TMI Blog2023 (2) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... eding the assessment year 20-21. AO has validly issued notice u/s 153A of the Act in respect of the instant assessment year 2013-14. Thus, the ground No. one of the cross objections of the assessee is accordingly dismissed. Assessment order passed u/s 153A as barred by limitation - Merely not uploading the instant assessment order on the income tax portal by 12.13 AM on 1/10/2021, it cannot be established that assessment order was not passed within the period of limitation. If the assessment order is served within a reasonable period from the expiry of the limitation of passing the assessment order, it is presumed that same was passed within the period of the limitation. The assessee has not brought on record any evidence that said assessment order was received beyond a reasonable period from the expiry of the limitation. In absence of any such documentary evidences, the allegations of the assessee are rejected. Bogus purchases - whether there was any incriminating material qua the addition of bogus purchase in the year under consideration? - We find that the (a) information in the form of statement of the supplier parties, (b) absence of evidence in support of transport/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d enquiry during search proceedings and nor have been produced by the assessee in assessment and remand proceedings. In our opinion, the decisions relied upon by the ld CIT(A) are of no assistance to the assessee. The assessee has failed to discharge its onus of establishing Identity, credit worthiness and genuineness of transaction. We set aside the order of ld CIT(A) on the issue of addition to the extent of 18 unsecured loan creditors. Since we have upheld the credit from those unsecured loan parties as unexplained, the corresponding addition for interest is also upheld. Disallowance of subcontract expenses - department conducted on the spot enquiry but the contractors were not found in existence at their given address - During proceedings before theCIT(A), assessee produced parties before the Assessing Officer in remand proceeding and thus ld CIT(A) deleted the disallowance - HELD THAT:- We find that by way of producing those parties before the Assessing Officer identity of the parties got established but the requirement of evidence in support of the services rendered by the those sub-contract parties has not been discharged by the assessee. In the circumstances, we fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnoring the facts that the identity of the parties, the genuineness of the transaction, and the credit-worthiness of the parties have not been proved to the satisfaction of the 40, so as to discharge the primary onus? 3. *Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of interest expenses of Rs. 1,42, 15,496/- on the unsecured loans when the said unsecured loans were found to be non-genuine as the assessee has not proved the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the parties? 2.1 The ground raised by the assessee in its cross-objection are reproduced as under: 1. On the facts and circumstances of the case and in law, the search was conducted on November 6, 2019 and notice us 153 A can be issued for six years preceding the year of search, for notice beyond six years certain conditions has to be satisfied which is not being satisfied and hence the proceedings u/s 153 A is void and bad in law. 2. On the facts and circumstances of the case and in law, the order passed by the AO under the provisions of section 153A r.w.s. 143(3) of the Act dated September 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowances made by the Assessing Officer included disallowance of bogus purchase of Rs. 48,04,750/- and unexplained cash credit u/s 68 of Rs. 2,86,53,687/-. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. 3.1 The addition for bogus purchases in various assessment years was made by the Assessing officer in respect of purchases made from 13 parties. Though, the Ld. CIT(A) rejected the contention of the assessee that there was no incriminating material vis- -vis addition of bogus purchases, but deleted the addition in respect of four purchase parties and in respect of balance 9 parties sustained addition @ 5% of the purchase amount. In respect of issue of unexplained cash credit u/s 68 of the Act, the Assessing Officer made addition in respect of 29 parties for various assessment years. The Ld. CIT(A) held that in view of no incriminating material qua the addition, same can t be sustained, following the decision of Hon ble Bombay High Court in the case of Continental warehousing corporation reported in 58 taxmann.com 78 On merit, the Ld. CIT(A) held that no loan entries were appearing in the books of accounts of the assessee in respect of 11 parties, hence ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1 -For the purposes of this sub-section, the expression relevant assessment year shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. 5.3 In view of the above provisions, wherever search under section 132 of the Act is initiated or requisition under section 132A of the Act is made after the 01/04/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion, the requirement of the law is that assessment order should be passed prior to expiry of limitation period. As far as limitation period is concerned, there is no dispute and that is admitted as on 30/9/20201. The contention of the assessee is that impugned assessment order was not uploaded on income-tax portal immediately after expiry of limitation i.e. midnight of 30/09/2021. In our opinion, merely not uploading the instant assessment order on the income tax portal by 12.13 AM on 1/10/2021, it cannot be established that assessment order was not passed within the period of limitation. If the assessment order is served within a reasonable period from the expiry of the limitation of passing the assessment order, it is presumed that same was passed within the period of the limitation. The assessee has not brought on record any evidence that said assessment order was received beyond a reasonable period from the expiry of the limitation. In absence of any such documentary evidences, the allegations of the assessee are rejected. The ground No. 2 (two) of the cross objections of the assessee is accordingly dismissed. 7. The ground 1 of the appeal of the Revenue relates to additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,26,193 18,30,019 15,68,280 65,56,050 80,09,332 Vimalnath Corporation 10,07,776 32,25,653 16,57,681 22,65,013 22,09,095 64,33,341 31,00,940 Navkar Corporation 39,94,616 23,87,388 Mahavir Enterprises 43,29,180 25,59,607 18,88,312 Bhavya Enterprises 34,52,173 22,06,521 Rishabh Corporation 9,89,718 19,17,347 36,49,805 25,67,970 38,37,494 82,83,929 1,03,74,183 47,15,958 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and key person of Mahavir Enterprises and Bhavya Enterprises. During survey at the premises of M/s Navkar Corporation, the survey team found WhatsApp messages exchanged between the key persons of the assessee and sh Kantilal D jain. The individuals whose statement were recorded stated that they had issued bogus bills to the assessee company without actual delivery of goods or material. The Assessing Officer has reproduced statement of the relevant persons of supplier companies from page 7 to 20 of the assessment order. In the assessment order, the Assessing Officer has noted that three parties were not found at the places of their business mentioned in bills. The inspectors of the income-tax department, who were deputed for verifying their place of business submitted that business premises of M/s Rushabh Corporation, Rushabh Trading Company and M/s Hitesh K shah were found closed and persons in neighborhood denied of any business activity carried out from those places. In case of Kohudiyar Enterprises also the Inspector reported that no entity or business was found to be running from the address of that party and nearby people denied of having any knowledge of said entity. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is in question. c) In the case of bogus purchase cases, the ratio laid down by the Apex Court, Jurisdictional High Court and Gujarat High Court in the following cases, need special mention considering the facts of the case. i) M/s. NK Protein Limited (reported at 84 taxmann.com 195 292 CTR 354 (SC) ii) Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014) (Bombay High Court.) iii) CIT V/S N K Industries (in Tax Appeal No. 240 of 2009 vide order dated 26.2.2016 (Gujarat High Court) subsequent decision in the case of CIT V/S Simit P. Seth 356 ITR 451 (Guj. H.C). Thus, undisputed fact is that the purchases claimed to have been made from these parties remained unverified. 7.10 After carefully going through the legal instances available on this issue the onus lay upon the assessee to prove the genuineness of the transaction when it claimed that the purchases are genuine. From the above case laws and the discussion on investigation, it is crystal clear that (1) The primary onus is on the assessee to establish the genuineness of the purchases claimed by it; ii) Since the primary facts are in the knowledge of the assessee it is his duty t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement was recorded, 2. The assessee has not submitted stock book and purchase order, and ME TAX replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock. 3. Party provided its contact number address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. Copy of the statement enclosed. The Ld. CIT(A) may decide the case on merits based on the above facts. 2 Rushabh Corporation (Proprietor Reema Hitesh Shah 1. Party appeared before this office hand statement was recorded 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. H. Enterprises 1. The assessee failed to produce the party. 2. The party has not submitted stock book, purchase order and purchase bills. 3. Party provided its contact number address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. The Ld.CIT(A) may decide the case on merits based on the above facts. 7. Jay Khodiyar Enterprises 1. Party appeared before this office and statement was recorded. 2. The assessee has not stock book and purchase order and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock is not stored at any place by the assessee and hence not maintained any stock book. 5. Party provided its contact number address in statement, the copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based on the above facts. 8. Vimalnath Associates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted stock book. 3. Party provided its contact number address in statement, which was verified independently by theinspectors and submitted report. As per the inspector report, party was found at the premise. 4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding. The Ld.CIT(A) may decide the case on merits based on the above facts. 7.7 The CIT(A) has noted that out of 13 parties, 4 parties namely Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, Hitesh K. Shah (HUF), Jay Khodiyar Enterprises had appeared before the Assessing Officer and their statement were recorded, and no adverse comment has been given by the Assessing Officer. In respect of Vimalnath Corporation, V.H. Enterprises and Mahavir Enterprises, though they did not attend before the Assessing Officer however they had submitted all the details. In respect of Maharashtra Pile Foundation, Vimalnath Associates Diyan Corporation Navkar Corporation, the ld CIT(A) noted that the parties submitted name and address which were verified by the Inspector of the Department. Regarding one party namely Bharti Enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es) and Shri Nishil M. Madhani (key person of Vimalnath Associates Divya Corporation), were recorded and they had admitted that they had provided bogus bills of purchases to the appellant company. These statements were confronted to Shri Nirmal Madhani, Director, who could not controvert the facts narrated in those statements. Thus, there was incriminating material found during the search and the AO has disallowed purchase based on such statements. Therefore, this argument of the assessee is rejected. 8.1 As far as the issue of incriminating material is concerned the Ld. DR before us, submitted that during the course of search proceedings statement and other material of the supplier parties, Inspector report regarding their non-existent at address etc. were obtained and which were duly confronted to the assessee. In view of those information gathered, the books of accounts of the assessee were having false claim of purchase expenditure and therefore seizure of regular books of accounts indicating falsity of the transaction made, constitute incriminating material found. The Ld. CIT(A) also upheld existence of incriminating material in view of information gathered regarding pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating material to form the basis of framing assessment u/s 153A of the Act. In case of B Kishore Kumar Vs DCIT (2014) 52 taxmann.com 449 (Madras), the Hon ble Madras High Court held that when there is a clear and categoric, voluntary admission of the undisclosed income by the assessee himself, there is no necessity to scrutinize the documents and that would constitute a good piece of evidence. A SLP filed against the said decision of the Hon ble Madras High Court has been dismissed by the Hon ble Supreme Court as reported in (2015) 62 taxmann.com 215. In the case of CIT vs Harjeev Aggarwal in ITA 8/2004 before the Hon ble Delhi High Court following questions of law were framed for consideration: 1. Whether the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs. 74 lacs paid by the Assessee in cash for the purchase of property bearing No.C-104, Naraina Vihar, Delhi? 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the provisions of Section 158 BB of the Income Tax Act, 1961 were not applicable to the facts of the case? 3. Whether the Income Tax Appellate Tribunal was correct in law in holding that the genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration. 11. Accordingly, the present appeals, along with all pending applications, are dismissed. 8.7 In the light of above position of law, when we examine the facts of the instant case , we find that the (a) information in the form of statement of the supplier parties, (b) absence of evidence in support of transport/delivery of material etc. from the assessee during the course of search proceeding,(c) none found at the premises of the supplier parties by the Inspector during verification etc. evidences, when seen in totality constitute material which is incriminating in nature. The entries in books of account regarding purchase are false, which also becomes an incriminating material for the purpose of invoking provisions of section 153A of the Act. 8.8 Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant firm. These persons have not retracted from their statements. Therefore, the averment made by them in their statements cannot simply be brushed aside. 9.2 However, the Ld. CIT(A) is of the view that since the assessee has executed work for the government agencies and therefore entire amount of bogus purchases cannot be disallowed. The relevant observation of the Ld. CIT(A) is reproduced as under: However, it is a fact that the appellant company was engaged in the business of execution of project work on behalf of government agency as well as MCGM and the project has been completed by the appellant firm. The appellant firm has received payment from the government agency on execution of project work assigned to it. The sale proceeds have been realised by the appellant firm from the government agencies. The AO has not doubted and disturbed the sales shown by the appellant as bogus or inflated. It is a settled principle of law that the AO cannot disallow 100% of purchases when the sales are not disturbed by the AO. Even the statements of Vinod Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V. Shah (Proprietor of V.H. Enterprises), Kantilal D. Jain ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the purchases corresponded to sales which were reflected in the retums of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue. We have also considered the two decisions relied upon by leamed standing counsel and we find that facts of the present case are clearly distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited decisions. 20. In Bholanath Polyfeb (P.) Ltd. (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.Y. 2013-14, the appellant has made purchases from Hitesh Kantilal Shah HUF (i) Rushabh Corporation (il) Rushabh Trading Co. As discussed in para 7.3.6, purchases made from Rushabh Corporation, Rushabh Trading Co, and Hitesh Kantilal Shah HUF have been justified by the appellant during the assessment as well as remand proceedings. Therefore, purchases of Rs. 48,04,750/- made from Rushabh Corporation Rushabh Trading Co. and Hitesh Kantilal Shah HUF is deleted. 9.4 We have heard rival submission of the parties on the merit of the addition of bogus purchases. Regarding the addition of bogus purchases, deleted by the Ld. CIT(A), we find that the Assessing Officer in the assessment proceedings made addition mainly for the reason that those parties were not produced before him during assessment proceedings and parties failed to provide proof of delivery of goods. The finding of ld CIT(A) are not acceptable due various reasons. Firstly, we find that during the remand proceedings out of those 13 parties, 4 parties were produced, but no proof of delivery of goods to the assessee has been produced by those parties. Secondly, out of those four parties, three parties were controlled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 40,000/- annually for using our name for issue of bogus bills. He would manage the whole affairs of M/s Vimalnath Corporation and I am not aware about business transactions carried out in the said entity. The commission of Rs. 40,000/- was paid to me in cash for F.Y. 2015-16 to F.Y. 2017-18. The commission for F.Y. 2018-19 is still not paid by him. The commission was sent to us through his person and we would collect the same from a decided spot in Bhayander or outside our Society Building. Same way, documents were sent to us for signature through his person. One of his persons is Shri Knatilal (Contact No.9769722713) who would handover the cash to me or bring documents for signature purpose. Q. 13 How much money do you receive for acting as a signatory in M/s Vimalnath Corporation? Ans . As stated above I have received an amount of Rs. 40,000 annually as commission for acting as a signatory in M/s Vimalnath Corporation. Q. 14 Please produce the books of accounts, Cheque books, bills and Vouchers etc of M/s Vimalnath Corporation. Ans . All the books of account, cheque book, bank book etc. are in the possession of Shri Hitesh Shah. No documents of M/s Vimal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the government organization, then sales not being doubtful, the only presumption would be that the assessee has purchased those goods from grey market and obtained bills from the bogus accommodation entry provider and money paid though cheques by the assessee must have been routed back to the assessee in cash. In such circumstances, the Hon ble Courts have held that the assessee must have only benefitted by way less purchase price paid in grey market and corresponding profit by which the assessee benefitted in entire transaction should only be added. Though, the source of investments in purchase of goods from grey market need to be examined in such cases. The Tribunal Mumbai Bench in the case of DCIT Vs Rajeev G Kalathi (2014) 51 taxmann.com 514 estimated 3 % of profit on bogus purchases. In the case of Kiran Navin Doshi Vs Income-tax officer (ITA No. 2601/Mum/2017) the Tribunal estimated profit at the rate of 12.5 % of the bogus purchases. (b) When the sales are doubtful or those sales are also accommodation entry bills, in such circumstances, the only addition which could be made in the hands of an assessee is commission income for issuing accommodation entry bills. 9.7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the event of failure to showcase physical movement of goods consumption thereof, disallowed the entire amount of bogus. Whereas, the Ld. FAA reverberating the findings of lower authority, restricted the disallowance to the GP ratio in the light of Hon ble Jurisdictional High Court of Bombay in Mohammad Haji Adam Co. (Supra) for the reason of acceptance of sales/revenue without dispute. Insofar as the bogus purchases are concerned, the ratio laid in Mohammad Haji Adam Co. (Supra) cannot squarely be applied to the present case for three factual variations, firstly the assessee before us is neither a trader nor a dealer but a Govt Civil Contractor and secondly there was complete absentia with regards to quantitative details or consumption of material purchased, and finally the sales or revenue were not exclusively with reference to goods purchases/consumed but inclusive of work contract services. However, the Hon ble Lordship had occasioned to considered similar facts and circumstance in the case of PCIT Vs Pinaki D Pinani (Bombay ITA/1543 of 2017), wherein the assessee being civil contractor, with evidential stock records and sales, was able to demonstrate the quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awala purchases, and thus we are inclined to uphold the order of assessment and reverse the order the Ld. FAA. 9.9 In view of above discussion and following the Tribunal in the case of Prtiam S mahale (supra) , where the decision in the case of Mohamad Haji Adam and Co. (supra) and N K Proteins Ltd (supra) have been analysed, the findings of ld CIT(A) on the issue of bogus purchases are set aside and the addition made by the Assessing officer is restored. The ground No. 1 of the appeal of the Revenue is accordingly allowed. The ground no. 3 of the cross objection of the assessee is dismissed. 10. The ground No. 2 of the appeal of the Revenue relates to addition of Rs. 2,86,53,687/- in respect of unsecured loans. The ground No. 3 relates to disallowance of interest expenses of Rs. 1,42,15,496/- in respect of those unsecured loan parties which have been held as unexplained by the Assessing Officer. 10.1 During the course of search proceedings total unsecured loans of Rs. 1,26,67,16,092/- were found recorded in the case of the assessee for assessment year 2013-14 to assessment year 20192020. During the course of search and survey proceedings on the premises of the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Burlington Mercantiles Pvt. Ltd. AABCB4362Q 8,21,250 4,80,000 9 Chaitanya Gems Pvt. Ltd. AADCC9257F 8,32,200 10 Crescent Diamond Exim Pvt. Ltd. AABCC4886B 5,80,350 45,00,000 9,34,920 11 Divyanshi Gems Pvt. Ltd. AADCD8741R 64,26,000 68,14,700 3,14,700 12 Dojahan Trading Pvt. Ltd AACCD3340F 75,00,000 6,41,085 2,08,200 13 Ensure Insure Brokers Pvt. Ltd. AACCB1526E 13,39,572, 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 Takshila Exim Pvt. Ltd. AADCT9006B 76,50,000 10,00,720 26 Badam Trading Pvt. Ltd. AAFCB0891H 10,90,890 3,01,050 27 Lalita Gems Pvt. Ltd. AABCL7179H 3,29,500 2,27,700 28 Moxa Diamond Pvt. Ltd. AACCM1959H 1,69,200 15,02,000 51,64,250 1,30,88,000 29 Shikha Diamond Pvt. Ltd. AAJCS5918B 17,48,818 25,00,000 51,64,250 51,64,250 1,80,88,000 Total 1,44,38,191 10,50,69,000 9,17,46,572 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.3 Based on inquiries and finding of the Department, the Assessing Officer issued show cause notice asking the assessee to explain the unsecured loan creditors and also produce those 29 parties before him. It was contended by the assessee that loans were received through banking channels and ledger accounts, income-tax returns and repayment of the loan to said parties had already been submitted before the Assessing Officer. The Assessing Officer however was not satisfied by the reply given by the assessee. According to him the key persons of the assessee company had admitted in statement on oath that they have taken bogus accommodation entries unsecured loans. The Assessing Officer was of the opinion that cash generated while bogus purchases was handed over to unsecured loan creditors. The Assessing Officer was of the view that the assessee failed to produce material evidences in support of genuineness of the loan transaction and accordingly, the assessee failed to discharge its onus u/s 68 of the Act to establish identity, genuineness of the transaction and creditworthiness of the parties. The Ld. Assessing Officer relying on the decision in the case of Roshan Di Hatti v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same will be returned to the beneficiary by issue of cheques after charging their commission on such transactions. 8.5 The assessee further relied on the fact that, the parties are identifiable and amounts were received through banking channels. These parties are credit worthy to make such investments in the assessee company and submitted that the transactions are genuine. The assessee failed to prove genuineness of these transactions. 8.6 The assessee in response to specific show cause notice has not made any submissions to disprove the departments above findings. The assessee except for pointing out that its name is not mentioned in the statements given, has not commented on the entire modus operandi admitted by the parties concerned. The controlling persons of unsecured loan parties have categorically admitted that they are involved in providing only bogas and accommodation entries for commission. The statements were given under oath in the Income Tax Act. The evidences gathered clearly proved that these parties have only provided accommodation entries for consideration /commission to the willing parties. These parties receive cash from the clients than through layering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation, ITR ,copy of balance sheet, bank statement in respect of those parties were already submitted during the remand proceedings. During appellate proceedings, the Ld. CIT(A) reconciled the ledger balances of 29 parties at the end of each year from assessment year 2013-14 to assessment year 2020-21 and found that out of 29 parties, in respect of 9 parties no credit transactions were appearing during the period from AY 2013-14 to 2020-21. The Ld. CIT(A) accordingly deleted the addition u/s 68 of the Act in respect of those 9 parties observing as under: 8.3.6 The AO has made reference to statement of Shri Rajendra Jain regarding providing accommodation entries of unsecured loans to various parties. The list of 29 parties include name of two parties i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, the appellant has not received any unsecured loan during F.Y. 201213 to F.Y. 2017-18 from Karnawat Impex Pvt. Ltd and Kriya Impex. Therefore, reliance of AO on the statement of Shri Rajendra Jain for making addition u/s.68 inrespect of unsecured loan from Karnawat Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the case of the appellant. The AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confession, it was much more incumbent upon the department to summon the creditor in order to verify the statements made in the confirmatory letter. This was never done. The so-called confession was not made available and was not quoted in any of the orders. The so-called confession was made in a third party s case and, hence, it was no pointer to the fact that it also related to the amount in question. The assessee having been called upon to explain the nature and source of the deposit, immediately filed the confirmatory letter from the creditor. The confirmatory letter contained the address of the party. It also contained the GIR number. The assessee having fumished all this, did all that it could do and these materials showed prima facie not only the identity of the creditor but also the genuineness of the transaction and also the capacity of the creditor and, as such, the assessee completely discharged its initial onus under section 68. The revenue did not summon the creditor under section 131. It took no steps to verify the statement of the assessee. Thus, after the assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the case of Commissioner of Income-tax v. Orissa Corpn, (P.) Ltd.[1986] 159 ITR 78 (SC), the Hon'ble Supreme Court of India has held as under: In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-lax assessees. Their index number was in the file of the revenue.The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further.The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under: The provision of section 68 deals with a cases, where any sum found credited in the books of accounts of an assessee, in any previous year, for which the assessee offered no explanation about the nature and source, thereof or the explanations offered by the assessee, in the opinion of the Assessing Officer is not satisfactory, then sum so found credited may be charged to income tax, as income of the assessee of that previous year. In order to fix any credit within the ambit of section 68, the Assessing Officer has to examine three ingredients i.e., identity, genuineness of transactions and creditworthiness of the parties. In this factual and legal background, if you examine, the present case in the light of various evidences filed by the assessee, in order to prove credit found in the form of share capital and share premium, one has to see. whether the assessee has discharged its initial onus cast upon under section 68 or not. In this case, the assessee has filed various details. including share application form, copy of declaration, board resolution, bank statement of investor company, PAN card, acknowledgment of return of income, financial statement of investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be sustained even on basis of statement of VS because the Assessing Officer has relied upon statement of VS, the erstwhile director of those five companies to make additions towards share capital, but when KK, the present director of the assessee-company asked for copies of statement of VS and also opportunity for cross examination of VS, the Assessing Officer has denied, the opportunity of cross examination and also not furnished copies of statement recorded from VS. It is a settled position of law that once, any third party information/statements is relied upon to make additions, it is the obligation of the Assessing Officer to provide copies of such statements/information and also to provide an opportunity of cross examination of the person, who gave the statement, when such opportunity has been availed by the person against whom, such statements are used. When, third party information is relied upon to draw an adverse inference against the assessee, the same needs to be provided and also opportunity of cross examination shall be given, if such opportunity is availed by the assessee. (Para 15] (emphasis supplied externally) 10.4 The Ld. CIT(A) further relied on othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also not sustainable. Therefore, addition of Rs. 1,44,38,191/- made by AO u/s.68 in respect of unsecured loans is deleted. 10.5 Regarding the issue of no addition could have been made without aid of the incriminating material in completed assessments, the Ld. CIT(A) held in favor of the assessee observing as under: 8.3.9 From the assessment order, it is seen that there is no reference in the assessment order about any incriminating document found/seized during the course of search proceedings relevant to the and unsecured loans. The appellant has also provided a copy of statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement was recorded us 132(4) on 08.11.2019 during the search proceedings. Even in their statement recorded us. 132(4), there is no mention about any incriminating evidences/material found or seized related to unsecured loans. Thus, it can be safely inferred that during the course of search proceedings, no incriminating material/evidences in relation to the unsecured loans were found/seized. It is a well settled law that in the unabated assessment order, no addition u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company was duly confronted all the facts of non-existence of those parties, despite, the assessee failed to produce those before the assessing officer. The confirmation letters, ITR etc had been filed on behalf of the unsecured loan parties before the Assessing Officer mostly between 21/09/2021 to 23/09/2021, which can t be a coincidence but can be possible only if filed by one person on their behalf and which could be none other than the assessee, so credential of those documents was required to confirmed independently by way of producing them and then confirming their creditworthiness. The Ld CIT(A) wrongly admitted the plea of the assessee that it had been a longtime since the loans taken and same were returned subsequently, but the Ld CIT(A) has conveniently ignored that the assessee had shown to have paid interest to them regularly, and thus can t say that those parties could not be produced before the Assessing Officer. 10.7 We have heard rival submission of the parties on the issue in dispute. As far as the addition of unsecured loan creditors is concerned, it has been assailed on legality of addition as well as on merit. Firstly, we examine whether the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 to AY 202021. On verification of table of addition of unsecured loan creditor by the Assessing Officer, we concur with ld. CIT(A). but regarding the remaining 9 parties, we find that the Assessing officer has made addition on the basis of the unsecured loan entries found in the books of the assessee during the course of search action, and credits in respect of those parties were duly appearing in the ledger accounts of unsecured loan creditor confronted to the director of the assessee. During assessment proceeding also no such facts was brought to the knowledge of the Assessing Officer that no credit transaction was with those 9 parties during the period from AY 2013-14 to AY 2020-21. The CIT(A) accepted the contention of the assessee without providing opportunity to the assessing Officer on the evidences which were produced for the first time before him, which is evident from the following finding of the ld. CIT(A) : From the above table, it is noticed that in case of Piyush Gems Pvt. Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the appellant and it is also evident from the details provided in the assessment order. From the above table, it is observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had received unsecured loans from such parties and such loans were not recorded in the books of accounts of the appellant. In fact, the AO has made addition of unsecured loans as these loans were received and reflected in the book of account of the appellant but such unsecured loans were not genuine and bogus. Also there is no mention in the assessment order that there was incriminating material found during the search and it reflected certain unsecured loans received by the appellant and they were not reflected in the books of accounts. Thus, the addition u/s 68 made by AO in respect of unsecured loans received from above mentioned 09 parties is without any basis and factually wrong addition. Therefore, addition of unsecured made u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Gems is deleted. 10.12 This action of Ld CIT(A) is in violation of principles of natural justice and rule 46A of income-tax rules, 1962. Thus, we feel appropriate to restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition in respect of unsecured loans. It is a fact that the appellant was not made aware of the material which was being used against the appellant by the AO in the assessment order and the same material was gathered by the AO behind the back of the appellant It is a settled principle of law that no addition can be made by the AO without providing and confronting the material gathered by the AO behind the back of the assessee In the case of the appellant also, the AO has relied upon the statements of Shri Rajendra Jain and Shri Deepak Jain and also the report of the investigation wing The appellant was not provided with the relevant material which has been used by the AO in the assessment order for making addition in respect of unsecured loans. Thus, there has been clear violation of principal of natural justice Had the AO provided the copies of statements of Rajendra Jain and Deepak Jain and also the evidences gathered by the investigation wing to the appellant, the appellant would had certainly provided to the AO all the necessary documents/evidences to rebut the statements or the evidences used against it. The AO has failed to provide the material gathered by him to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the figure of Rs. 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer Thus both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion It was thus a fit case for the exercise of power under Article 136. In the result, the appeal was to be allowed and the order of the Tribunal was to be set aside and the case was to be remanded to it with direction that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries In the case of Kishinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer should have done was to grant an opportunity to the assessee to meet the case against him by providing the matenal sought to be used against him in arriving before passing the order of assessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment and therefore, renders the orders passed by the Commissioner (Appeals) and the Tribunal vulnerable. The assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents whose statements were relied upon by him. Despite the request seeking an opportunity to cross examine the deponents and furnish the assessee with copies of statements and disclose material these were denied to him. Therefore, the addition made to the income of the assessee was not justified and liable to be deleted [Para 17) In the case of CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) the Hon'ble High Court of Delhi has held that since material collected by revenue behind back of assessee was used against him without disclosing that material to him or giving any opportunity to him to cross-examine p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee The assessee was not given opportunity to cross-examine the witnesses Statements were written in Hindi whereas the farmers were illiterate or semiliterate Affidavits were filed by the assessee of each and every farmer, which have been relied upon by the Commissioner of Income-tax (Appeals) and the said finding has been affirmed by the Income-tax Appellate Tribunal. 4. The Commissioner of Income-tax (Appeals) with respect to sundry creditors has given the findings that on consideration of statements of 20 farmers and the affidavits, mert has been found in the contention of the assessee that the Inspector of Income-tax was not authorized to record or collect statements and the said statements were recorded behind the back of the assessee. It was further held that to expect iterate and semi-literate farmers to recount from memory details of accounts with the assessee was asking too much. They are not expected to be familiar with concepts such as financial year and 31st March They do not understand the timing difference. Merely by the fact that the stamp papers were purchased from one stamp vendor it does not lead to the inference that the contents of the affidavits were dicta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been affirmed by the Income-tax Appellate Tribunal, thus, no case for interference in the appeal is made out No substantial question of law is involved with respect to the deletion of Rs. 22,41,482. In the case of CIT v. Raja Ginning Udyog[2005] 268 ITR 383(MP), the Hon'ble High Court of Madhya Pradesh has held that: 5. With regard to ground No (1) the Tribunal has recorded a finding that some enquiry was conducted by the Assessing Officer on his own and he had not asked the assessee to produce the farmers so as to ascertain from them the payments made to them with regard to cotton purchased by the assessee Assessee was asked to produce farmers for the first time on 4th January 1993, Le about 3 months before passing of the final order. Since the farmers were busy during this period they could not be produced and no further opportunity in this regard was given Thus, finding has been recorded in the enquiry that was conducted by the Assessing Officer behind the back of the assessee This violated the principles of natural justice in the light of this finding, CIT(A) and Tnbunal both found the procedure adopted by Assessing Officer as erroneous and against law This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity and credit worthiness of the lender parties and genuineness of the transaction and he relied merely on profiling of the lender made based on details available in Income-tax Department database (ITBA), without carrying out further enquiries. The Ld CIT(A) has relied on the decision Hon ble Patna High Court in the case of Additional CIT Vs Hanuman Agrwal (supra) where the creditors confessed the loan as unexplained cash credit, but later on filed confirmatory letter, but the ITO rejected the claim of the assessee and made addition u/s 68 of the Act. The Hon ble High Court held the ITO should have issued summon u/s 131 of the for taking statement of the creditor when his correct address was provided by the assessee and the onus of the assessee is discharged when correct address is provided. Further, the Ld CIT(A) held that the Assessing Officer in remand proceeding also insisted upon production of the unsecured loan creditor and did not issue summon u/s 131 or notice u/s 133(6) of the Act. The Ld CIT(A) relied on the decision of Hon ble Supreme Court in the case of CIT vs Orissa Corporation P Ltd (supra). In the said case, the assessee supplied correct name and address of the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncl : as above Yours faithfully, Sd/- sd/- (Suraj Singh) (Prateek Gehlot) Inspector, o/o ADIT(Inv) Inspector, o/o ADIT(Inv) Unit-3, Surat Unit-1(1), Mumbai 10.17 This fact of non-availability of creditors at their address was duly confronted to the director of the assessee company during search proceedings itself, however, he could not provide their new address or contact number of unsecured loan creditors. During assessment proceeding or remand proceeding the assessee did not provide their new address. The assessee also did not make any request for issuing of summon to its witness or deposit their travel expenses to the office of the Assessing Officer for ensuring their attendance as per the procedure laid down under code of Civil Procedure ,1908 . The assessing officer, in view of the information gathered by the Inspectors of the department during search proceeding, insisted for personal attendance of the parties for verification of their identity. Regarding the creditworthiness, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Ltd., were found to be non- existent at the address provided. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company Respondent. Another example is of Ganga Builders Ltd. Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings and nor have been produced by the assessee in assessment and remand proceedings. In our opinion, the decisions relied upon by the ld CIT(A) are of no assistance to the assessee. The assessee has failed to discharge its onus of establishing Identity, credit worthiness and genuineness of transaction. We set aside the order of ld CIT(A) on the issue of addition to the extent of 18 unsecured loan creditors. Since we have upheld the credit from those unsecured loan parties as unexplained, the corresponding addition for interest is also upheld. 10.19 The ground No. 2 and 3 of the appeal of the Revenue are accordingly partly allowed. 11. In ground no. 4 of the cross objection, the assessee has raised the issue that despite giving no adverse comment in remand report, the Assessing Officer is not justified in preferring the appeal before the ITAT. We find that ld DR did not accept this contention of the Ld Counsel that assessing officer had not given adverse remark for unsecure loan creditors. We have also verified from the summary of remand report reproduced by the Ld CIT(A) in the impugned order and find that the contention of the assessee is not correct. Hence the ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19 F.Y. 2019-20 Total Ashok Construction 21,41,548 3,09,18,793 6,03,41,671 1,49,85,213 1,80,10,577 12,63,97,802 Rajni Developers 42,69,374 89,36,529 46,02,528 Total 21,41,548 3,51,88,167 6,92,78,200 1,95,87,741 1,80,10,577 14,42,06,233 15.1 The department conducted on the spot enquiry but the contractors were not found in existence at their given address. The report of Inspectors of the department have reproduced on page 3839 of the Impugned assessment order. During assessment proceedings, the assessee submitted v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank Statement etc. However, the AO has ignored the evidences provided by the appellant company during the assessment proceedings. The AO has merely relied upon the finding of the Investigation Wing and the report of the Inspector that the premises was found closed at the time of his visit. During the remand proceedings, both the parties have attended before the AO during the remand proceedings and their statements were recorded. Both the parties have provided necessary documentary evidences to AO. The AO has not made any adverse remark against both the parties. In view of the above facts, the appellant company has been able to prove with documentary evidences that the payment made to M/s. Ashok Construction M/s. Rajni Developers was genuine and justified. 15.4 Before us the Ld DR submitted that producing the parties before the AO establish the identity of the party, but the proof that what services were actually rendered by those parties, the assessee has not furnished any documentary evidence in support, including measurement book etc. duly verified by the Govt authority i.e MCGM that part of the works contract had been executed by the assessee using the services of relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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