TMI Blog2022 (7) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the addition made under section 68 of the Act cannot be sustained and thus, we direct the Assessing Officer to delete the addition made in respect of share capital under section 68 of the Act in the case of Shri Pankaj Agarwal, Smt. Shobha Agarwal and Smt. Rita Agarwal. We find that the sole basis for the Assessing Officer to make the addition under section 68 of the Act is that investigation carried out by the Income Tax Department on certain entry providers and statement recorded from them. Except this, no other evidence was available with the Assessing Officer to prove that share capital received from M/s. Kaner Investments Ltd. is accommodation entry taken to convert unaccounted income of the assessee. On the other hand, the assessee has filed all the evidences including name and address of the creditors, confirmation from the parties, financial statements, etc. to prove the identity of the creditor and also filed necessary bank statement to prove the genuineness of the transaction. Further, the investing company has sufficient source to explain the investment made to the assessee company. From the above what is clear is that the assessee has discharged the onus cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in response to the said notice. Notices under section 143(2) and 142(1) of the Act were also duly served on the assessee. Thereafter, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 153A of the Act dated 31.03.2015 by making addition of ₹.1,25,00,000/- under section 68 of the Act. On appeal, the ld. CIT(A) confirmed the addition made under section 68 of the Act. 3. On being aggrieved, the assessee is in appeal before the Tribunal. By relying upon the grounds of appeal, the ld. Counsel for the assessee has submitted that the action of the Assessing Officer in bringing to tax the unsecured loans despite establishing the identity of the contributor/creditor as well as the genuineness of the transactions was wholly unjustified and unsustainable in law. It was further submission that the ld. CIT(A) went wrong in rejecting the plea of the assessee for cross-examination of Jagdish Prasad Roy and Prasad Lahoti and concluding that the right of cross examination was not absolute. It was also challenged the validity of the search assessment in the absence of any incriminating seized material(s) and prayed for deleting the addition made under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve only taken place through banking channels clearly evidencing the source. Accordingly, your assessee humbly wishes to state that there is no doubt about the identity of the Company's, their creditworthiness and genuineness of the transactions. I would further like to state that the loan is given by the company out of its known and valid source like Sale of their Investments in Shares etc., details of the same is enclosed herewith along with this reply. There is no question of doubt about their identities and these companies had sufficient capital funds to extend the Loan to me and the amounts have been received through proper banking channels. Your kind authority have made general statement about entry operators and their modus operandi like - Operation of many bank accounts in the name of companies, firms and proprietary concern and individuals in the-same bank and branch - Hiring of person for operation in the accounts and filing of ITRs. - Collection of Cash - Employing relatives/others with low remuneration to sign cheques, documents, etc. - Obtaining PAN and filing of returns of income - Operations of multiple bank account in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards to the transactions mentioned in your show cause notice, were found during the search. Based on the above, I have provided the identity of the Loan Creditor and also the credit worthiness and genuineness of the transaction, request your honour not to be prejudiced based on general statements it is humbly submitted that no addition is warranted in my hands. 5.1 On perusal of the statement of account of M/s. Echolac Vinimay Pvt. Ltd., the Assessing Officer has observed that the said company had minimum balance on various dates before using the cheque to any loan debtor, namely the assessee. It received amount equal to cheques to be used, i.e., ₹.1,25,00,000/- and it was deposited into the bank only for the purpose of issuing cheques to the extent of loan to be given, even though these are through Bank entries. Moreover, the time lag between such deposits and issue of cheques is generally a day or two, which proves that the lender did not have the sufficient wherewithal for giving loans. These types of transactions are typically followed by the Jamakharchi/ Shell/Paper Companies. 5.2 After examining the Balance Sheet of M/s. Echolac Vinimay Pvt Ltd., the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account statements and other relevant evidences, the Assessing Officer has noted that the above sum of ₹.1,10,00,000/- represents sum credited in the books of the assessee as explained in previous paragraphs and is assessee's unaccounted money routed through channels provided by the accommodation entry operator by way of various Jama Kharachi/Shell/Paper Companies utilizing regular banking modes. The assessee's contention that these are genuine transactions received from the lender whose identity is genuine and that it is creditworthy does not hold good as this company's operations have already been investigated by the Investigation Directorate, Kolkata and have been proven well beyond doubt and in the words of the connected persons, is only controlled and managed by the above-referred individual (accommodation entry operator) with a set of employees (name lenders) acting as dummy directors, who sign on the dotted lines for a meager remuneration and are in no way connected to the control and management of the affairs of the company. Hence, to sum up, the following are the facts which emerge from the aforesaid: a. During relevant assessment year the assessee r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been assessed, the assessment u/s 153A of the Act will be made only on the basis of incriminating material found during the course of search proceedings u/s 132 of the Act. (ii) SLPs have been preferred by the Revenue before the Hon ble Supreme Court in the case of Continental Warehousing and the same was also admitted{(2015]235 Taxman 568(SC)} Similarly SLPS filed by the PCIT, Central III, Delhi in the case of Meeta Gutgutia for AYs 2000-01 to 2003-04 that involve the question of law on the bone of contention with reference to scope of S.153A of the Act in cases of absence of incriminating materials recovered during search proceedings are still pending. (iii) The jurisdictional High Court i.e., Hon'ble High Court of Madras has not yet delivered any judgment on the subject matter as to whether assessment u/s 143A in respect of completed assessments should be made only on the basis of incriminating material or not. (iv) The Hon'ble ITAT Chennai in most cases have ruled in favor of assessee and has decided in favor of the Revenue too as mentioned supra. (v) As discussed earlier, the ratios in the cases of St. Francis Clay D cor Tiles(supra) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmy directors of the various companies who sign the cheques to the beneficiaries as per their requirement. 6.30. The appellant is still insisting on the genuineness of the transaction, The appellant had credited certain amounts in his books and the department has challenged the same based on investigations carried out and has confronted the same to the appellant but appellant has not been able to rebut the charge of non genuineness made by the department against him. Mr. Jai Prakash Roy who is Director of the EcholacVinimay private limited stated that he is a mere dummy director and is on the payroll of the entry operators by the name Beni Prasad Lahoti and Hari Prasad Rathi. He is the one who has signed the financials of the company also. Therefore his statement and the admittance that he is a dummy director is of immense significance. He denies giving any loan to the appellant by implication as he stated the affairs were managed by someone else who in turn has admitted that the bank accounts in the name of the company were used to provide accommodation entry to the beneficiaries and admits that he is merely a dummy director signing at the instance of the entry providers then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entry providers. 2) The accommodation entry provider, namely Beni Prasad Lahoti, has specifically taken the name of the company M/s. Echolac Vinimay as a company used for providing accommodation entry by using Jagdish Prasad Roy as Dummy Director. 3) The modus operandi of accommodation entry is explained by the Entry providers as routing the cash received from beneficiaries through various bank accounts and then issuing cheques to them, mostly on the same day, meaning thereby that there would be credit entry in the bank account of Echolac Vinimay before the cheque is issued to the beneficiary. The same trend can be seen in the bank account from whom cheques are issued the appellant from DCB, Braubourne Road, Kolkata. 6.34. In the above statement the beneficiaries seen are either the appellant or his other family members. It can be clearly seen that before the issue of cheque to the beneficiary similar amount is credited and then subsequently cheques are issued. Also the address of the company mentioned in the bank is different from the address mentioned in details filed before ROC. 4) Though the appellant claims that Echolac Vinimay is a group company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore necessary verification had to be carried out and that turned out to be false as it was stated that the credit entry was an accommodation entry. That means the explanation of the credit given by the appellant was not correct. The right of cross examination is not absolute. In the case of Soman Sun Citi Vs JT. CIT (ITAT Mumbai), Appeal Number I.T.A. No.2960/Mum/2016 (Date of Judgement/Order 23/10/2018) it has been held that Had assessee discharged its primary onus, but still the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee. Thus we uphold/sustain the orders of learned CIT(A) in which we do not find any infirmity, which we confirm/sustain. The assessee fails in this ground. We order accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e materials available on record and gone through the orders of authorities below. The facts born out from the record are that in this case, search operation under section 132 of the Act was conducted on 18.12.2012. It is an admitted fact on record that the assessment for the impugned assessment year in question in all these appeals is unabated/concluded as on the date of search, because, the time limit for issue of notice under section 143(2) expires on 30.09.2012 i.e., before the date of search on 18.12.2012. Thus, from the above facts, it is very clear that the assessment for the assessment year under consideration is unabated/ concluded as on the date of search. Further, it is well settled principles of law by the decision of various High Courts, including the decision of the Hon ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein, it has been held that no addition can be made in the assessment framed under section 143(3) r.w.s. 153A of the Act unless, the addition is supported by incriminating material found during the course of search, if such assessment is unabated/concluded as on the date of search. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court, which decided the issue in favour of the assessee. 11. In this case, there is no dispute with regard to the fact that the search was conducted on 18.12.2012 and as on date of search assessment for the assessment year 2011-12 is unabated and thus in the absence of any incriminating material, no addition can be made including the addition of share capital under section 68 of the Act. In this case, if we go through the addition made under section 68 of the Act, we find that there is no reference to any incriminating material and thus, we are of the considered opinion that the addition made under section 68 of the Act cannot be sustained and thus, we direct the Assessing Officer to delete the addition made in respect of share capital under section 68 of the Act in the case of Shri Pankaj Agarwal, Smt. Shobha Agarwal and Smt. Rita Agarwal. 12. Now, coming back to the appeal filed by Smt. Bimla Devi. In this appeal, the assessment year involved in question is assessment year 2012-13 and thus, the assessment is abated as on the date of search, because, time limit of issuing notice under section 143(2) of the Act expires by 30.09. 2013. Therefore, this appeal can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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