TMI Blog2023 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... e society s contention that these twelve (12) statements did not contain any incriminating material which could be used to disturb the finality of these unabated AYs and justify the additions made by the AO u/s 68 Improper KYC documentation - AO had prima facie stated that KYC compliance was done by the assessee at the time of opening the accounts in these two AYs. In our considered view therefore, in the facts and circumstances discussed instances of improper KYC documentation if any noted in second search cannot constitute incriminating material found in the course of first search so as to make additions in the impugned unabated AYs. Report of Ld. DDIT(I CI) - Only if the Revenue demonstrates that some material or document or evidence was unearthed in the course of search or that some incriminating statement was obtained in the course of search, which supported the findings of this verification report, only then such verification report could have been used to disturb the finality of the unabated assessments. The Revenue, however, has been unable to do so in the present case. In our considered view therefore, this verification report on its own cannot be said to be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onspectus of the facts, we thus hold that the reasoning given by the Ld. CIT(A) viz., existence of incriminating material statements against the assessee society, to justify the validity of the additions made in the unabated assessments framed u/s 153A/143(3) of the Act for AY 2010-11 was untenable both on facts and in law. Disallowance of interest administrative expenses u/s 69C - As per CIT-A there was no incriminating material found in the course of search which suggested that these expenses were unaccounted for - HELD THAT:- CIT(A) has rightly observed that these expenses were recorded in the regular books of the assessee and therefore invocation of Section 69C - there was no incriminating material qua the assessee which would justify the additions made by the AO in the unabated AY 2010-11. AO is accordingly directed to delete the same. Therefore, the ground of appeal of the assessee stands allowed. - I.T.A. Nos. 4001 & 4002/Mum/2019, I.T.A. Nos. 3943 & 3944/Mum/2019 - - - Dated:- 6-2-2023 - SHRI ABY T. VARKEY, JM AND SHRI AMARJIT SINGH, AM For the Assessee : Shri Dharmesh Kansara For the Revenue : Smt Riddhi Mishra (DR) ORDER PER ABY T. VARKE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : Disallowance / Issue AY 2010 11 AY 2011-12 Addition of deposits made by members by way of unexplained cash credit u/s 68 of the Act 577,23,58,118/- 1882,83,84,972/- Disallowance of expenditure u/s 69C of the Act 9,24,13,277/- 15,99,28,041/- 3. We first take up the appeal filed by the assessee and the Revenue for AY 2010-11 in IT(SS) No. 4001/Mum/2019 3943/Mum/2021 as the lead case. For AY 2010-11, the assessee society had originally filed the return of income on 28-09-2010 declaring total income of Rs. NIL. The income tax assessment u/s 143(3) of the Act for AY 2010-11 was completed on 07-12-2012 at total income of Rs.NIL. After the assessee filed a return in response to notice u/s 153A of the Act, notices u/s 143(2) 142(1) of the Act were issued calling for details/information. According to the AO, the pre-search enquiries had revealed that the assessee society was facilitating transfer of unaccounted monies belonging to various persons, including itself, through Scheduled Banks. It was also g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hemant Hargovind Saboo 501/6 63,22,858 10. Basant Raj Purohit 501/7 33,72,55,575 11. Surya Trading Co. Prop. Bhupendra Singh Thakur 501/9 30,87,500 12. Kundanlal Sahu 501/10 61,16,200 4. According to the AO, these account holders had stated that, they had received commission to facilitate cash deposits and transfers and these transactions were not related to the business activities of the account holders. The statements of some of these persons have been extensively extracted by the AO at Pages 17 to 68 of the assessment order. Referring to these statements, the AO observed that the assessee society was openly violating the relevant norms regulations of the Reserve Bank of India in as much as it did not follow the KYC norms. According to the AO, the assessee was well aware that these members were small-time earners, and that by permitting them to deposit several crores of rupees in their accounts, the assessee society had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety in rural areas/segments and urban areas/segments separately. iii) Copy of requisite permission obtained by RBI for carrying out the operations as a Co- operative Credit Society in Maharashtra, as per Banking regulation act and if so a copy of the Registration Certificate. iii) You as a credit society do not accept cheque as a norm. The moneys are received only in cash from all your members. Please explain the process of registering the members and what are your charges for registering such members. iv) Please provide a copy of the Annual Financial statements, Balance Sheet, Audit report of the F.Y. 2009-10 F.Y. 2010-11 pertaining to A.Y. 2010-11 A.Y. 2011-12, Minutes of AGM of the BODs and the resolution which you have submitted to Central Registrar of Cooperative society, New Delhi. v) Please give the account statements of all the regular members of your co-operative credit society who are stated to be your shareholders for A.Y. 2010-11 A.Y. 2011-12. Also give comprehensive details of all regular as well as nominal members of your society. 5. The assessee was allowed a day s time to respond to the above show cause to which the assessee complied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety. He reiterated that he had never been issued pass book or cheque book from the said society and he was not aware of his member status as of now since he never operated the account in the first place. He was asked whether he files his return of income regularly to which he questioned me whether I had the authorization to pose such questions to him to which I replied that it was a general inquiry as per the orders of my superiors. The enquiry was thus concluded. 2. Thereafter, I visited the residence of Mr. Shaikh Irfan Ismail, another credit society member at the address given at 40, Tandel Street, 1stfloor, North Dongri at 7.30 p.m. However, 1 was informed by the resident that the person had shifted somewhere else and she does'nt know about his present address. 3. I also tried to locate the address of the other member viz. Essa Shiekh at 3rdFloor, Room No. 29, Chinch Bunder Post Office, Bldg. Shajda Marg, Dongri, Chinch Bunder, Mumbai : 400009 However, I could not locate the residence since the address was incomplete in that, the name of the building was not mentioned in the address and enquiries with the local people proved futile in finding out his whereabout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny incriminating material unearthed in the course of search. Having regard to these pleadings of the assessee, the Ld. CIT(A) vide letter dated 31-08-2018 required the AO to submit a remand report after making necessary enquiries. Thereafter, vide letter dated 17-12-2018, the AO was further directed to quantify the deposits in relation to whom corresponding PAN/KYC details were available and where such details were not available. The AO was also required to quantify the deposits where there was violation of Rule 114B of the Rules. The AO furnished his 1st remand report on 22-01-2019 whose relevant extracts are as follows: 3. Your good self vide above referred letter dated 31.08.2018 has asked to furnish the details of the evidences on the basis of which the addition of Rs. 577.23 crores has been made. 3.1 In this regard, it is submitted that during the assessment proceedings, total credits in the different types of accounts of the members of the said society were found to the tune of Rs. 577.23 crores. Accordingly, the assessee was asked to submit the KYC documents of all the account holders and to prove the creditworthiness of the members. In reply, assessee submitted KY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases had been made which proved that in some cases the details provided by the assessee are incorrect and in some cases account holders are completely unaware of their account held with the society. 6. Your good self vide letter dated 17.12.2018 has asked to quantify the deposits wherein PAN and KYC details are available and wherein such details are not available. Your good self has also asked to quantify the deposits wherein there has been violation of Rule 114B. 6.1 In this regard, it is submitted that during the remand proceedings, the assessee has submitted details of total credits of Rs. 577.23 crores which includes the transfer credits of Rs. 318.60 crores. Out of total 577.23 crores, total cash deposits are to the extent of Rs. 258.62 crores. Out of total cash deposits of Rs. 258.62 crores, deposits exceeding Rs. 50000/- per account in the year under consideration amounts to Rs. 256.68 crores. In this regard, assessee has submitted PAN/Form 60 KYC documents of top 50 account holders. It is clarified that these data were not submitted during the assessment proceedings in the physical form but in soft copy only. Further, as per the finding of the appraisal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed herewith as Annexure 'C'). b) Shaikh Irfan Ismail: He may have shifted to other address but at the time of accounting opening he has signed the account opening form, affixed his photograph on account opening form, Nomination Details has been filled and signed by him along with witness (Ansari Sajjad), his thumb impression has been affixed on the form and he has also submitted the self attested copy of PAN Card, Ration Card Form-61. After the account has been opened, the accountholder has not intimated any changes in his address, if any. During the FY-2009-2010, he has deposited cash of Rs. 100/- only in his account maintained with the society. (Copy of account opening form, form-60/61 and KYCS are attached herewith as Annexure 'D'). c) Essa Shaikh: The address mentioned in the report of the Inspector O/6 ACIT- CC-4(4) (as per the assessment order) itself is incorrect. That is the reason why they could not locate the address. The address which the officer visited was 3rd Floor, Room No.29, Chinch Bunder Post Office, Bldg, Shajda Marg, Dongri, Chinch Bunder, Mumbai - 400 009. However, the address as per the KYC documents (Passport Copy Ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cross-verify the correctness of the data from the ITD/ITBA system. The Ld. CIT(A) also directed the AO to re-verify the assessee s contention that out of the total addition of Rs.577.23 crores, sum of Rs.318.60 crores related to transfers within the various accounts of the assessee and therefore not in the nature of cash deposits assessable u/s 68 of the Act. The Ld. CIT(A) is noted to have further re-analyzed the balance sum of Rs.258.62 crores [577.23 318.60] and found that sum to the extent of Rs.19.46 crores related to accounts where individually cash deposited was less than Rs.2 lacs. Since deposit of Rs.2 lacs by the members in the entire year is quite nominal, according to Ld. CIT(A), the aforesaid sum was not relevant for the purposes of Section 68 of the Act. Out of the balance sum of Rs.239.16 crores (258.62 19.46), the Ld. CIT(A) noted that, the assessee had furnished PAN, address and details of gross cash deposited in relation to accounts in which sum of Rs.108.88 crores were deposited. For the remaining balance of Rs.130.27 crores, the assessee had explained that these accounts were originally opened with Form 60/61 given by the account holders, but had provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns where this issue has been examined by the Hon'ble Courts which includes the decisions of the jurisdictional High Court in the cases of Continental Warehousing Corpn. (Nhava Sheva Ltd.) (58 taxmann. com 78) and Murli Agro Products (49 taxmann.com 172), decisions of the Hon'ble Delhi High Court in the cases of Anil Kumar Bhatia (352 ITR 493) and Chetandas Lachmandas (211 taxmann. 61) and Hon'ble Kerala High Court in the case of Canara Housing Development Co. (49 taxmann.com 98). After analyzing all such decisions on this issue, the Hon'ble Delhi High Court in the case of Kabul Chawla (61 taxmann. 412), has summarized the legal position that emerges as under: i.Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six A.Ys. immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such A.Ys. will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that no additions can be made since no incriminating material was unearthed at the time of the search action. 14. According to Ld. CIT(A) however the search action at Bhopal, Indore Sendhwa had revealed that the assessee society was being used as a conduit for transferring unaccounted cash across various parts of the country by depositing cash in dummy accounts. For this, (i) he referred to the statements of twelve (12) account holders at Raipur as recorded in the course of the search. The Ld. CIT(A) also (ii) referred to the report of the DDIT(I CI), Mumbai; and (iii) the instances of improper KYC documentation found in the course of the second search action conducted on 26.05.2017 as incriminating material found in the course of search. The Ld. CIT(A) also relied (iv) upon the findings of the test check enquiries which were conducted by the AO in the course of assessment through his ITI in respect of three (3) depositors who had held bank accounts with the assessee society in FY 2009-10. The Ld. CIT(A) thus held that, there were sufficient incriminating evidences and incriminating statements which constituted incriminating material unearthed in the course of search t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80P(2)(a) of the Act on the additions made u/s 68 69C of the Act. Referring to the decisions of the Hon ble Supreme Court in the case of Citizens Cooperative Society Ltd Vs ACIT (397 ITR 1), the Ld. CIT(A) observed that, the assessee had acted in violation of the Cooperative Societies Act and the principles of mutuality, as it was rendering services to nominal members as well apart from the ordinary members. Further, by relying upon the decision of the coordinate Bench of this Tribunal at Hyderabad in the case of Citizens Cooperative Society Ltd Vs Addl. CIT (24 taxmann.com 347), the Ld. CIT(A) held that deduction u/s 80-P of the Act could not be given to cooperative societies found to be involved in giving accommodation cheques. He, accordingly, rejected this alternate claim of the assessee. 18. Aggrieved by the order of Ld. CIT(A), the assessee as well as Revenue are in appeal before us by taking the following grounds. Grounds of Appeal of the Assessee (ITA No.4001/Mum/2019) BREACH OF THE PRINCIPLE OF NATURAL JUSITCE 1.1 The Learned Commissioner of Income tax (Appeals) 52, Mumbai, [ Ld. CIT (A) ] erred in confirming the assessment order w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer credits related to transactions involved with outside entities 100% To be quantified by the AO B Cash deposits less than Rs.2 lacs 10% 1,946 C Cash deposits between Rs. 2 lacs to Rs.40 lacs (i) Where PAN submitted but ROI not submitted 100% 81.26 (ii) Where PAN submitted but ROI not submitted 100% 17.94 (iii) Where PAN submitted and Roi filed but no business income declared 100% 2.39 (iv) Where PAN submitted, ROI filed and business income declared 10% 2.03 D Cash deposits exceeding Rs. 40 Lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly allowing the addition to the extent of Rs. 202.46 Cr and deleting the balance addition of Rs. 56.16 Cr without considering the facts of the case that the total addition made u/s. 68 on account of total cash deposit was at Rs. 258.62 Cr 2. Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A), is justified in deleting the addition made u/s. 69 of the I.T. Act, 1961 of Rs. 9,24,13,277/- on account of interest administrative expenses without considering the facts that during the assessment proceedings the assessee has failed to discharge its onus to prove the genuineness of the expenses recorded in the regular books of account of the assessee. 19. After going through the grounds raised in appeal by both parties, we deem it fit to first to take up the 2nd ground raised by the assessee and modify the ground to adjudicate as agreed by both sides as to whether there was any incriminating material found in the course of search at the premises of the assessee to justify the additions/disallowances made in the unabated assessments of the assessee society. 20. As noted earlier, on the date of search i.e. 22-06-2016, income tax assessment for AY 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts which are not abated and assessments which are pending on the date of search and therefore it is treated to be abated. In case of abated assessments, the AO is free to frame the assessment in regular manner and determine the correct taxable income for the relevant year inter alia including the undisclosed income, having regard to the provisions of the Act. However, in relation to unabated assessments, which were not pending on the date of search, there is restriction on the powers of the AO. In case of unabated assessments, the AO can re-assess the income only to the extent of and with specific reference to the incriminating material which the Revenue unearths in the course of the search.The logic behind this legislative classification is that merely because an assessee is subjected to search, such assessee cannot be placed on a different pedestal or put in a more disadvantageous position than an assessee who is not subjected to search unless in the course of search, some incriminating documents or evidence or information is gathered by the Investigating authorities, so as to vest the AO with the necessary powers to make additions to the total income in relation to assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and any other material existing or brought on the record of the Ld AO. vii. Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 21. We find that the Hon'ble Delhi High Court while adjudicating the appeal in the case of CIT vs Kabul Chawla (supra) had judiciallytaken note of a host of earlier decisions rendered in the cases of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT vs Chetan Das Lachman Das reported in (2012) 211 Taxman 61 (Del HC) ; Madugula Venu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer. 5. On further appeal before the Tribunal, the assessee interalia challenged the validity of the assessment made under Section 153A of the Act. This on account of the fact that no assessment in respect of the six assessment years were pending so as to have abated. The impugned order accepted the aforesaid submission of the respondent-assessee by interalia placing reliance upon the decision of the Special Bench of the Tribunal in Al-Cargo Global Logistics Ltd. rendered on 6 July 2012. The Tribunal in the impugned order further held that no incriminating material was found during the course of the search. Thus the entire proceedings under Section 153A of the Act were without jurisdiction and therefore the addition made had to be deleted on the aforesaid ground. The impugned order also thereafter considered the issues on merits and on it also held in favour of the respondent-assessee. 6. Mr. Kotangale, the learned Counsel for the revenue very fairly states that the decision of the Special Bench of the Tribunal in Al-Cargo Global Logistics Ltd. was a subject matter of challenge before this Court as a part of the group of appeals disposed of as CIT v. Continenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment either to the Revenue or the assessee. Even in the case of Gurinder Singh Bawa (referred to supra) the assessment was under section 143(1) of the Act and the court held that the scope of assessment after search under section 153A would be limited to the incriminating evidence found during the search and no further. In the said judgment, the judgment of this court in Continental Warehousing Corpn. (Nhava Sheva) Ltd. (referred to supra) has been followed. 6. Considering the authoritative pronouncements of this court in the above referred cases one of which is also with regard to assessment under section 143(1), the issue is no longer res integra and stands concluded in the above referred judgments. 24. It is noted by us that the Ld. CIT(A) also agreed with the above position of law and categorically held that a non-abated assessment which had attained finality can be disturbed only if some incriminating material is found in the course of search action conducted u/s 132 of the Act. Even the Ld. CIT, DR appearing on behalf of the Revenue has not disputed this legal principle. The Ld. CIT(A) has however held that there were incriminating material in the form of statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regularly maintained or the returns filed with the authorities from time to time, etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie prove that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in the ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be incriminating in nature unless the AO thereafter brings on record further corroborative material or evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remarks Mohd. Irshad Siddique He was not aware of his member status as he never operated the account Shaikh Irfan Ismail Shifted to some other address. Essa sheikh Could not locate the address. 3.2 Further, independent enquiries were conducted in case of some of its account holders on random basis to identify the creditworthiness. Details of the same are reproduced hereunder. As per the above facts, the assessee failed to substantiate the identity, creditworthiness of the account holders. Therefore, the addition was made of Rs. 577.23 crores were made of in the hands of the assessee on the basis of on the verification of these physically submitted data and the enquiries done in some cases on random basis. 4. Further, good self has asked to furnish the details on the basis of which the expenses of Rs. 9.24 crores have been disallowed. 4.1 In this regard, it is submitted that during the assessment proceedings, it was conclusively proved that the credits in the accounts held with ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AYs 2010-11 2011-12. 30. Lastly, the Ld. AR took us through the contents of the report of the Ld. DDIT(I CI), which was relied upon by the Ld. CIT(A), as incriminating material found in the course of search. He showed us that, the Ld. DDIT(I CI) had only cast aspersions on the high value deposits being made by some of the account holders in their accounts held with the assessee society and it was accordingly reported that the assessee was being used by these unscrupulous individuals as a conduit to transfer their unaccounted monies from one place to another. According to Ld. AR, the contents of this report did not contain any tangible incriminating material against the assessee. He submitted that, if one reads the findings of Ld. DDIT(I CI), it would be noted that the Investigating authority had nowhere stated or suggested that the monies deposited with the assessee society represented their own unaccounted monies. Instead, the Ld. DDIT(I CI) was categorical in its findings that these deposits represented the unaccounted monies of other individuals who were taking advantage of the absence of reporting obligation on the assessee society to accommodate the transfer of their mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions made by the AO u/s 68 69C of the Act in these unabated AYs was indeed supported by incriminating material found incriminating statements obtained in the course search.Therefore, she does not want us to disturb that part of addition upheld/confirmed him. However, she assailed the action of Ld. CIT(A) directing deletion of addition made by AO u/s 68 of the Act as well as the action of Ld. CIT(A) directing the AO to delete Rs.9.24 crores (interest and administrative expenses) which was added by AO u/s 69C of the Act and pleaded that action of Ld CIT(A) be reversed on this part of his order. 32. Having heard both the parties and after perusing the material placed before us, we note that, in the course of assessment, the AO had issued several notices u/s 142(1) of the Act requiring the assessee to explain the deposits made by the several account-holders with the assessee society. However, at no point of time did the AO in his notices refer to any material or document seized in the course of search. The Ld. AR has rightly pointed out that the AO, in his remand report dated 22-01-2019, did not refer to any incriminating material unearthed in the course of search which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound during the search and no further. It was pointed out by the Ld. AR that this enquiry was initiated and the report was obtained much after the completion of the search action u/s 132 of the Act (report of inspector was made with in a day at the fag end of framing of assessment). Hence, according to him, this material cannot be neither termed as incriminating material nor as a material un-earthed during search to disturb the finality of the unabated assessments. 35. In this regard, it is noted by us that the assessee had furnished all the relevant KYC documentation which it was required to maintain ordinarily in respect of these three (3) account holders. Perusal of ITI report of three (3) members dated 26.12.2017 (AO passed the assessment order making addition of Rs.577 cr on 29.12.2017) shows that the Inspector located the first account holder, i.e. Mr. M. I. Siddique, and that the depositor informed him that he was enticed by some persons to open account with the credit society. Although he was not interested in the same but he still signed some papers which were given to him. He averred that he was not aware about the deposits made in the said account and refrained from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m PAN and KYC documentation were done in FY 2009-10 and the enquiry were made by ITI after more than seven (7) years, one cannot doubt the existence of the account holder simply because he had shifted from that address and failed to intimate the same to the assessee society. The Ld. AR rightly submitted that the PAN details were available with the office of the AO and therefore his current address could have been obtained from the ITD/ITBA system. He further pointed out that, his mobile number was also available in KYC documentation but there is no indication in the report that the ITI had tried to contact him over phone to enquire about his present address or made any use of any digital tools to locate him. 37. As regards the third depositor, Essa Sheikh, the Ld. AR rightly showed us that the address at which the ITI made the enquiry and the address mentioned in the KYC documentation furnished before the AO was different and therefore the allegation of the ITI that the address given was incomplete is incorrect. The Ld. AR submitted that the AO never confronted the assessee society with this report nor tried to cross-verify the relevant address and had that been done, the correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever observed that, the Ld. CIT(A) additionally relied upon new material viz., statements/report etc., which according to him, also constituted incriminating material which supported the impugned additions in these unabated AYs. According to Ld. AR, when the AO himself did not rely upon these material to justify the impugned additions in these unabated assessments in his remand report, then the Ld. CIT(A) could not have made out a completely new case on this aspect. However, the Ld. CIT, DR, pointed out on this contention of Ld. AR that the Ld. CIT(A) not only has co-terminus powers of the AO, but the power of enhancement as well, and therefore the Ld. CIT(A) was well within his rights to support the order of the AO with new material/evidence which came before him in the course of the appellate proceedings. We do not find it necessary to examine this contention raised by the assessee as such because we are inclined to examine the additional materials relied upon by the Ld. CIT(A) and adjudicate as to whether any of them constituted incriminating material qua the assessee society qua the un-abated AY s before us, which would justify the additions made in their hands. 41. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai, Kolkata etc., and selling the same in the local market of Raipur. The money collected in advance from the bullion traders of Raipur was deposited and RTGS was done to Mumbai, Kolkata etc. for purchasing bullion on their behalf. 43. In view of the above, we find merit in the submissions of the Ld. AR of the assessee that these twelve (12) statements of the account-holders did not contain anything which incriminated the assessee society or which would suggest that the cash deposited with the assessee society by these account holders represented its own unaccounted monies. Even if these statements are considered at their face value, it is noted that some individuals were taking advantage of the absence of reporting compliances on the assessee society to route their own unaccounted monies and even the ultimate beneficiaries had been named by these account-holders and identified by the authorities as well. On these facts, we find merit in the assessee society s contention that these twelve (12) statements did not contain any incriminating material which could be used to disturb the finality of these unabated AYs and justify the additions made by the AO u/s 68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unearthed in the course of search or that some incriminating statement was obtained in the course of search, which supported the findings of this verification report, only then such verification report could have been used to disturb the finality of the unabated assessments. The Revenue, however, has been unable to do so in the present case. In our considered view therefore, this verification report on its own cannot be said to be incriminating material unearthed in the course of search. 46. Also, this spot verification was conducted in relation to the cash deposits made by ten (10) members in their accounts held with the assessee society during FY 2015-16 and therefore it did not pertain to the relevant AYs 2010-11 2011-12. The Ld. AR also explained that this spot verification report primarily traces the cash deposits with the transfers/RTGS made to different firms/entities. He showed us that, during the relevant FY 2009-10 there were no RTGS made by any of the members of the assessee society and therefore this report was of no relevance in the relevant AY. Hence, we find merit in the Ld. AR s contention that the Ld. CIT(A) s reliance on this report to justify the impugned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to obtain the relevant KYC details of the members at the time of opening of their accounts and like other banks / banking institutions, they were not statutorily empowered to enquire into their source of funds or their creditworthiness whenever they deposited funds in their respective accounts held with the assessee society. He pointed out that, unlike banks which could flag suspicious transactions in their suspicious transaction report or cash transaction report which they were required to statutorily file with the concerned departments, the assessee society was unable to do so in the absence of any corresponding provision in law. It is noted by us that this absence of statutory reporting obligation/liabilities were also taken note of by the DDIT(I CI) in their report. The Ld. AR thus submitted that, the absence of statutory reporting liabilities cannot be held against the assessee so as to suggest that the assessee was facilitating such high value cash deposits. To substantiate the bonafides of the assessee society, the Ld. AR showed that the assessee had suo moto written several petitions to the Financial Intelligence Unit (FIU-IND) much prior to the date of search on 09.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the relevant year is an unabated assessment, which cannot be disturbed in absence of incriminating material as held by jurisdictional High Court in the cases of Continental Warehousing Corp. (Nhava Sheva) Ltd. (supra) and Murli Agro products (supra),, there is merit in the contention of the assessee that the disallowance of interest and administrative expenses made by the AO under sec.69C is not correct. The AO is therefore directed to delete the said disallowances of the interest and administrative expenses of Rs. 4.86 crores and Rs. 4.37 crores respectively. 51. Before us, the Ld. CIT, DR was unable to bring anything on record to controvert the above findings of the Ld. CIT(A). Accordingly, we do not see any reason to interfere with the above findings of the Ld. CIT(A). 52. For the reasons set out above, we are therefore of the view that there was no incriminating material qua the assessee which would justify the additions made by the AO in the unabated AY 2010-11. The AO is accordingly directed to delete the same. Therefore, the ground of appeal of the assessee as stated by us at para 19 (supra) therefore stands allowed. 53. In view of our above findings, the remain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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