhs is warranted in the hands of the assessee. Provisions of Sec.68 of the Act have been judicially considered by several courts of law, as per which an addition u/s. 68 can be made where an assessee fails to prove identity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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