Income Tax Appellate Tribunal - Jaipur
M/S. Multi Metal Private Ltd., Kota vs Deputy Commissioner Of Income Tax, ... on 29 January, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "A", JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 1024/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2010-11
M/s Multimetals Limited, cuke D.C.I.T.,
Plot No. 6 and 7, Heavy Vs. Central Circle,
Industrial Area, Kansua Road, Kota.
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1100/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2010-11
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1101/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2011-12
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
2 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
izR;k{[email protected]. No. 38/JP/2018
(Arising out of vk;dj vihy la-@ITA No. 1101/JP/2018)
fu/kZkj.k o"kZ@Assessment Years 2011-12
M/s Multimetals Limited, cuke D.C.I.T.,
Plot No. 6 and 7, Heavy Vs. Central Circle,
Industrial Area, Kansua Road, Kota.
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1102/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2012-13
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
izR;k{[email protected]. No. 39/JP/2018
(Arising out of vk;dj vihy la-@ITA No. 1102/JP/2018)
fu/kZkj.k o"kZ@Assessment Years 2012-13
M/s Multimetals Limited, cuke D.C.I.T.,
Plot No. 6 and 7, Heavy Vs. Central Circle,
Industrial Area, Kansua Road, Kota.
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1025/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2013-14
M/s Multimetals Limited, cuke D.C.I.T.,
Plot No. 6 and 7, Heavy Vs. Central Circle,
Industrial Area, Kansua Road, Kota.
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
3 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
vk;dj vihy la-@ITA No. 1103/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2013-14
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1026/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2015-16
M/s Multimetals Limited, cuke D.C.I.T.,
Plot No. 6 and 7, Heavy Vs. Central Circle,
Industrial Area, Kansua Road, Kota.
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1104/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2015-16
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 1230/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2016-17
D.C.I.T., cuke M/s Multimetals Limited,
Central Circle, Vs. Plot No. 6/7, C-Block, Heavy
Kota. Industrial Area, Kota,
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCM 6604 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
4 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vijay Goyal (CA) &
Shri Gulshan Agarwal (CA)
jktLo dh vksj ls@ Revenue by : Shri Varinder Mehta (CIT-DR)
lquokbZ dh rkjh[k@ Date of Hearing : 17/01/2019
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/01/2019
vkns'k@ ORDER
PER: BENCH These are six appeals by the revenue for the A.Ys. 2010-11 to 2013- 14, 2015-16 and 2016-17, three cross appeals by the assessee for the A.Y. 2010-11, 2013-14 and 2015-16 and two cross objections by the assessee for the A.Y. 2011-12 and 2012-13 respectively arising from the assessment framed in pursuant to the search and seizure action U/s 132 of the Income Tax Act, 1961 (in short the Act). The assessment for the A.Y. 2010-11 to 2013-14 and 2015-16 were framed U/s 153A of the Act whereas the assessment for the A.Y. 2016-17 was passed U/s 143(3) read with Section 153B(1)(b) of the Act.
2. All the appeals as well as the cross objections are being heard together and for the sake of convenience, a composite order is being passed.
3. The assessee is a group concern of Kota Dall Mill (KDM) group and subjected to the search and seizure action U/s 132 of the Act carried out 5 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT on 02/5/2017. The Assessing Officer initiated the proceedings U/s 153A of the Act in pursuant to the search for the A.Y. 2010-11 to 2013-14 and 2015-16 and made various additions U/s 68 of the Act on account of unsecured loans, special deposits against the issue of preferential equity shares treating the same as accommodation entries availed by the assessee from the entry providers. The assessee challenged the orders passed by the Assessing Officer before the ld. CIT(A) and contended that the Assessing Officer has made the addition merely on the basis of the statements recorded by the Investigation Wing, Kolkata and without any incriminating material found or seized during the search and seizure action in the case of the assessee. The assessee also raised objection against the additions made by the Assessing Officer on the ground that the assessee was not given an opportunity of cross examination of the witnesses whose statement was relied upon by the Assessing Officer while passing the assessments. The ld. CIT(A) did not accept these objections raised by the assessee, however, on merits of the addition, the ld. CIT(A) has deleted the major part of the addition for which the Assessing Officer was not having any material in his possession but confirmed the addition in respect of which the statement of the alleged entry provider was with the Assessing Officer. Thus, both the assessee as well as the revenue are aggrieved by the impugned orders of the ld. CIT(A) and filed the cross 6 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT appeals as well as the cross objections for the respective assessment years.
4. Assessments for the A.Y. 2010-11 to 2012-13 were completed and not pending on the date of search and therefore, common ground are raised by the assessee in respect of these three assessment years against the additions made by the Assessing Officer for want of any incriminating material found or seized during the search and seizure action.
5. First we take up the assessee's appeals as well as cross appeal of the revenue wherein the assessee has raised common grounds except the addition sustained by the ld. CIT(A) varies from year to year. In the appeal for the A.Y. 2010-11, the assessee has raised following grounds:
"1. On the facts and in the circumstances of the case and in law the order passed u/s 153 A read with section 143(3) of the Income Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The Id. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.
2. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. The findings of Id CIT(A) in this regard are perverse and erroneous.
It is contended that the Id. AO passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged 7 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT accommodation entry providers, therefore the assessment order ought to held as bad in law and deserves to be annulled.
3. That the order of the Id CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case. The addition confirmed by Id. CIT (A) deserves to be deleted.
4. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in confirming the additions made u/s 68 of the Income Tax Act, 1961 by: -
(a) solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee.
(b) giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.)-Kolkatta.
(c) holding that the assessee has not adduced any evidence to rebut the adverse factual finding made by the AO in the assessment order though detailed paper book for relevant AY and common paper books have been submitted, and
(d) holding that incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkatta.
5. On the facts and in the circumstances of the case and in law the Id.
CIT(A) erred in confirmation the addition of Rs. 25,71,25,000/- made by Id. AO u/s 68 of Income Tax Act, 1961 on account of unsecured loans taken from following parties and erroneously held that the identity, creditworthiness and genuineness of the under mentioned company is doubtful: -
8 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Name of the company from Amount Name of alleged entry whom loan received operator whose statement were relied Jalsagar Commerce Pvt. Ltd 25,71,25,000 Shri Anand Sharma
6. On the facts and in the circumstances of the case and in law the Id.
CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds.
7. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal.
6. Ground No. 1 of the appeal is regarding the validity of reassessment of income of the assessee U/s 153A of the Act for want of incriminating material. This issue is common for the A.Y. 2010-11 to 2013-14. The assessee is a public limited company and engaged in the business of manufacturing of nonferrous metal tubes rods and sections. The assessee filed its return of income U/s 139(1) of the Act on 26/9/2010 which was subjected to scrutiny assessment U/s 143(3) on 08/3/2013. Similarly the assessment for the A.Y. 2011-12 was also completed U/s 143(3) of the Act on 30/3/2014 and for the A.Y. 2012-13 on 21/3/2015. Thus it is clear that on the date of search i.e. 02/07/2015, the assessment for all the three years were completed U/s 143(3) of the Act and were not pending and consequently the assessment for these three years were not got abated by virtue of search and seizure action U/s 132 of the Act. The ld. CIT(A) though accepted the fact that there was no incriminating material found or seized during the course of search and seizure action to support the 9 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT additions in question. However, the ld. CIT(A) has rejected the objection of the assessee on the ground that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla 380 ITR 573 is pending before the Hon'ble Supreme Court.
7. Before us, the ld AR of the assessee has submitted that in compliance to the notice U/s 153A of the Act, the assessee submitted its return of income and declared the total income as it was declared in the original return of income. The Assessing Officer has made the addition U/s 68 of the Act on the basis of the statement of Shri Anand Sharma and in some cases on the basis of statement of Shri Ankit Bagri without any incriminating material found or seized during the course of search and seizure action. Thus, the ld AR has contended that the Assessing Officer is not empowered to make any addition in the total income of the assessee which was assessed while passing the assessment order U/s 143(3) of the Act. He has contended that it is settled principles of law that there cannot be a review under the garb of reassessment proceedings U/s 153A of the Act and therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and invalid. The provisions of Section 153A of the Act cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes to the possession/knowledge of the Assessing Officer during the 10 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT course of search proceedings. Since the assessment for these three assessment years were not pending as on the date of search and seizure and there is no incriminating material found or seized during the course of search then the Assessing Officer is bound to reassess the total income as it was assessed on the original return of income. Though the Assessing Officer is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality and, therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for otherwise addition can only be made on the basis of undisclosed income derived from material/documents seized as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of any 11 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT incriminating material found or seized during the course of search and seizure proceedings, the additions made by the AO during the course of reassessment under section 153A of the Act are without jurisdiction and liable to be deleted. In support of his contention the ld. A/R has relied upon the decision of Hon'ble Delhi High Court in case of Kabul Chawla, 380 ITR 573 (Delhi) and submitted that Hon'ble High Court has held that in case of completed assessment not abated by virtue of search under section 132 of the Act in the absence of any incriminating material, the same can be reiterated and, therefore, no addition could have been made to the income already assessed. The ld. A/R has also relied upon the following decisions :-
1. Principal CIT vs. Kurele Paper Mills Pvt. Ltd.
(2016) 380 ITR 571 (Delhi) SLP filed before the Hon'ble Supreme Court was dismissed vide order dated 07.12.2015.
2. Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) SLP filed before the Hon'ble Supreme Court was dismissed vide order dated 2nd July, 2018.
3. Jai Steel (India) vs. ACIT (2013) 219 Taxman 223 (Raj.) Thus the ld. A/R has submitted that the Hon'ble Jurisdictional High Court has held that the requirement of assessment or reassessment under section 153A has to be read in the context of section 132 or 132A of the IT Act, in as much as in case nothing incriminating is found on account of 12 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined purpose of making assessment of total income under section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The assessment or reassessment proceedings which have already been completed and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when search or requisition is made, there is no question of any abated assessment since no proceedings were pending and, therefore, the addition to the income that has already been assessed will be made on the basis of incriminating material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the ld. A/R has submitted that the AO has made the additions in the assessment under section 153A whereby the completed assessments have been disturbed without even referring to any incriminating material found or seized during the course of search and seizure under section 132 of the Act. The only basis of addition is the statement of third party recorded in the search of the third party that has no connection with the search proceedings of the assessee and, 13 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act.
8. On the other hand, the ld. D/R submitted that the additions made to the total income of the assessee relate to the unexplained cash credit in the books of account introduced in the garb of unsecured loans, partners' capital which in fact is the re-routing of the assessee's undisclosed income.
It is clearly evident from the innumerable evidences which came to the fore in the numerous investigations, enquiries, search and survey actions carried out by the Investigation Wing of the Department that the Assessing Officer received information from the Investigation Wing Kolkata regarding the involvement of KBM Group (assessee) in obtaining entries of bogus unsecured loans, partners' capital, special deposits etc. detected in the investigation carried out by the Investigation Wing Kolkata. Such information was received prior to the initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Accordingly, during the course of assessment proceedings under section 153A, the Assessing Officer conducted further enquiry about the genuineness of the transaction of unsecured loans, partners' capital, special deposits etc. The assessee was duly confronted with the results of all these enquiries and information shared by the Investigation Wing. In 14 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT these circumstances it cannot be a case of addition made without any incriminating material but the Assessing Officer was having sufficient material disclosing the undisclosed and unexplained cash credit introduced by the assessee in the garb of unsecured loans and partners' capital.
Once the insurmountable evidences unearthed by the Investigation Wing Kolkata which is the basis of the additions made by the Assessing Officer, the assessee was required to discharge its onus by producing the contrary evidence or by producing alleged creditors for verification. The ld. CIT D/R has further submitted that the information received from the Investigation Wing Kolkata is also the incriminating material found during the search and pertains to the assessee disclosing undisclosed income. Therefore, it is not a case of reassessment framed by the Assessing Officer under section 153A without any incriminating material. The Assessing Officer even conducted further investigation during the course of assessment proceedings through the Investigation Wing Kolkata and, therefore, the addition is fully based on the evidence in the possession of the Assessing Officer. As per the provisions of section 132 read with section 153A of the IT Act, the Assessing Officer has to assess or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefore cover not only the income emanating from the declared source or any material 15 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT omission before Assessing Officer but from all sources including undisclosed ones or based on unplaced material before the Assessing Officer. The ld. CIT D/R has thus submitted that the decisions in the case of M/s. All Cargo Global Logistics Ltd. as well as Kabul Chawla (supra) were challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court has admitted the SLP for examination of the issue. Hence the issue is still pending adjudication before the Hon'ble Supreme Court.
He has relied upon the orders of the authorities below.
9. We have considered the rival submissions as well as relevant material on record. Undisputedly the assessment for the A.Y. 2010-11 to 2012-13 were not pending on the date of search on 02/7/2015 as the original assessment U/s 143(3) of the Act were also completed prior to the date of search. Thus, the assessment for these three assessment years were not got abated by virtue of search U/s 132 of the Act on 02/7/2015 and therefore the Assessing Officer would assess the total income of the assessee as per the provisions of Section 153A of the Act in respect of these three assessment years having regard to the fact that whether any incriminating material was found or came to the knowledge of the Assessing Officer during the search and seizure proceedings. Since these assessment years were not pending as on the date of search, therefore, the proceedings U/s 153A of the Act in respect of these three assessment 16 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT years would be in the nature of reassessment and not in the nature of assessment as in the case of the remaining assessment years in the A.Y. 2014-15 and 2015-16 which were got abated by virtue of search and seizure action U/s 132 of the Act on 02/7/2015. At the outset we note that the assessments framed by the Assessing Officer U/s 153A of the Act in the case of the assessee before us is solely on the basis of the information received from the Kolkata Investigation Wing which contains the statement of one Shri Anand Sharma in respect of some assessments and the statement of Shri Ankit Bagri in respect of some other assessments. Thus, undisputedly the Assessing Officer has made the addition while completing the assessment U/s 153A of the Act for all the assessment years on the basis of the information received from the Investigation Wing, Kolkata and not on the basis of any material or information gathered during the course of search and seizure action in the case of the assessee. We find that the assessment framed by the Assessing Officer as well as the orders passed by the ld. CIT(A) in the case of the assessee are identical and based on similar facts and circumstances as in the case of M/s Kola Dall Mill pursuant to the same search and seizure action carried out on 02/7/2015.
This Tribunal in the case of Kota Dall Mill Vs DCIT vide order dated 31/12/2018 in ITA Nos. 997 to 1002/JP/2018, 1119/JP/2018, 1057 to 17 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT 1062/JP/2018 and 1210/JP/2018 has considered and decided this issue in para 6 as under:
"6. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessments for the assessment years 2010- 11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of these four assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in respect of these four assessment years would be in the nature of reassessment and not in the nature of assessment as in the cases of the remaining two assessment years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee's total income, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The provisions of section 132 read with section 153A of the Act stipulate two types of situations - one where the assessment of any assessment year falling within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the
18 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :-
"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs 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 AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the 19 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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. Conclusion
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."
Thus the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the 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 document 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. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :-
"1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act.
20 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital.
3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination."
The SLP filed by the revenue against the said decision of Hon'ble Delhi High Court was dismissed by the Hon'ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon'ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under :-
"55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue.
56. Section 153A of the Act is titled "Assessment in case of search or requisition".
It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re-open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified.
57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed:
21 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under:
"31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search.
32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with."
59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under:
'33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:
"22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is 22 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:
(a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;
(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and
(c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made."
34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision"
which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under:
"26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."'
60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under:
23 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs 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 AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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 24 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT made known in the course of original assessment."
61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-
07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under:
'15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment 25 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.
16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income.
Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.
** ** **
19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to 26 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.'
62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla(supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa(supra), the Bombay High Court held that:
"6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings."
63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015.
The decision in Dayawanti Gupta
64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was:
"We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of 27 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms."
65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein.
66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus:
"Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes."
67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a year-wise non- recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017.
68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under:
"23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at 28 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee."
69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs."
The Hon'ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon'ble Jurisdictional High Court in the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon'ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the ld. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under :-
"53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security 29 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)."
Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jai Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under:-
"23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:--
"19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments.
30 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.
20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.
21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the 31 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made."
(Emphasis supplied)
24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, 32 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the notice and consequential assessment under Section 153A have to be undertaken.
25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act.
26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.
27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under:--
"19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate.
20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the 33 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore.
28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided."
29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra).
30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made."
In the case in hand, the transactions of unsecured loans as well as introduction of capital by the partners were duly recorded in the books of account and available with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners' capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners' capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolkata. It is pertinent to note that the said information was available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015.
34 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Therefore, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkata and statement of one Shri Anand Sharma, who is stated to be an entry operator and managed various concerns/companies including M/s.Royal Crystal Dealers, one of the loan creditors of the assessee. Except the said statement and report of the Investigation Wing Kolkata, the AO has neither referred to or was having in possession of any material to indicate that the unsecured loans shown in the books of accounts as well as partners' capital received by the assessee are nothing but assessee's own unaccounted and undisclosed income routed back in the garb of unsecured loans and partners' capital. There is no dispute that these transactions of unsecured loans and partners' capital contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while 35 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT framing the assessment under section 153A of the Act for the assessment years 2010-11 to 13-14. It is appropriate to refer relevant part of the assessment order in para 12 pages 48 to 50, para 19 page 83 and para 22 page 86 as under :-
" 12. Submissions made on behalf of the assessee firm have been duly considered. However, even the very elaborate and case laws loaded submissions of the assessee are totally off the mark. Against the self- speaking facts of the very nature of the activities of the so called partner's providing huge partner's capital in the most uninterested manner and providing huge unsecured loans without any collateral or other security, the emphasis of the assessee firm in its submissions has been on seeking protection under various judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances;
a. The department has very sound basis to treat, the receipts of unsecured loan and partner's capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not based on any presumption, assumption, guess or bare suspicion. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source as enumerated the Hon'ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC).
Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT (1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT (1977) 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the
36 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68.
b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evide4nces to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital.
c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wherein the details of year- wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during search action has been accepted to be bogus by all family members in their respective statements."
"19. In view of above facts of the case and in the light of above judicial decision, it is established that genuineness of the transaction has not been proved. Section 68 of the I.T. Act provides for charging to income tax on any sum credited in the books of the assessee maintained for any previous year if the assessee offers no explanation about the nature and source thereof or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. It places no duty upon the Assessing Officer to point to the source from which the money was received by the assessee. Where an assessee fails to prove satisfactorily the source and the nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender's identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner's capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circumstances, I am left with no option than to tax the entire unexplained credits by way of partner's capital and Unsecured loans received from the persons mentioned in para 5 above as 37 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT unexplained cash credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective assessment years."
" 22. After examination of the information and details placed on record and discussion with the assessee, the total income of the assessee is computed as under :-
Returned income as per ITR u/s 153A of Rs. 2,82,83,460/- the Act.
Additions| Unexplained cash credits u/s Rs. 67,20,14,999/-
|68 of the Act in the form of
|unsecured loan and partner's
|capital
Assessed income Rs. 70,02,98,459/-
R/o Rs. 70,02,98,459/-
The total income of the assessee in the status of Firm for Assessment Year 2010-11 relevant to Previous Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately."
The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon'ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :-
"3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or 38 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT reassess the total income of such six assessment years.(emphasis supplied by me). (The decisive words used in the provisions are to 'assessee or reassess the total income'). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO.
3.2.3 The concept of 'assess or reassess' and 'shall abate' as contemplated u/s 153A is under hot judicial debate. I find that legally, this issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., and SLP has been filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court has granted leave vide order dated 12.10.2015 as reported in 64 taxmann.com 34 (S.C.). Similarly, in the case of Kabul Chawla SLP has also been filed.
3.2.4 In view of SLPs admitted in case of Kabul Chawla, M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., (supra), assessee's contention cannot be accepted. Moreover, in any case, the additions are to be adjudicated on merits as per relevant ground of appeal, the issue raised in this ground for present remains for academic discussion only. Accordingly, issue raised in ground no. 12 is dismissed."
Therefore, neither in the assessment order nor in the order of the ld. CIT (A) there is any mention or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during 39 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was also dismissed by the Hon'ble Supreme Court, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted. We order accordingly."
The foundation of the assessment order is the information received from the Investigation Wing, Kolkata and statement of Shri Anand Sharma and Shri Ankit Bagri in respect of the different transactions of unsecured loan/special deposits for issuing special preferential equity shares. The ld.
CIT(A) though has not disputed the legal proposition on this issue, however, the ground raised by the assessee was dismissed merely on the reason that the SLP filed by the revenue in the case of CIT Vs. Kabul Chawla (Supra) and M/s All Cargo Global Logistics Ltd. (supra) have been admitted for decision by the Hon'ble Supreme Court. The relevant findings of ld. CIT(A) in the case of Kota Dall Mill has been reproduced by the Tribunal in the order cited (supra) and we find that an identical finding has 40 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT been given by the ld. CIT(A) in the case of assessee. Therefore, neither in the assessment order, the Assessing Officer has referred or relied upon any incriminating material found during the course of search and seizure action in the case of assessee nor the ld. CIT(A) has disputed this fact that the Assessing Officer was not having any incriminating material in his possession found and seized during the course of search and seizure action in the case of the assessee which has disclosed any unaccounted or undisclosed income of the assessee. The information received from the Investigation Wing, Kolkata as well as the statement of Shri Anand Sharma and Shri Ankit Bagri cannot be regarded as incriminating material unearthed during the course of search and seizure U/s 132 of the Act in the case of the assessee. Hence, in view of the decisions/binding precedents as relied upon by the ld AR and also considered by this Tribunal in the case of Kota Dall Mill (supra), we have no reason to take a different view on this issue. Accordingly, by following the earlier decision of this Tribunal in the case of group concern M/s Kota Dall Mill we hold that the addition made by the Assessing Officer while passing the assessment orders for the A.Y. 2010-11 to 2012-13 U/s 153A of the Act are not sustainable and liable to be deleted. Hence, this ground of the assessee's appeal is allowed.
41 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
10. Ground No. 2 of the appeal is regarding the addition made by the Assessing Officer without giving the opportunity of cross examination of the witnesses and consequently there is a violation of principles of natural justice.
11. The ld AR of the assessee has submitted that the sole basis of the addition is the statement of Shri Anand Sharma in some of the assessment years and the statement of Shri Ankit Bagri in some other assessment years whereas the assessee was not given the opportunity of cross examination despite repeated requests and demands. The Assessing Officer has violated the principles of natural justice by not providing the copies of material used against the assessee at the assessment stage and further not providing the opportunity of cross examination of the witness during the remand proceedings at appellate stage. Though the ld. CIT(A) called for a remand report and asked the Assessing Officer to provide opportunity of cross examination to the assessee, however, after the remand proceedings the Assessing Officer did not afford an opportunity of cross examination rather the Assessing Officer has asked the assessee to produce the witness instead of allowing the assessee to cross examine the witness. In support of his contention, the ld. A/R has relied upon the decision of Hon'ble Supreme Court in case of Andaman Timber Industries vs. Commissioner of Central Excise (2016) 15 SCC 785 (SC). He has also 42 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Ashwani Gupta, 322 ITR 396 (Delhi) and submitted that the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor was permitted to cross examine a person on whose statement the Assessing Officer relied upon, it would amount to deficiency and denial of natural justice. The ld. A/R has then referred to the decision of Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay).
Thus the ld. A/R has submitted that once the assessee has already discharged its primary onus to prove the cash credit by furnishing relevant documents, substantiated identity, creditworthiness and genuineness of the transaction, then the burden is shifted on the Assessing Officer to disprove the documents produced by the assessee in support of the claim.
The Assessing Officer has relied upon the statement of Shri Anand Sharma and no material was brought on record to controvert the documentary evidence filed by the assessee. Thus the ld. A.R has stated that the addition made by the Assessing Officer and sustained by the ld. CIT (A) be deleted.
12. On the other hand, the ld CIT-DR has submitted that the ld. CIT(A) has duly considered the objection of the assessee for allowing the cross examination of Shri Anand Sharma and Shri Ankit Bagri, however, since 43 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the witnesses belonged to Kolkata and statements were also recorded at Kolkata by the Investigation Wing, therefore, it was not possible for the Assessing Officer to make them available at Kota for cross examination of the assessee. He has relied upon the orders of the authorities below.
13. In rebuttal, the ld AR of the assessee has submitted that the assessee agreed to bear the cost of cross examination of the witnesses, however after accepting the objections initially by the ld. CIT(A), the assessee was finally not granted the opportunity of cross examination, therefore, there is a violation of principles of natural justice.
14. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee demanded the cross examination of the witnesses, therefore, statements have been relied upon by the Assessing Officer while framing the assessments under consideration. The ld. CIT(A) though while calling the remand report of the Assessing Officer directed to allow the cross examination to the assessee, however, when the Assessing Officer has expressed his inability to produce the witnesses for cross examination, the ld. CIT(A) has finally rejected the objection raised by the Assessing Officer. An identical issue has been considered by us in the case of Kota Dall Mill (supra) vide order dated 31/12/2018 in para 11.1 as under:
44 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee for cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the back of the assessee, therefore, the said statement of Shri Anand Sharma cannot be the sole basis of assessment without giving an opportunity of cross examination to the assessee. The Hon'ble 45 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Supreme Court in the case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held in para 6 to 9 as under :-
6. "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them".
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-
examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject- matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this court in CCE v. Andaman Timber Industries Ltd., order dated 17.3.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
46 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show-cause notice.
9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. No costs."
Once the assessee has disputed the correctness of the statement and wanted to cross examine the witness which was not given by the AO as well as ld. CIT (A), then the orders passed based on such statement are not sustainable in law. The Hon'ble Delhi High Court in case of CIT vs. Ashwani Gupta, 322 ITR 396 (Delhi) while dealing with the issue of not providing the opportunity to cross examine the witnesses has held in para 5 to 7 as under :-
"5. Secondly, in fact, a rectification application being MA 264/Delhi/2008 under section 254(2) of the Income-tax Act, 1961 had been filed by the revenue before the said Tribunal. In that also, in paragraph (g) of the Miscellaneous Application, the revenue had submitted as under:--
"(g )Because, although findings of the Tribunal are factually correct but the decision of the Tribunal is not acceptable because violation of the canons of natural justice in itself is not fatal enough so as to jeopardize the entire proceedings. In the interest of justice, the Tribunal could have set aside the assessment order with the limited purpose of offering assessee an opportunity to cross- examine Shri Manoj Aggarwal before completing the proceedings." [Emphasis supplied]
6. A reading of the said paragraph (g) makes it clear that the revenue had accepted the findings of the Tribunal on facts as also the position that there had been a violation of principles of natural justice. However, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11- 2008.
7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on 47 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration."
Thus the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on whose statement the AO relied upon, granted, then, such deficiencies would amount to denial of opportunity and consequently would be fatal to the proceedings. The Hon'ble Bombay High Court in the case of H.R. Mehta vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination in para 11 to 17 as under :-
"11. We have therefore proceeded to hear and decide the matter unassisted by the revenue. In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather & Platt (India) Ltd.(supra) and submitted that merely because a person is not found at an address after several years it cannot be held that he is non existent and that the assessee had discharged his primary onus by identifying the source of the amount paid. The Court observed that once the primary onus is discharged, the onus shifted to the revenue to verify genuineness of the transaction. In the present case no such effort was made by the revenue. We find that in S. Hastimal (supra) the Madras High Court observed that after a lapse of several years the assessee should not be placed upon the rack and called upon to explain not only merely, the origin and source of his capital contribution but the origin of origin and the source of source as well. In yet another case of Bahri Brothers (P) Ltd. (supra) the Division Bench of Patna High Court observed that where the assessee upon whom the initial burden lies, produces bank certificate to establish that the transaction was carried out through account payee cheques thus disclosing the identity of the creditors as also the source of income, the burden shifts on to the department and the department cannot add the cash credits to his income from undisclosed source.
12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the instant case by virtue of the fact that the transaction was completed by cheque payments, the appellant has contended that it had satisfied all the three tests.
48 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
13. In Kishanchand Chellaram (supra) wherein the Supreme Court observed that the revenue authorities had not recorded the statement of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue.
14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer neither since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained.
15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant- assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case.
16. In the instant case although the appellant assessee has called upon us to draw an inference that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various issues raised and the decisions cited by Mr.Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conclude that the loan was a bogus transaction.
17. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of 49 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the reassessment and therefore renders the orders passed by the CIT (A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statement and disclose material, these were denied to him. In this view of the matter we are inclined to allow the appeal on this very issue."
Thus the denial of opportunity to cross examine was considered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :-
"2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impugned assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the 50 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn't provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While doing so, the AO stated that "in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the assessee." Further, regarding cross examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated.
2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand 51 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer.
2.10 In this regard, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812-818) has held that "The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it." It was held in that case that "In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing."
The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT 52 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard."
The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him."
53 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT 2.11 In light of above proposition in law and especially taking into consideration the decision of the Hon'ble Supreme Court in case of C. Vasantlal & Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed."
Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted.
54 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee."
The facts and circumstances in both the cases are identical and therefore, following the earlier order of this Tribunal in case of Kota Dall Mill, we hold that the addition made by the Assessing Officer on the basis of the information/report of the DDIT (Investigation), Kolkata as well as the statements of Shri Anand Sharma and Shri Ankit Bagri without giving an opportunity of cross examination is not sustainable as the addition is solely based on the statement and information which is nothing but summary of statements recorded by the DDIT(Inv), Kolkata. Hence, the addition made by the Assessing Officer is deleted. Ground No. 2 of the appeal is decided in favour of the assessee.
15. Grounds No. 3 to 5 of the appeal are regarding the merits of the addition made by the Assessing Officer, part of which was sustained by the ld. CIT(A). The assessee has shown unsecured loans from two parties namely M/s Jalsagar Commerce Pvt. Ltd. of Rs. 25,71,25,000/- and M/s Teac Consultants Pvt. Ltd. of Rs, 2,02,50,000/- total amounting to Rs.
27,73,75,000/-. The Assessing Officer made the addition of the entire loan amount of Rs. 27,73,75,000/- by treating the same as accommodation entries received by the assessee and consequently unexplained cash credits U/s 68 of the Act. The assessee challenged the action of the 55 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Assessing Officer before the ld. CIT(A). The ld. CIT(A) confirmed the addition in respect of M/s Jalsagar Commerce Pvt. Ltd. but deleted the addition in respect of M/s Teac Consultants Pvt. Ltd. on the ground that the Assessing Officer was not having any material or even statement of the alleged enter operator in respect of M/s Teac Consultants Pvt. Ltd..
16. Before us, the ld AR of the assessee has submitted that the Assessing Officer has relied upon the statement of Shri Anand Sharma for making the addition of these loans, however, Shri Anand Sharma has not stated that he either controlled M/s Jalsagar Commerce Pvt. Ltd. or has given any accommodation entry to the assessee. The statement of Shri Anand Sharma nowhere disclosed any accommodation entry in respect of the loan taken by the assessee from M/s Jalsagar Commerce Pvt. Ltd.. As regards M/s Teac Consultants Pvt. Ltd., it is also not the case of the assessee that the said company was owned or controlled by Shri Anand Sharma, therefore, in absence of any material in the possession of the Assessing Officer, the addition made by the Assessing Officer is not sustainable. He has referred to the show cause notice issued by the Assessing Officer wherein the list of entry operators is given but the name of M/s Jalsagar Commerce Pvt. Ltd. is not mentioned in the said list, therefore, when the Assessing Officer himself has not given the name of M/s Jalsagar Commerce Pvt. Ltd. as a company/entity owned by Shri 56 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Anand Sharma then the addition sustained by the ld. CIT(A) is not justified. The ld AR has then referred to the four reports of the Investigation Wing, Kolkata dated 30/3/2016 and 24/3/2017 and so on but none of the report of the Investigation Wing shows that the transaction of loan from M/s Jalsagar Commerce Pvt. Ltd.. is part of any accommodation entry. All the details given in the reports have no where alleged the name of M/s Jalsagar Commerce Pvt. Ltd. Even otherwise when M/s Jalsagar Commerce Pvt. Ltd. is neither owned or controlled by Shri Anand Sharma then the transaction of loan taken from M/s Jalsagar Commerce Pvt. Ltd..
treated as bogus accommodation entry is devoid of any substance. The ld AR has pointed out that the assessee has already repaid the amount on 01/09/2015. The interest on the said loan was also paid after TDS and the Assessing Officer has allowed the claim of interest expenditure on these loans without any question. He has also referred the various documents produced by the assessee before the Assessing Officer in support of the claim which includes the availability of the funds in the shape of share capital, reserve and surplus with the loan creditor. The assessment orders framed U/s 143(3) of the Act for the A.Y. 2005-06 and 2011-12 to 2014-15 wherein the Assessing Officer has accepted the transactions without any question. The ld AR has further pointed out that the loan creditors have issued share capital during all these years and therefore, there was 57 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT sufficient funds available with the loan creditor. The Assessing Officer has not pointed out any discrepancy in the books of account or in the bank statement to indicate that the assessee's own unaccounted money has routed back in the garb of unsecured loans. Once the assessee has already repaid the entire loan and supported the claim with documentary evidence then in absence of any contrary material, the addition made by the Assessing Officer merely on the basis of statement and report of Investigation Wing, Kolkata is not sustainable. He has pointed out that the Assessing Officer had already passed the assessment order U/s 143(3) of the Act for the A.Y. 2010-11 to 2012-13 and accepted these transactions as genuine, therefore, in the proceedings U/s 153A, the same cannot be treated as unexplained cash credit in absence of any material or evidence to justify the review of his own decision. The assessee has duly discharged its burden cast U/s 68 of the Act by proving the identity, creditworthiness and genuineness of the transaction. All the loan creditors complied with the notices/summons issued by the Assessing Officer/department and also replied to the queries raised by the department. The existence of these companies was established when they have responded to the notices issued by the department. Even otherwise once all the creditors were subjected to scrutiny assessment then the identity and creditworthiness of them cannot be disputed. The ld AR has referred to the ROC record kept in 58 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT master data and submitted that the company status is shown as active and therefore it cannot be treated as a shell company. The assessee produced all the documents pertaining to the creditors which includes ITR, copies of balance sheet and annexure of loan and advances, copy of bank statement showing the entry of payment made to the assessee, confirmation of the loan given to the assessee from the books of account of the parties, confirmation of the loan account in the books of account of the creditor, affidavit of the Director of the company, balance sheet as on 31/3/2010 to 31/3/2016, assessment orders passed U/s 143(3) etc.. All the loans were received trough bank account and verifiable from the bank statement of the assessee as well as loan creditors. The onus U/s 68 of the Act is to prove the identity, capacity and genuineness of the transaction which has been discharged by the assessee by producing the documentary evidence as well as the response of the loan creditors to the notices issued by the Assessing Officer. The transactions of loan were accepted by the Assessing Officer while the assessment framed U/s 143(3) of the Act in the hand of the loan creditors. In support of his contention, he has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Aravali Trading Co. Vs. ITO (2008) 8 DTR 199 (Raj) and submitted that the Hon'ble High Court has held that once the existence of the creditor is proved and such persons own the credits, the assessee's onus stands discharged and the 59 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT assessee is not required to prove the source from which the creditor could have acquired the money deposited with him. Even otherwise when the loan creditors were subjected to scrutiny assessment U/s 143(3) of the Act wherein the transaction of loan were accepted by the Assessing Officer then the creditworthiness of the loan creditors were also accepted.
The assessee produced the financial statements of the loan creditors to prove the availability of funds being share capital and reserve and surplus which are much more than the loan given to the assessee. The Assessing Officer has not found any discrepancy in the accounts of loan creditor and particularly the bank statement of loan creditor. Therefore, treating the transaction as bogus and in the nature of entry provided against the cash is not sustainable in law. The assessee has paid interest after deduction of TDS and the interest expenditure is allowed by the Assessing Officer as genuine claim in the assessments framed U/s 143(3) as well as in the assessments framed U/s 153A of the Act. Therefore, the finding of the Assessing Officer treating the loan as accommodation entry is without any basis, material evidence but the same is based purely on surmises, conjectures and irrelevant material. No positive material was brought on record by the A.O to show that the loan creditor company is a shell company whereas the assessee produced all the relevant documents to establish the identity, creditworthiness and genuineness of the transaction 60 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT as well as loan creditors. He has also submitted that an identical issue has also been considered by this Tribunal in the case of Kota Dall Mill (supra).
17. On the other hand, the ld. CIT D/R has submitted that the Assessing Officer has received the information from Investigation Directorate, Kolkata regarding involvement of the assessee group in obtaining entries of bogus unsecured loans, share capital, special deposits etc. detected in the investigation carried out by the DIT Kolkata. Such information was received even prior to initiation of proceedings under section 153A and also during the pendency of proceedings under section 153A. Once the Assessing Officer has confronted the assessee with the report of the Investigation Wing, Kolkata as well as the statement of Shri Anand Sharma and other persons who have admitted to have provided accommodation entries of bogus unsecured loans, share capital, special deposits etc. to the various parties through their companies and concerns and assessee has shown the unsecured loans as well as deposits from those concerns, then onus was shifted on the assessee to establish the genuineness of the transactions of unsecured loans. During the course of assessment proceedings, the Assessing Officer again conducted enquiries through Investigation Wing Kolkata regarding the genuineness of the transaction and the assessee was duly confronted with the results of all these enquiries and information shared by the Investigation Wing, Kolkata.
61 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT In these circumstances and in the interest of natural justice, the assessee was required to produce the alleged creditors for examination so that genuineness of cash credit could be verified by the Assessing Officer.
Despite providing several opportunities, the assessee miserably failed to produce any creditor. The assessee never expressed its inability to produce the alleged creditor nor the assessee requested the Assessing Officer to issue summon to the alleged creditor for verification of the genuineness of the cash credit in the form of unsecured loan. It is evident that the assessee never intended to produce the alleged creditor. The ld. CIT-D/R has further submitted that the present case is not one where assessee obtained small loans or insignificant share capital so that the assessee could take the plea that it is not in a position to ensure presence of alleged creditors. The size of the transactions which are tainted unsecured loans constitute the major portion of entire capital of the assessee and other group companies. Even the assessee did not produce the partners who introduced the capital for examination. Thus the assessee has failed to establish the identity, creditworthiness of the creditor and genuineness of the transaction. The addition is not made merely on the basis of report of the Investigation Wing Kolkata but the Assessing Officer conducted enquiry through Investigation Wing and statements of entry operators were also recorded, therefore, overwhelming evidences in the possession 62 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT of the Assessing Officer indicate bogus nature of transaction of loan and unsecured loan which has been extensively discussed in the assessment order. During the course of assessment proceedings, the assessee was provided a number of opportunities for producing the alleged creditors for verification and failure of the assessee in producing the creditors in the light of the evidences was enough to invoke the provisions of section 68 of the IT Act. The ld. D/R has further submitted that the repayment of loan for credit entries also does not in itself prove the transactions to be genuine. Shell companies are used to provide accommodation entries and even reversal of an entry does not ipso facto prove the genuineness of the initial credit entry. In support of his contention, he has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd., 226 Taxman 190 (Mag.) and submitted that the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (SC). Thus it is evident that the assessee has failed to discharge its onus to rebut the evidence unearthed by the Investigation Wing, Kolkata which shows that the transactions of unsecured loans are nothing but bogus accommodation entries wherein the assessee's own undisclosed income has been routed in the garb of unsecured loan. As regards cross examination of the witnesses, since the witnesses belong to Kolkata and statements were also recorded at Kolkata by the Investigation 63 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Wing, therefore, it was not possible for the Assessing Officer to issue summon to the witnesses for cross examination at the office of the Assessing Officer at Kota. The ld. CIT D/R has relied upon the order of the Assessing Officer.
18. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made the additions in respect of the unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. as well as M/s Teac Consultants Pvt. Ltd. by treating the same as accommodation entries. The Assessing Officer for the A.Y. 2010-11 has relied upon the statement of Shri Anand Shama which was recorded by the Kolkata Investigation Wing and then forwarded to the Assessing Officer.
On appeal, the ld. CIT(A) deleted the addition in respect of M/s Teac Consultants Pvt. Ltd. by noting the fact that the Assessing Officer was not even having any statement of alleged entry operator controlling M/s Teac Consultants Pvt. Ltd.. The ld. CIT(A) confirmed the addition of unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. because the Assessing Officer was having the statement of Shri Anand Sharma and accepted that M/s Jalsagar Commerce Pvt. Ltd. is beneficiary of accommodation entries. At the outset we note that that the identical issue of unsecured loan taken from the M/s Jalsagar Commerce Pvt. Ltd. was considered by us in case of Kota Dall Mill (supra) in para 11 as under:
64 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "11. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the assessee has challenged the addition sustained by ld. CIT (A) in respect of unsecured loan from M/s. Jalsagar Commerce Pvt. Ltd. The other additions made by the AO on account of unsecured loans as well as partners' capital for the assessment year 2010-11 were deleted by the ld. CIT (A) on the ground that the AO was not having in his possession even the statement of the concerned persons in support of his finding that the alleged loan and partners' capital is nothing but bogus accommodation entries. Therefore, the revenue has challenged that part of the order in the cross appeal.
The ld. A/R of the assessee has pointed out that for the assessment year 2010-11 there was no loan from the company controlled by Shri Anand Sharma, M/s. Royal Crystal Dealers Pvt. Ltd. but the assessee took the loan from M/s. Jalsagar Commerce Pvt. Ltd. which is not the company owned or controlled by Shri Anand Sharma. The ld. CIT (A) has sustained the addition in respect of loan from M/s. Jalsagar Commerce Pvt. Ltd. in para 5.1 to 5.12 as under :-
"5.1 In this respect, I find that Shri Anand Sharma whose statement is reproduced at Page 56 of the Assessment Order has clearly accepted that M/s Jalsagar Commerce Pvt. Ltd. is beneficiary company like Kota Dal Mill and both of these were provided bogus loans/advances by Royal Crystal Dealer Pvt. Ltd which is a paper company controlled by him. He further stated that the beneficiary party such i.e. M/s Jalsagar Commerce Pvt. Ltd. gave him cash in lieu of which cheques was given by him for some commission income. He also admitted that some paper companies have sold to beneficiary parties. Though, in the initial report dated 28.11.2017, M/s Jalsagar Commerce Pvt. Ltd. was treated a party in Rajasthan, in later report dated 06.12.2017 the entry operator Shri Anand Sharma was linked with M/s Jalsagar Commerce Pvt. Ltd. as per the data base prepared by Directorate of InvestigationKolkata The relevant part of 65 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the said statement as reproduced on page no.57 of the assessment order is as under: -
5.2 However, it is the submission of the Appellant that no notice under Section 131 or 133(6) of the Act was issued to this company, either by the Ld. AO or by the concerned AO or by the DDIT (Inv.) Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Order. However, the relevant documents including the Ledger a/c 66 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT showing the transactions with appellant company, Source sheet of funds of transactions made with the Appellant, Copy of bank statement showing the transactions, etc. stand submitted for confirmation of the transaction of loan with the Appellant.
5.3 In my considered view, as the name of M/s Jalsagar Commerce Pvt. Ltd. is clearly mentioned as beneficiary company in the statement of Shri Anand Sharma, and Shri Anand Sharma is mentioned that some of such paper company are sold to beneficiary party, in view of fact that name of M/s Jalsagar Commerce Pvt.
Ltd. Is mentioned in the reports as discussed in para 4.4.7 above, a genuine doubt is raised on the identity and genuineness of company. Further, the adverse facts pointed out in the reports as discussed in para 4.4.7 above for established background of all these share holders / depositors being the puppet in the hand of one or other accommodation entry providers, layering the transaction by cheque deposit on the same day or preceding day of share application / deposits, the assertions of the AO for no-creditworthiness or in-adequate creditworthiness of the so-called shareholders / depositors holds fields. During the appellate proceeding before me, though paper books for relevant AY and common Paper Books have been submitted, the same does not adduce any evidence to rebut the adverse factual finding made by the AO in the assessment order as mentioned by me in Para 4.1 above and categorically mentioned in the reports as discussed in para 4.4.7 above. Under these adverse background of appellant employing modus- operendi of resorting accommodation entry provider to build-up share capital / unsecured loans by foul means, what the AO is vehemently making the case for is the law on the issue-section 68 of Income-tax Act has to be applied by evolving perceptions for the law on the issue and not on the basis of routine perceptions on the law on the issue that is losing their relevance.
5.4 With all due respect to authorities cited by the appellant for canvassing his stand point, I am not able to persuade my conscience to agree with appellants arguments. In my considered opinion, under the adverse background of appellant employing modus-operendi of resorting accommodation entry provider to build-
67 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT up unsecured loans as established in the assessment order as briefly highlighted in Para 4.1 above, and armed with several authorities on the issue cited by the AO, I fully agree with the view taken by AO. However, to fortify the finding of the AO and to highlight the guiding principle on adjudicating non-genuine unsecured loans raised through accommodation entry proviers, I place further reliance on few more case laws with underlining the similarity of adverse facts prevailing in the present case as follows:-
5.5 In case of Suman Gupta V/s. Income Tax Officer ITAT, Agra Bench (2012) 138 ITD 0153 held as under:-
The AO discussed each and every creditor in the assessment order and the crux of the findings of the AO had been that there were very small bank balances in the bank accounts of the creditors and they were having meager income and as such, they were not men of means to advance any loan to the assessee. It is well settled law that burden is upon the assessee to prove ingredients of section 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions. The assessee has, however, failed to prove the creditworthiness of the creditors who were having only meager income. No details of their savings have been filed. The assessee has never shown his willingness to produce the remaining creditors for examination before the AO. Therefore, the genuineness of the transaction could not have been examined by the AO. The smallness of the bank balance in the bank accounts of the creditors prior to issue of cheques would clearly reveal that they were not having any source and it was the money of the assessee which was routed through the bank accounts of the creditors for the purpose of giving credits to the assessee. These were, therefore, accommodation entries only and as such, could not be considered as genuine transactions. Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. On consideration of the facts of the case in the light of above discussion and decision, there is no justification to interfere with the order of the ld. CIT(A). The assessee has failed to prove the creditworthiness of all the creditors and no
68 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter. All the creditors have been rightly found to be men of meager means and no source of income have been filed to prove that they were having sufficient funds or savings in order to give loans to the assessee. On verification of the bank account of the depositors, it was specifically found that there were no sufficient funds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses or day-to-day requirements. Therefore, it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee. CIT(A) was justified in confirming the addition u/s. 68 of the IT Act. In the present case, the assessee has not adduced any sufficient evidence before the authorities below to prove the creditworthiness of the creditors and genuineness of the transactions in the matter. Therefore, the assessee has not satisfied the essential ingredients of section 68 of the IT Act. Conclusion:
Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction.
The above decision is confirmed by Hon'ble Allahabad High Court vide their judgment in ITA No.680/12 vide judgment dated 07.08.2012 and SLP of assessee was dismissed before the Hon'ble Apex Court as reported in 2013-LL-0122-69 5.6 Hon'ble High Court of Delhi in case of Commissioner of Income Tax V/s.
Navodaya Castles Pvt. Ltd. reported at (2014) 367 ITR 0306 involving exactly similar facts observed in Para 2, 3 then Para 2 as under:-
2. The appeal arises out of the impugned order dated 31st October, 2011, passed by the Income Tax Appellate Tribunal, upholding the order passed by the Commissioner of Income Tax (Appeals) deleting addition of Rs.54,00,000/- made under Section 68 of the Income Tax Act, 1961 (Act, for short), by the Assessing Officer on account of share application.
69 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
3. The assessee, a company, had filed their return of income for the assessment year 2002-03 declaring loss of Rs.1,58,035/- on 20th October, 2002, which was processed under Section 143(1) of the Act. Subsequently, on the basis of a report submitted by the Investigation Wing that the assessee was a recipient of accommodation entries in form of share application money/share capital/share premium, notice under Section 147 read with Section 148 of the Act was issued and served on 25th March, 2009......................................................... ...........................................................................................................
7. Summons under Section 131 of the Act were sent to the alleged shareholders and they were asked to furnish details on 10th December, 2009. Directors/Principal officers were required to personally come and depose. The summonses, as per the assessment order, were received back unserved. At the same time, the assessee filed details and confirmations of the alleged share capital. Earlier on 8th December, 2009, a detailed show cause notice was issued, fixing the hearing on 14th December, 2009. The assessee was asked to produce the shareholders along with their books of accounts to substantiate its claim of genuineness of the cash credits. In fact on 10th December, 2009, authorized representative had appeared and he was apprised that the summons issued to the shareholders under Section 131 had been received back unserved in five cases and he was requested to provide the present postal address of the parties. Inthemeanwhile, the Assessing Officer managed to get hold of the bank statements of the shareholders, who had allegedly made deposits by way of cheques and pay orders. The assessment order specifically records that huge cash deposits in lacs were being regularly deposited in the said accounts and then pay orders/cheques were issued to the respondent assessee.
8. On 14th December, 2009, authorized representative appeared and stated that the assessee was unable to produce directors or principal officers of the six shareholder companies pleading that they were not shareholders now and seven years had passed since the transactions took place. The assessment order records and mentions about the transactions recorded in the bank accounts of the shareholder/entry operator companies to show and establish that there was 70 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT immediate deposit of cash and then issue of cheques. It was further mentioned that these companies were under control of one Mahesh Garg and his group, who were operating various accounts. The Assessing Officer made addition of Rs.54,00,000/- under Section 68 of the Act and Rs.1,08,000/- as commission paid for procuring the said shares being 2% of Rs.54,00,000/-. .................................................................................................................... ...........................................................................................................
11. We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax Vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax Vs. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-II Vs. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., [1994] 205 ITR 98 (FB)(Delhi), CIT Vs. Divine Leasing and Finance Limited [2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC).
12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the share holder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized.
13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of 71 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These three requirements have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct.
14. Certificate of incorporation, PAN number etc. are relevant for purchase of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. It is in this context, the Supreme Court in CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) had observed:-
"Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."
72 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
15. Summarizing the legal position in Nova Promoters and Finlease (P) Ltd.(supra), and highlighting the legal effect of section 68 of the Act, the Division Bench has held as under:-
"32. The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee- company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. In A. Govindarajulu Mudaliar v CIT, (1958) 34 ITR 807, this argument advanced by the assessee was rejected by the Supreme Court. Venkatarama Iyer, J., speaking for the court observed as under (@ page 810):-
"Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income 73 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income- tax Officer is entitled to draw the inference that the receipt are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs."(emphasis supplied) Section 68 recognizes the aforesaid legal position. The view taken by the Tribunal on the duty cast on the Assessing Officer by section 68 is contrary to the law laid down by the Supreme Court in the judgment cited above. Even if one were to hold, albeit erroneously and without being aware of the legal position adumbrated above, that the Assessing Officer is bound to show that the source of the unaccounted monies was the coffers of the assessee, we are inclined to think that in the facts of the present case such proof has been brought out by the Assessing Officer. The statements of Mukesh Gupta and RajanJassal, the entry providers, explaining their modus operandi to help assessee's having unaccounted monies convert the same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be said to have discharged the duty. The statements refer to the practice of taking cash and issuing cheques in the guise of subscription to share capital, for a consideration in the form of commission. As already pointed out, names of several companies which figured in the statements given by the above persons to the investigation wing also figured as share- applicants subscribing to the shares of the assessee-company. These constitute materials upon which one could reasonably come to the conclusion that the monies emanated from the coffers of the assessee-company. The Tribunal, apart from adopting an erroneous legal approach, also failed to keep in view the material that was relied upon by the Assessing Officer. The CIT (Appeals) also fell into the same error. If such material had been kept in view, the Tribunal could not have failed to draw the appropriate inference.
74 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
16. In the said case, the Division Bench had also examined the decision of the Supreme Court in Lovely Exports P. Ltd. (supra) and other cases in which the assessee had succeeded. It was noticed that in the case of Lovely Exports P. Ltd. affidavits/confirmations of shareholders were filed and income tax record numbers of the shareholders were made available, but the Assessing Officer, who had sufficient time, failed to carry out inquiry and examination. reference was made to the observations in Divine Leasing (supra) to the effect that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue, but when there is preponderance of evidence to show absence of culpability, the assessee should not be harassed by the Revenue. A delicate balance must be maintained between the two interests. In Divine Leasing (supra), the following proposition was elucidated:-
"In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessed has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the credit worthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable Explanation by the assessed. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessed nor should the AO take such repudiation at face value and construe it, without more, against the assessed. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation."
75 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
17. Nova Promoters and Finlease (P) Ltd. (supra) after referring to the dismissal of SLP against Divine Leasing case (supra) observed as under:-
"...............So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre-meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence ormaterial in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall 76 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT under this category and it would be a travesty of truth and justice to express a view to the contrary."
18. Lovely Exports Pvt. Ltd.(supra) was also considered and distinguished in N.R. Portfolio Pvt. Ltd. (supra) and it was held that the entire evidence available on record has to be considered, after relying upon CIT Vs. Nipun Builders and Developers, [2013] 350 ITR 407 (Delhi), wherein it has been held that a reasonable approach has to be adopted and whether initial onus stands discharged would depend upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain un-served and uncomplied. As a general proposition, it would be improper to universally hold that the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders' attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflect on the genuineness of the transaction and creditworthiness of the creditor. It would be also incorrect to universally state that an Inspector must be sent to verify the shareholders/subscribers at the available addresses, though this might be required in some cases. Similarly, it would be incorrect to state that the Assessing Officer should ascertain and get addresses from the Registrar of Companies' website or search for the addresses of shareholders themselves. Creditworthiness is not proved by showing issue and receipt of a cheque or by furnishing a copy of statement of bank account, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the 77 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness of the shareholders.
19. In N.R. Portfolio Pvt. Ltd. (supra), it has been held as under:-
"18. In the remand report, the Assessing Officer referred to the provisions of Section 68 of the Act and their applicability. The word "identity" as defined, it was observed meant the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing PAN number or assessment particulars did not establish the identity of the person. The actual and true identity of the person or a company was the business undertaken by them. This according to us is the correct and true legal position, as identity, creditworthiness and genuineness have to be established. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated as sufficient to discharge the onus, even when payment is through bank account.
19. On the question of credit worthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or 78 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT interest to the said entry operators/subscribers. The profit motive normal in case of investment was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan, would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions.
30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details incase of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them."
20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced the order of the Commissioner of Income Tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its coordinate bench in the case of MAF Academy P. Ltd., a decision which has been overturned by the Delhi High Court vide its judgment in C.I.T vs. MAF Academy P.Ltd [ (2014) 206 DLT 277). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine 79 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions.
21. In view of the aforesaid discussion, we feel that the matter requires an order of remit to the tribunal for fresh adjudication keeping in view the aforesaid case law. The question of law is, therefore, answered in favour of the Revenue and against the respondent-assessee, but with an order of remit to the tribunal to decide the whole issue afresh.
As reported at 2015-TIOL-314-SC-IT, in the above case, the Hon'ble Supreme Court observed to effect that 'merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity & genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account' 5.7 It may be mentioned that as reported at 2016-TIOL-207-SC-IT, the Hon'ble Supreme Court dismissed SLP by Rick Lunsford Trade & Investment Ltd in case of Rick Lunsford Trade & Investment Ltd Vs CIT 'upholding that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders.' 5.8 Hon'ble Delhi High Court in case of Commissioner of Income Tax-II V/s MAF Academy Pvt. Ltd. involving exactly similar facts in ITA 341/2012 dated 28th November, 2013 observed in Para 33 to 36 as under:
33. The Assessee company is a private limited company and had not come out with any public issue nor made any advertisement for issuance of share capital.
However, in one year there is infusion of share capital including premium of Rs.4,35,00,000/-, out of which only Rs.92,00,000/- was infused from the Directors/family members of the Directors. The remaining share capital had been infused from parties which were completely unrelated either to the Assessee or to any of its Directors. In a private limited company, normally the investment of 80 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT shares is from parties or persons who are friends or relatives of Promoters/Directors.
34. It is noticed that the shares had face value of Rs.100 /- and were allotted at a premium of Rs.100 /- to Rs.200/- and were then subsequently purchased by the Promoters/Directors, who had originally transferred these shares at Rs.35 /- per share.
35. It is really surprising that a person who had purchased shares at a premium of Rs.100 /- to Rs.200/- per share i.e. at a price of Rs.200 /- to Rs.300/- per share, sold the shares at Rs.35 /- per share i.e at a substantial loss. Another surprising factor is that the entire investment happened during a short span of time and re- transfer of the shares to the four Promoters/Directors of the company at Rs.35 /- per share by different parties also happened during a short span of few days. The modus operandi and the manner in which cash is deposited in a bank and then utilized by way of an account payee cheque for purchase of shares for a premium of Rs.100 /- to Rs.200/- per share and then the sale of shares at a loss clearly establishes that the said transaction was a camouflage transaction. The Assessee has clearly attempted to camouflage the accommodation entries and tried to give it a colour of purchase of share capital and then sale of the same at a loss. Thus the Assessee's capital increased or was enhanced by a substantial figure through these dubious transactions. This should be and has to be checked.
36. Out of Rs.4.35 crores received as share capital including premium, only Rs.92 lacs has been received from the directors or their family members and the remaining amount has been received from parties totally unrelated to the Assessee. Notices to some of the investors could not be served and even the Inspector who was deputed to serve the summons stated that none of the addresses could be found. The authorised representative of the Assessee refused to produce the parties who had invested in the share capital on the ground that they were not in a position to produce them. The fact that the Assessee failed to produce the persons who had invested towards share capital shows that these were people who were completely unrelated to the Assessee and as such, all the entries were merely accommodation entries. Otherwise, in a private limited company, it would not have been difficult on the part of the Assessee to produce 81 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT persons who were investing substantial amount of money in the company towards share capital.
37. The Assessing Officer in his order has as a sample referred to the entries in the account of some of the share holders noticing that there are cash deposits of the exact amount for which cheque is subsequently issued to the Assessee. Perusal of the bank statements clearly establishes that these parties were depositing cash and immediately either on the same day or in the near future withdrawing the same through a cheque which was issued in favour of the Assessee.
Then Hon'ble Delhi High Court held in Para 53 to 54 as under:-
53. In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction. Though, in our considered opinion, none of the above judgments, referred to by the Assessee respondent, are applicable in the facts of the present case and in view of the findings recorded by us hereinabove.
54. In view of the above, we are of the view that the Assessee has not discharged the onus satisfactorily and the additions made by the Assessing Officer were justified and sustainable.
5.9 Hon'ble Income Tax Appellate Tribunal Delhi Bench: 'B' in case of M/s.
Amtrac Automotive India Pvt. Ltd. Versus ACIT, Circle 1(1), involving exactly similar facts in their appellate order ITA No.2920/Del/09 for A.Y. 2005-06 dated 31.12.2009 observed in Para 3 & then Para 2 as under:-
3. The assessee company is engaged in share trading in the year under consideration. In the course of scrutiny, the assessing officer noted that the appellant has introduced fresh share capital to the tune of Rs. 15,00,000/- at a share premium of Rs. 1,35,00,000/-.........
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82 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT 2.1 The AO asked the appellant to furnish details of such share holders mentioning their identity, genuineness of transaction and credit-worthiness.
Appellant produced confirmation of deposit from directors of the respective company, copies of income tax return filed and copies of bank statement reflecting the above transactions. In order to verify the entire transactions in the Asstt. year 2005-06 light of genuineness and creditworthiness, he issued summons u/s 131 of the Act to all the above 15 persons. They were asked to produce the copies of return for AY. 2005-06 and their ledger accounts from which the source of above share application money could have been verified. All the above summons were returned unserved with the comments from the postal authorities as "no such person in the above address". The AO accordingly brought this fact to the notice of the counsel of the assessee vide order sheet entry dated 18.12.2007 and he was given an opportunity to produce the functional directors of the above companies for verification. As mentioned in the assessment order, after certain adjournments, a letter was finally filed from the appellant mentioning that it is no in touch of the above share holders and their present whereabouts are not known to it. The appellant, however, relying upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. In which the powers of the Assessing Officer was not precluded from making enquiries in share application money, submitted that no addition can be made. 2.1.1 The AO however was not convinced with the submission of the appellant. He observed that that it was only in the course of enquiry that he tried to examine the above share applicants. Since the summons issued to such persons remained unserved, it became the duty of the appellant either to produce them for verification or to state their correct addresses. It appears to be highly improper that in a Private Ltd. Company, the assessee is not in a position to state the exact whereabouts or fail to produce the persons who collectively hold more than 25% of its total share holding. He also observed that mere filing of Asstt. year 2005-06 confirmation letters do not absolve the appellant from its onus to prove the credit entries reflected in its books of accounts as has been held by Hon'ble Calcutta High Court in the case of CIT vs. United Commercial & Industrial Co. (P) Ltd.[1991] 187 ITR 596. He further observed that the facts that the amount were 83 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT paid by account payee cheques do not make it satisfactory as held in CIT vs. Precision finance Pvt. Ltd. 208 ITR 465 (Cal.). Even income -tax file particulars, where the share holder is assessed to tax is not sufficient as found in CIT vs. Korlay Trading Co. Ltd. 232 ITR 820 (Cal.) 2.1.2 The AO also referred the enquiry initiated by investigation wing of the Department in August 2003 which culminated into detection of many entry operators who are operating number of accounts in the same bank/branch or in different branches, in the names of companies, firms, proprietary concerns and individuals. For the operations of these bank accounts, filing income tax returns etc. persons are hired. Like any other business it does requires manpower according to the scale of operation. Except for two or three persons who are required regularly to visit banks and do other spade work like collection of cash etc., most of the other persons involved are on part time basis. The part time employees are called as and when required to sign documents, cheque books etc. Some of the entry operators have also roped in their own relatives for operation of entry accounts and filing the income tax returns. Interestingly most of these concerns / individuals have obtained PAN from the department and are filing returns as well. What is shown in the returns is not the actual state of affairs. For example with one PAN several bank accounts are simultaneously Asstt. year 2005-06 operated and only one account might be shown for the purpose of audit and filing income tax returns. The entry operators provide entry in the garb of share application money, gifts, loans etc. through these accounts, in lieu of cash, to any person who is having unaccounted money.
2.1.2.1 The AO observed that some of the companies show above by the appellant as its share holders were found to have stated before investigation wing that they were mere name lender for advancing money. To quote some of them, Shri Rajesh Bansal, Director of M/s. Rubicon Associates Pvt. Ltd., Shri Mahesh Garg, Director of M/s. S.J. Hosiery Pvt. Ltd. Etc. have categorically stated before the Investigation wing, in their statement taken on oath, that they used to take the amount in cash and give entries to different concerns as gift, loan or share 84 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT application money. According to AO, to enquire into this aspect also, the appellant was asked to produce the functional directors of such share holders. 2.1.3. In view of these facts and circumstances, the Assessing Officer concluded that the credit in the name of these shareholders are not genuine and represents unexplained cash credits. Accordingly he made addition of Rs. 1.50 lakhs to the returned income.
Then Hon'ble Income Tax Appellate Tribunal Delhi Bench: 'B' held in Para 6 as under:
6. As regards ground No. 2, we find that the assessee has stated to have received fresh share capital to the tune of Rs. 15 lacs and share premium of Rs.1,00,35,000/- i.e. a share of face value of Rs. 10/- each issued at a premium of Rs. 90/- totaling to Rs. 100/-. When the AO asked the appellant to furnish the details the assessee produced share application forms and other details like bank statement, copy of acknowledgment of return etc. However when the AO conducted inquiry at the stated address, summons were received back unserved with the postal remark "no such person in the above address". This fact was Asstt.
year 2005-06 brought to the notice of assessee also. Thereafter the assessee except producing the papers could not prove existence or availability of the respective share applicants. When the identity of the person is required to be proved so as to examine whether in fact they have applied for allotment of shares, the existence itself is not proved. The existence of a person is not merely on paper. Particularly when the AO required the assessee to produce the share applicants and particularly when at the stated address the share applicants do not found to be existing, it cannot be said that the amount received by assessee is proved to be towards share capital. The transaction cannot be proved merely on paper. Neither before AO nor before Ld. CIT (A) the assessee could make the share applicants available. Therefore when the identity of the person itself is not proved, the amount received by assessee cannot be considered to be genuinely received.
85 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT 6.1. It is also to be noted that the assessee company is stated to have issued shares at premium 9 times its face value. The assessee is a private limited company. It has not issued prospectus for issue of shares nor under the Companies Act 1956, it can invite the public to apply for and allot the shares. The company is prohibited from making any invitation for allotment of shares. How the premium was fixed is not forth coming. Looking to the balance sheet or past history of assessee, the assessee company has never declared dividend in the past. The company has no business plans which can raise its profitability in the near future. The income declared by the assessee is only by way of short term capital gain and the assessee do not seem to have carried on any business. Asstt. year 2005-06 In such circumstances the share premium is not found to be justified by any of the act on the part of assessee. These facts are revealing more than the apparent shown on the paper. All these facts put together reveal that neither the identity of the share applicants are proved nor justification for share premium has been proved. In such circumstances the court cannot put blinker on the eye and look only at the papers presented before it. There is something more than that meets the eye. As rightly contended by Ld. DR in such situation the observation of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 and in the case of Sumati Dayal Vs. CIT 214 ITR 801 are apt for application. We therefore do not find any reason to hold that the share capital receipts by assessee were from persons whose identity is established and the amount is genuinely received towards share capital.
5.10 In a recent decision in case of Principal Commissioner Of Income vs Bikram Singh in ITA 55/2017, the Hon'ble High Court of Delhi held on 25 August, 2017 as under:-
25. The law applicable to transactions of this nature is well settled by this Court in Divine Leasing (supra). Both parties have referred to and relied upon this judgment. This Court, after analyzing the entire law on the subject in the context of Section 68 of the Act, held as under:
86 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "...16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor /subscriber the genuineness of the transaction and the veracity of the repudiation...."
26. In Divine Leasing (supra), on the question of burden of proof, the Court relied upon CIT v. Musaddilal Ram Bharose, (1987) 165 ITR 14, to hold that the initial burden is upon the Assessee to show the absence of fraud and this is not discharged by the Assessee tendering an incredible and fantastic explanation. The Court also held that every explanation given by the Assessee need not be accepted.
27. In Kamdhenu (supra), this Court categorically held that the initial burden lies on the Assessee to establish the identity of the shareholders, the genuineness of the transaction and the creditworthiness of the shareholders. It is only after the initial burden is discharged that the onus shifts to the Revenue. This Court in Kamdhenu (supra) referred to CIT v. Sophia Finance, 205 ITR 98 which had held to the same effect. The Divine leasing (supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 is well settled.
87 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT ...............................................................................................................................
43. The transactions in the present appeal are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness.
5.11 In my considered view, the technical objections raised by the Appellant in respect of loan from M/s Jalsagar Commerce Pvt. Ltd. are of no avail to the appellant due to following undisputed facts:-
i. It is undisputed fact that the Income Tax Department has made tremendous investigations in such shell companies of Kolkata, Mumbai and Delhi providing accommodation entry and statements made by several accommodation entry providers have become virtually in public domain. It is no argument that the AO did not provide such statement before the assessement or in any of the notices. These facts were well known to the appellant group and ignorance is mere pretence.
ii. Moreover, such statements are so vocal and undeniable that as mentioned in some of the case laws above, cross-examination of such accommodation entry provides by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for.
iii. It is undisputed fact that in the statement dated 06.02.2014 Shri Anand Sharma had admitted to be one of such accommodation entry providers. The sum and substance of the said statement is that the concern M/s Jalsagar Commerce Pvt. Ltd. was engaged in the activities of providing accommodation entries and the appellant happened to be one of such beneficiary of such concern. It is also admitted fact that Shri Anand Sharma had been running the affair of the said company.
88 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT v. The statement of Shri Anand Sharma in which name of M/s Jalsagar Commerce Pvt. Ltd. cannot be completely ignored solely on the legal grounds raised by the Appellant.
5.12 In view of above discussion, it is clear that the incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkata, during the assessment proceedings and all such material have been shared with the appellant at least during the remand report proceeding. In view of nation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for cross-examination of same accommodation entry providers. Any way in the rejoinder submission to remand report the appellant is absolutely silient on cross-examination and by such conduct he has forgone his right to cross-examine. Therefore, the principles of natural justice have been followed. As discussed in preceding paras, under the facts and circumstance of the case, it could not be said that AO did not followed the binding decision of the Hon'ble Supreme Court and the Hon'ble jurisdiction Court. Therefore, in view of above facts discussed in Para 4.1 & 4.4.7, 5.1 to 5.3 and legal position apprised in Para 5.5 to 5.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to Rs. 12,36,49,999/- from M/s Jalsagar Commerce Pvt. Ltd. sustainable and the same is confirmed."
Thus the addition was confirmed based on the report of the DDIT (Inv.) Kolkata. We find that the report of the DDIT (Inv.) Kolkata is also based on the statements of various persons recorded during their investigation and the statement of Shri Anand Sharma was also sent along with the report of the AO. The ld. CIT (A) has confirmed the addition because of the reason that the statement of Shri Anand Sharma was very much in the possession of the AO who has admitted in his statement that M/s. Jalsagar Commerce Pvt. Ltd. was engaged in the activity of providing accommodation entry. However, we find that M/s. Jalsagar Commerce Pvt. Ltd is not managed or 89 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT controlled by Shri Anand Sharma, rather the company M/s. Royal Crystal Dealers Pvt. Ltd. was stated to have been owned by Shri Anand Sharma and in his statement dated 6th February, 2014 Shri Anand Sharma has stated to have been providing entries from M/s. Royal Crystal Dealers Pvt. Ltd. to M/s. Jalsagar Commerce Pvt. Ltd. Therefore, there is no allegation or any admission in the statement of Shri Anand Sharma that he has provided bogus loan entry to the assessee or any group concerns of the assessee. Since the name of M/s. Jalsagar Commerce was crepted in his statement, the AO has presumed that the loan provided by M/s. Jalsagar Commerce Pvt Ltd is nothing but the bogus accommodation entry provided by Shri Anand Sharma through M/s. Royal Crystal Dealers Pvt. Ltd. The AO has tried to establish the nexus of the loan received by the assessee through the statement of Shri Anand Sharma where he has purported to have provided the alleged entry. Since there is no direct allegation or admission of providing loan by Shri Anand Sharma to the assessee through M/s.Royal Crystal Dealers Pvt. Ltd., then even if there is a possibility of bogus accommodation entry routed through another intermediary company M/s.Jalsagar Commerce Pvt. Ltd., it requires a definite link of the transactions from M/s.Royal Crystal Dealers Pvt. Ltd. to M/s.Jalsagar Commerce Pvt. Ltd. and then the loan to the assessee. Once the chain of transactions and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank accounts statement of loan creditor, return of income, assessment orders framed under section 143(3), confirmation of the loan creditor, then a proper examination could have very well established the link, if any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan creditor M/s.
90 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Jalsagar Commerce Pvt. Ltd. there was no suspicious transaction of receiving any entry or any deposit of an equal amount prior to giving the loan to the assessee. The assessee has paid interest to the creditor, which was duly accepted by the AO as business expenditure. Undisputedly, the assessee has produced the income-tax record of the loan creditor, bank statement, financial statements including Balance Sheet, copy of ROC master data showing the status of loan creditor company as "active", confirmation of loan given to the assessee. Further, the AO issued summons and also got the summons served through DDIT Kolkata under section 131 of the IT Act which were duly responded by the loan creditor. Except the statement of Shri Anand Sharma and the report of the Investigation Wing Kolkata, the AO has not brought on record any other material to controvert or disprove the documentary evidence produced by the assessee. It is pertinent to note that the loan creditor was assessed to tax and the AO completed the assessment under section 143 (3) for various assessment years which are relevant for the assessment year under consideration. The AO in case of loan creditor has not disturbed the transactions of loan given by this company to the assessee. From the financial statements of the loan creditor it is apparent that the loan creditor was having sufficient funds to advance the loan amount to the assessee and once the said financial statements were not disturbed, then the creditworthiness of the loan creditor cannot be doubted when it was accepted in the assessment order passed under section 143(3) of the IT Act. We further note that the AO insisted the assessee to produce the directors of the loan provider company. The assessee produced the affidavit, and the notices issued by the AO under section 131 and 133(6) of the Act were duly complied with by the creditor. The statement of the Director of M/s. Royal Crystal Dealers Pvt. Ltd. was also recorded by the AO wherein the Director has confirmed the transaction of loan. There are various reports of the DDIT Kolkata which are placed at pages 406 to 422 of the paper book. We find that all these reports are based on the statements recorded during the 91 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT investigation but no documentary evidence was either gathered or has been referred in these reports. Therefore, even if these reports are to be taken into consideration, these are nothing but narration of the statements of various persons taken during the investigation. It is well settled principle as well as the directions of the CBDT issued under the Circulars that during the course of investigation, the department should concentrate and focus on collecting documentary evidence disclosing undisclosed income instead of obtaining the statement and then support of their claim merely on the basis of the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assessee has produced the documentary evidence and particularly the financial statements of the loan creditors, their bank account statement, then in the absence of any discrepancy or fault in these financial statements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and not on any tangible material disclosing the non-genuineness of the transactions. The AO has not disputed the transactions routed through banking channel having sufficient funds which is also supported by the financial statements and further the assessments of the loan creditor were completed under section 143(3). The details of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and repayment of loan amount as well as closing balance are as under :-
Name of Company AY Opening Loan taken Interest Interest Loan Closing Balance during the credited in credited in repayment/ balance year loan a/c interest Paid TDS/transfer in during the /payable a/c partner capital year during the year Jalsagar Commerce 10-11 41,298 34,70,40,000 13,96,176 12,56,558 34,21,15,916 51,05,000 Private Ltd Jalsagar Commerce 11-12 51,05,000 77,18,70,000 16,71,599 15,04,439 77,18,37,160 53,05,000 Private Ltd
92 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Jalsagar Commerce 12-13 53,05,000 78,95,00,000 1,07,08,434 96,37,591 31,72,80,655 47,85,95,188 Private Ltd Jalsagar Commerce 13-14 47,85,95,188 2,76,31,50,000 0 0 2,97,53,40,000 26,64,05,188 Private Ltd Jalsagar Commerce 14-15 26,64,05,188 97,34,50,000 0 0 1,24,03,55,188 (5,00,000) Private Ltd Jalsagar Commerce 15-16 0 1,34,89,00,000 49,00,600 44,10,540 1,34,93,90,060 0 Private Ltd Jalsagar Commerce 16-17 0 87,11,00,000 1,67,23,178 1,50,50,860 87,27,72,318 0 Private Ltd All these details were before the AO as all these assessment years were passed by the AO pursuant to the search and seizure action under section 132 of the IT Act. Thus it is clear that for the assessment year 2015-16 there was Nil balance on account of loan taken from M/s. Jalsagar Commerce Pvt. Ltd. and the entire loan was already repaid by the assessee. We further note that it is not the case of repayment of loan after the search action on 2nd July, 2015 but there is a regular repayment of loan for each year as it is evident from the details reproduced above. Therefore, the transactions of taking loan and repayment cannot be treated as bogus once the assessee has been regularly repaying the loan amount and small balance was there at the end of the year. Once there was no balance at the end of the year on the loan account, then the addition cannot be made by treating the loan taken and repaid as bogus transaction. Apart from these facts, the assessee has also made the payment of interest which was also subjected to TDS. This shows the genuineness of the transactions and all these transactions have taken place prior to the date of search and duly recorded in the books of accounts and also subjected to assessment under section 143(3) for some of the assessment years. Therefore, even as per the evidence produced by the assessee, the alleged suspicion of the AO was got dispelled and in the absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable."
Thus, the Tribunal has considered the fact that the assessee produced all the relevant documentary evidence in support of the claim to establish the 93 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT identity, creditworthiness and genuineness of unsecured loan. We further note that in support of its claim, the assessee produced following documents:
S. No. Particulars of Documents 1 Copy of Ack. of ITR of AY 2010-11 2 Copy of balance sheet and annexure of loans & advance of AY 2010-11 3 Copy of relevant page of bank statement showing the entry of payment made to assessee.
4 Confirmation of loan given to assessee from books of accounts of party.
5 Confirmation of loan given to assessee from books of accounts of assessee.
6 Copy of affidavit of Sangeeta Somani director of company. 7 Copy of balance sheet of company of 31.03.2010, 31-03-
2011,31-03-2012, 31-03-2013, 31-03-2014,31-03-2015 and 31-03-2016 8 Copy of assessment order passed in the case of above named company for AY 2005-06, AY 2007-08, AY 2011-12, AY 2012- 13 and 2014-15.
9 Copy of ROC master data.
10 Copy of PAN card.
The Assessing Officer has not brought any material on record to controvert the correctness of the evidence filed by the assessee rather all these records was subjected to the scrutiny assessment in the case of the loan creditor, therefore, once the department has accepted financial statement of the loan creditors then the same cannot be denied while examining genuineness of the transaction in the hand of the assessee.
Hence, by following the earlier order of this Tribunal in the case of Kota Dall Mill (supra) wherein the issue of loan taken from M/s Jalsagar 94 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Commerce Pvt. Ltd. was examined and decided in favour of the assessee, we delete the addition made by the Assessing Officer in this regard.
19. Ground No. 6 of the assessee's appeal is regarding denial of benefit of telescoping, recycling and rotation of funds by rejecting the peak credit theory.
20. We have considered the ld AR of the assessee as well as the ld CIT-
DR and considered the relevant material on record. Since the additions made by the Assessing Officer have been finally deleted by us, therefore, this ground of the assessee's appeal is become infructuous.
21. In the cross appeal for the A.Y. 2010-11, the revenue has taken following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 2,02,50,000/- made by the AO u/s 68 of the IT Act on account of unexplained unsecured loans claimed to have obtained by the assessee from M/s Teac Consultant Pvt. Ltd.
2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender M/s Teac Consultant Pvt. Ltd is not shell company without considering the financial statements of these companies.
3. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Teac Consultant Pvt. Ltd merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record.
95 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Teac Consultant Pvt. Ltd despite the fact that the directors or Principal Officers of these companies were never produced before the Assessing Officer for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.
5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loan claimed to have obtained from M/s Teac consultant Pvt. Ltd merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions.
6. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon'ble Supreme court in Navodaya Castle (P) Ltd. Vs CIT (2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions.
"The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
22. The only issue involved in the revenue's appeal is the loan taken from M/s Teac consultants Pvt. Ltd. was deleted by the ld. CIT(A). The ld.
CIT-DR has submitted that as per the report of the Investigation Wing, Kolkata, this company was found to be shell company. Once the Assessing 96 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Officer has brought on record the report of the Investigation Wing, Kolkata to prove that the said company is a shell company and engaged in providing bogus accommodation entry then the assessee was duty bound to discharge its onus of proving the genuineness of the transactions. The assessee has failed to produce the Principal Officer or the Director of the loan creditor before the Assessing Officer for examination despite various opportunities given by the Assessing Officer. He has relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Navodaya Castles Pvt. Ltd. 226 Taxman 190 and the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (Hon'ble Supreme Court)
23. On the other hand, the ld AR of the assessee has submitted that an identical issue has been considered and decided in favour of the assessee and against the revenue by this Tribunal in the case of Kota Dall Mill (supra). He has supported the order of the ld. CIT(A).
24. We have considered the rival submissions as well as relevant material on record. At the outset, we note that an identical issue was considered by us in the case of Kota Dall Mill (supra) in para 15 as under:
"15. We have considered the rival submissions as well as the relevant material on record. The AO has made the addition on account of unsecured loans taken from all the parties whereas the ld. CIT (A) has deleted the addition 97 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT in respect of the loans taken from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. and confirmed the addition made on account of loan taken from M/s. Jalsagar Commerce Pvt. Ltd. The issue of addition made in respect of the unsecured loans taken from M/s. Jalsagar Commerce Pvt. Ltd. was considered and decided by us in the assessee's appeal. The revenue is aggrieved by the order of the ld. CIT (A) as the unsecured loans taken from these three companies were deleted on the ground that the AO was not having any material to substantiate that these companies are controlled by so called entry operators. The relevant finding of the ld. CIT (A) in para 6.1 to 6.14 are as under :
6.1 As discussed in para 4.4.8 above, in respect of these three lenders namely M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited adverse findings alongwith eloquent evidences in the form of statement on oath of relevant entry operators are not visible in the reports dated 28.11.2017 and 06.12.2017 from Investigation Directorate, Kolkata and therefore it could not be treated as shell company.
6.2 Now, coming to the loan from M/s Birla Arts Private Limited no notice under Section 131 or 133(6) of the Act was issued to this company, either by the AO or by the concerned AO or by the DDIT (Inv.) Kolkata.
This shows that no independent enquiry was done by the AO to establish that the said companies were shell companies, blind reliance has been placed by the AO on the investigation report of the DDIT, Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Order. 6.3 As far as the remaining lender companies namely, M/s Teac Consultants Private Limited and M/s Sangam Distributors Pvt. Ltd. are concerned, it is evident from the documents placed on record that Notice 98 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT was issued by DDIT, Kolkata u/s 131 to these companies which was duly complied with and relevant documents were filed. There is no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed providing unsecured loan to the Appellant and source of providing the said loan. Also, it is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators.
6.4 For these three creditors namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, which are available at page no.443 to 644 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to these companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited totaling to Rs. 12,36,40,000/- is unjustified; firstly, on the ground that no inquiries 99 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT were made to rebut the evidences filed by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of creditor and genuineness of the transaction. In particular, none of the material or statements have been provided in the Assessment Order wherein names of the said companies are mentioned. Notably, the transactions with the said four companies are duly verifiable from confirmation of accounts placed at page no. 453 to 455, 532 to 534 & 588 to 589 of PB with supporting bank statements placed at page no. 444 to 452, 521 to 531 & 571 to 587 PB and have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 6.5 Furthermore, from the perusal of documentary evidences submitted by the Appellant, it is seen that transactions have been done through banking channels and on the date of making of loans, there is balance available in the accounts of the borrowers, which proves the creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of any of the creditors at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case of CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA), CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that no notice u/s 131 or 133(6) of the IT Act were issued to M/s Birla Arts Private Limited, however as far as the companies M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited are concerned, these have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO.
100 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT 6.6 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal is not a partner in the Appellant Firm. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant firm or its total income, this basis of addition adopted by the AO is farfetched & cannot be concurred.
6.7 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in the account statement of creditor, there is corresponding credit entry of equal amount, however, this observation of the AO is itself not sufficient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making loans to party, funds are required to be arranged by the lender, therefore reflection of such entries in bank statement doesn't lead to draw any adverse inference against the Appellant. Needless to say that Appellant is not required to prove source of the source u/s 68 of the Act in view of the settled judicial precedents.
6.8 In my considered view, mere not believing an explanation cannot lead to a conclusion that the borrowed amount is the income of the assessee (borrower) from some undisclosed sources while in the present case, no evidences of any generation of undisclosed income or their utilization in the form of unsecured loans has been found and brought on record.
6.9 Similarly, I find that various observations of the AO on balance sheet / ITR of the lender companies are misconstrued, misconceived and 101 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT are factually incorrect. I further find that the various other allegations / observations of the AO are misconceived and premature only and in view the appellant's submission made in para 10 as reproduced in Para No. 4.2 of this order, the same does not lead any where to draw any adverse inference against the Appellant. Further, the various case laws relied upon by the AO are distinguishable from the facts of the present case as categorically countered by the Appellant in his written submissions as mentioned in para 16 as reproduced in Para No. 4.2above. 6.10 It is settled judicial precedents that under the income tax law primary burden u/s 68 of the Act is on the Appellant and once this burden is discharged u/s 68 of the Act, no addition u/s 68 of the Act is justifiable in the hands of the Assessee in view of the judgments in case of Shree Barkha Synthetics Ltd. V/s Assistant Commissioner of Income-tax (2006) 155 TAXMAN 289 (RAJ.), COMMISSIONER OF INCOME-TAX, JAIPUR -II V. MORANI AUTOMOTIVES (P.) LTD. [2014] 264 CTR 86 (RAJASTHAN-HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel Ramniklal Hirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal Commissioner of Income-tax-4 v. G & G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon'ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in ITA No. 744/Del/2012 vide its order dated 10.02.2016. Further, Hon'ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal & Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing & Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation 102 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this question of law.
6.11 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income tax authorities only and therefore, in view of the judgment CIT v/s Victor Electrodes Ltd. [2010] 329 ITR 271, the Appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of lender companies and some directors/officer were also produced before the AO. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the present case it is untenable to make any addition for alleged non-appearance by the concerned person before the authorities though they complied with the notices/summon issued to them.
6.12 In the present case in hand, I find that AO asked Assessee to produce lender companies without verifying the facts of lending money from respective jurisdiction assessing officer and without verifying their returns of income and balance sheet wherein these transactions are reported, accordingly the AO has not followed the principles laid down under section 68 of the Act. The Hon'ble Gujrat High Court in the case of Commissioner of Income-tax v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) has held that:-
Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before 103 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] In the instance case before me , the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujrat High Court (supra).
6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the Appellant Firm as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in case of the Appellant.
Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of any incriminating material found during search to rebut the evidences filed by the Appellant, the impugned addition made in respect of unsecured loan u/s 68 of the Act is legally untenable and unjustified. 6.14 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon'ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited totaling to Rs.12,36,40,000/- is not sustainable and hence the same stands deleted."
Thus the ld. CIT (A) was of the view that so far as the loans taken from M/s. Jalsagar Commerce Pvt. Ltd., the AO was having the statement of Shri Anand Sharma to the effect that the said company was involved in providing accommodation entry and controlled by the entry operator whereas in respect of these three companies the AO was not having any document or even the statement of any person who are entry operators and controlling these companies so as to establish that the transactions 104 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT are in the nature of bogus accommodation entries. We have already considered the issue on merits in respect of the addition made on account of unsecured loans taken from M/s. Jalsagar Commerce Pvt. Ltd. whereas the loans taken from these companies are even as per the revenue on better footings of genuineness than M/s. Jalsagar Commerce Pvt. Ltd. There is no dispute that the AO was not having any evidence or even any statement to impugn the transactions as bogus accommodation entries. Further, the assessee has produced all the relevant supporting documentary evidence as we have reproduced in the foregoing paras as referred by the ld. A/R of the assessee and these creditor companies were subject to regular assessments and scrutiny assessments under section 143(3) were completed by the department as per the details reproduced. Therefore, once these creditor companies are regularly assessed to tax and duly examined by the department at the scrutiny assessments, then the transactions of loans cannot be held as bogus when the same were accepted in the hands of the creditors. We further note that these companies were having sufficient funds in the shape of share capital, reserves and surplus. The details of the share capitals of these companies are as under :-
M/s Birla Arts Pvt. Ltd Assessment Year Financial Year Share capital raised 1998-1999 1997-1998 12,90,000 1999-2000 1998-1999 16,82,000 2003-2004 2002-2003 50,00,000 2004-2005 2003-2004 2,74,40,000 2005-2006 2004-2005 3,69,50,000 2007-2008 2006-2007 3,26,00,000 2010-2011 2009-2010 250,00,000 2011-2012 2010-2011 20,00,000 2014-2015 2013-2014 67,57,37,000
105 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT M/s Teac Consultants Pvt. Ltd Assessment Year Financial Year Share capital raised 1996-1997 1995-1996 26,00,000 2001-2002 2000-2001 73,98,000 2003-2004 2002-2003 1,00,00,000 2005-2006 2004-2005 4,85,50,000 2007-2008 2005-2006 3,35,00,000 2010-2011 2009-2010 2,76,00,000 2011-2012 2010-2011 94,00,000 M/s Sangam Distributors Pvt. Ltd.
Assessment Year Financial Year Share capital
raised
2005-2006 2004-2005 2,47,50,000
2006-2007 2005-2006 10,50,00,000
2007-2008 2006-2007 7,93,50,000
2011-2012 2010-2011 2,50,00,000
2013-2014 2012-2013 13,00,00,000
These details clearly show that at the time of granting of loans to the assessee these companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As we have discussed earlier that the AO has not pointed out any discrepancy in the financial statements or in the bank account statements of the loan creditors to show that there was deposit or introduction of the cash prior to giving the loan to the assessee, accordingly, in view of the facts and circumstances of the case as well as our finding on the issue of addition in 106 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT case of M/s. Jalsagar Commerce Pvt. Ltd., we do not find any error or illegality in the order of ld. CIT (A) qua this issue.
Ground Nos. 7 to 11 of the revenue are regarding the addition of Rs. 42,47,25,000/- made on account of partners' capital received from four parties was deleted by the ld. CIT (A) on the similar ground that the AO was not having any evidence or material to establish that the transactions are bogus accommodation entries."
Thus, the Tribunal in the case of Kota Dall Mill (supra) has examined all the relevant details including the funds available with Teac Consultants Pvt. Ltd., which is sufficient for advancement of loan to the assessee.
Further the ld. CIT(A) has deleted the addition on the basis that the Assessing Officer has not brought any material on record to controvert the documentary evidence filed by the assessee even the statement of alleged entry operator was not in possession of the Assessing Officer. The finding of the ld. CIT(A) in the case under consideration is identical as in the case of Kota Dall Mill (supra), therefore, following the earlier order of this Tribunal, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, the appeal of the revenue is dismissed.
25. In the appeal for the A.Y. 2011-12, the revenue has raised following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 42,15,21,050/- made by the AO u/s 68 of the IT Act on account of unexplained 107 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT unsecured loans claimed to have obtained by the assessee from M/s Birla Arts Pvt. Ltd. and Teac Consultant Pvt. Ltd.
2. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender M/s Birla Arts Pvt. Ltd. and M/s Teac Consultant Pvt. Ltd are not shell company without considering the financial statements of these companies.
3. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd and M/s Teac Consultant Pvt. Ltd merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record.
4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd and M/s Teac Consultant Pvt. Ltd. despite the fact that the directors or Principal Officers of these companies were never produced before the Assessing Officer for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.
5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loan claimed to have obtained from M/s Birla Arts Pvt. Ltd. and M/s Teac consultant Pvt. Ltd merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officer were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions.
6. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the 108 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT decision of the Hon'ble Supreme court in Navodaya Castle (P) Ltd Vs CIT (2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions.
The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
26. The only issue involved in the revenue's appeal is the addition made by the Assessing Officer in respect of the unsecured loan from M/s Birla Arts Pvt. Ltd. and M/s Teac Consultants Pvt. Ltd., was deleted by the ld.
CIT(A) on the identical reasoning that the Assessing Officer was not having any material or even the statement of alleged entry operator to substantiate the addition.
27. The ld. CIT-DR has submitted that the company was found to be a shell company and the assessee was asked by the Assessing Officer to produce the Principal Officer/ Director of the company for examination but the assessee failed to discharge its onus. He has reiterated its contention as raised in the case of M/s Teac consultants Pvt. Ltd.
28. On the other hand, the ld AR of the assessee has reiterated its contention as in the case of M/s Teac Consultants Pvt. Ltd. and submitted that the assessee has produced all the relevant documentary evidence in support of the claim which has not been controverted by the Assessing Officer. He has supported the order of the ld. CIT(A).
109 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
29. We have considered the rival submissions as well as the relevant material on record. The facts and circumstances relevant to the issue of loan taken from M/s Birla Arms Pvt. Ltd., which was treated as bogus accommodation entry by the Assessing Officer but was deleted by the ld.
CIT(A) are identical as in the case of M/s Teac Consultants Pvt. Ltd. for the A.Y. 2010-11. We have already reproduced our finding in the case of Kota Dall Mill (supra) wherein M/s Birla Arts Pvt. Ltd. was one of the loan creditor, accordingly in view of our finding as reproduced (supra), we do not find any error or illegality in the order of the ld. CIT(A) qua this issue.
Hence, the revenue's appeal is dismissed.
30. In the cross objection of the assessee for the A.Y. 2011-12, following grounds have been taken by the assessee:
"1. On the facts and in the circumstances of the case and in law the order passed U/s 153A read with Section 143(3) of the Income Tax Act, 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT(A) erred in holding that the contention of the assessee cannot be accepted in view of SLP's admitted in various cases. The ld. CIT(A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.
2. On the facts and in the circumstances of the case and in law the ld.
CIT(A) erred in not declaring the assessment order as bad in law and void an initio. It is contended that the A.O. passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the 110 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT opportunity of cross examination of the alleged accommodation entry providers, therefore, the assessment order ought to hold as bad in law and deserves to be annulled. The findings of the ld. CIT(A) in this regard are perverse and erroneous.
3. The appellant craves leave to add, alter, amend, any of the grounds of appeal at or before the time of hearing of appeal."
31. Ground No. 1 of the C.O. is regarding the addition made without any incriminating material as the assessment was not abated due to the search and seizure. This issue has been considered by us while deciding ground No. 1 of the assessee's appeal for the A.Y. 2010-11. Accordingly, in view of our finding on this issue for the A.Y. 2010-11, ground No. 1 of the assessee's C.O. is allowed.
32. Ground No. 2 of the assessee's C.O. is regarding non affording the opportunity of cross examination and consequently violation of principles of natural justice. We have heard the ld AR as well as the ld DR and considered the relevant material on record. An identical issue has been considered and decided by us in ground No. 2 of the assessee's appeal for the A.Y. 2010-11. In view of our finding on this issue for the A.Y. 2010-11, ground No. 2 of the C.O. of the assessee stands allowed.
33. In the appeal for the A.Y. 2012-13, the revenue has raised following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 24,66,00,000/-
111 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT made by the AO u/s 68 of the IT Act on account of unexplained unsecured loans claimed to have obtained by the assessee from M/s Birla Arts Pvt. Ltd. and Teac Consultant Pvt. Ltd.
2. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender M/s Birla Arts Pvt. Ltd. and M/s Teac Consultant Pvt. Ltd are not shell company without considering the financial statements of these companies.
3. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd and M/s Teac Consultant Pvt. Ltd merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record.
4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd and M/s Teac Consultant Pvt. Ltd. despite the fact that the directors or Principal Officers of these companies were never produced before the Assessing Officer for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.
5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loan claimed to have obtained from M/s Birla Arts Pvt. Ltd. and M/s Teac consultant Pvt. Ltd merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officer were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions.
6. Whether on the facts and circumstances of the case and in law, the CTI(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden 112 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT to produce the lenders before the AO and in not considering the decision of the Hon'ble Supreme court in Navodaya Castle (P) Ltd Vs CIT (2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions.
The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
34. The only issue involved in the revenue's appeal is the addition made by the Assessing Officer in respect of the unsecured loan from M/s Birla Arts Pvt. Ltd. and M/s Teac Consultants Pvt. Ltd., was deleted by the ld.
CIT(A) on the identical reasoning that the Assessing Officer was not having any material or even the statement of alleged entry operator to substantiate the addition.
35. We have heard the ld. CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The issue of loan taken from M/s Birla Arts Pvt. Ltd. and M/s Teac Consultants Pvt. Ltd., was considered by us for the A.Y. 2010-11 as well as A.Y. 2011-12 and in view of our finding on this issue, we do not find any merit or substance in the appeal of the revenue. Hence, the grounds raised by the revenue in the appeal stand dismissed.
36. In the cross objection of the assessee for the A.Y. 2012-13, following grounds have been taken by the assessee:
113 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "1. On the facts and in the circumstances of the case and in law the order passed U/s 153A read with Section 143(3) of the Income Tax Act, 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT(A) erred in holding that the contention of the assessee cannot be accepted in view of SLP's admitted in various cases. The ld. CIT(A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.
2. On the facts and in the circumstances of the case and in law the ld.
CIT(A) erred in not declaring the assessment order as bad in law and void an initio. It is contended that the A.O. passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore, the assessment order ought to hold as bad in law and deserves to be annulled. The findings of the ld. CIT(A) in this regard are perverse and erroneous.
3. The appellant craves leave to add, alter, amend, any of the grounds of appeal at or before the time of hearing of appeal."
37. Both the issues raised by the assessee in the C.O. are identical to the C.O. of the assessment year 2011-12 as well as the issue raised in the grounds No. 1 and 2 in the appeal for the A.Y. 2010-11. In view of our finding on these issues for the A.Y. 2010-11, the grounds raised in the C.O. of the assessee are allowed.
38. In the appeal for the A.Y. 2013-14, the assessee has raised following grounds of appeal:
"1. On the facts and in the circumstances of the case and in law the order passed u/s 153 A read with section 143(3) of the Income 114 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Tax Act 1961 is bad in law, void ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT (A) erred in holding that the contention of the assessee cannot be accepted in view of SLPs admitted in various cases. The Id. CIT (A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.
2. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. The findings of Id CIT(A) in this regard are perverse and erroneous. It is contended that the Id. AO passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore the assessment order ought to held as bad in law and deserves to be annulled.
3. That the order of the Id CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case. The addition confirmed by ld.CIT (A) deserves to be deleted.
4. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in confirming the additions made u/s 68 of the Income Tax Act, 1961 by : -
a) solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee.
b) giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.)-Kolkatta.
115 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
c) holding that the assessee has not adduced any evidence to rebut the adverse factual finding made by the AO in the assessment order though detailed paper book for relevant AY and common paper books have been submitted, and
d) holding that incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkatta.
5. On the facts and in the circumstances of the case and in lawthe Id.
CIT(A) erred in confirmation the addition of Rs. 25,00,00,000/- made by Id. AO u/s 68 of Income Tax Act, 1961 on account of special deposit received from following parties and erroneously held that the identity, creditworthiness and genuineness of the under mentioned company is doubtful: -
Name of the company Amount Name of alleged entry
from whom loan operator whose
received statement were relied
Caplin Dealcom Pvt. 25,00,00,000 Shri Ankit Bagri Ltd
6. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds.
7. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal.
39. Ground No. 1 of the appeal is regarding the addition made without incriminating material. At the time of hearing, the ld AR of the assessee has stated at bar that since the assessment was pending as on the date of search, therefore, the assessee does not press ground No. 1 of the assessee's appeal and the same may be dismissed as not pressed. The ld.
116 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT CIT-DR has not raised any objection if ground No. 1 of the assessee's appeal is not pressed. Accordingly, ground No. 1 of the assessee's appeal is dismissed being not pressed.
40. Ground No. 2 of the appeal is regarding the violation of principles of natural justice as the opportunity for cross examination was not provided to the assessee. We have heard the ld AR as well as the ld. CIT-DR and considered the relevant material on record. This ground of appeal is common for the A.Y. 2010-11 to 2012-13, therefore, in view of our finding on this issue for the A.Y. 2010-11 as well as the C.O. of the assessee for the A.Y. 2011-12 and 2012-13, the same is decided in favour of the assessee and against the revenue.
41. Ground Nos. 3 to 5 of the appeal are regarding the addition of special deposits received from M/s Caplin Dealcom Pvt. Ltd. for allotment of equity shares on preferential basis, which was sustained by the ld.
CIT(A). The Assessing Officer has made addition of unsecured loan taken from M/s Birla Art Pvt. Ltd. as well as various special deposits received from five parties by treating the same as bogus accommodation entries based on the report of the Investigation Wing, Kolkata as well as the statement of one Shri Ankit Bagri. The ld. CIT(A) has sustained the addition in respect of M/s Caplin Dealcom Pvt.
117 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Ltd. but deleted the rest of the additions on this ground that the Assessing Officer was not having any material or the statement of alleged entry providers except Shri Ankit Bagri. The ld AR of the assessee has submitted that the ld. CIT(A) has confirmed the addition on the basis of statement of Shri Ankit Bagri recorded U/s 131 of the Act on 03/7/2014. The Assessing Officer has made the entire addition based on the said statement. The ld AR has referred to question No. 6 and 8 of the statement of Shri Ankit Bagri wherein he stated that after the death of his partner on 07/4/2012, he has not done any transaction of accommodation entry. The ld AR has then submitted that the transaction in question as receipt from M/s Caplin Dealcom Pvt. Ltd. is subsequent to the said date i.e. 07/4/2012 and therefore, the statement itself does not make out a case of bogus entry in the garb of special deposits received by the assessee. The ld AR has also referred to question No. 13 and submitted that though there was no allegation against the assessee or the transaction of the assessee, however, the Assessing Officer has extrapolated the statement for making the addition of entire special receipts as well as unsecured loan creditor.
He has also referred to the various reports of Investigation Wing, Kolkata and submitted that none of the report has made out any case of bogus accommodation entry between the assessee and the other parties. The reports are alleging some other creditors but not the creditors in question 118 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT from whom the assessee has received the said deposits. Therefore, once the report itself does not make out any charge against the assessee then the addition made by the Assessing Officer is not sustainable. He has further contended that due to abnormal delay of approval granted by the Kolkata Stock Exchange, the assessee could not issue the preferential shares to the applicants from whom the deposits were received and consequently the entire amount was refunded by the assessee. He has referred to the details of the amount refunded by the assessee. The ld AR has also referred to the documents produced before the Assessing Officer to show the identity, creditworthiness of the creditors and genuineness of the transaction. These documents include the financial statements as well as the assessment orders passed U/s 143(3) of the Act. Thus, the ld AR has pointed out that the said company was also amalgamated as per the scheme of amalgamation approved by the Hon'ble Kolkata High Court with the other company M/s Baijnath Commosales Pvt. Ltd., hence the allegation of the Assessing Officer is baseless to say that these companies are shell companies when the assessee has produced all the relevant documents and even these companies are subjected to scrutiny assessment. He has further contended that the creditor/applicant is NBFC which is supervised and regulated by the RBI and therefore, the financial affairs of the NBFC cannot be doubted without any material. He has 119 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT pointed out that this company M/s Caplin Dealcom Pvt. Ltd. was duly examined by this Tribunal in the case of Kota Dall Mill vide order dated 31/12/2018 (supra).
42. On the other hand, the ld CIT-DR has submitted that once the Investigation Wing, Kolkata has detected that these are shall companies and engaged in providing accommodation entries then it was the duty of the assessee to produce the Principal Officers/Directors of these companies. Further Shri Ankit Bagri has admitted in his statement as entry provider and controlling these companies, therefore, the assessee has failed to discharge its onus when the Assessing Officer asked to produce the Principal Officers/Directors of these companies.
43. We have considered the rival submissions as well as the relevant material on record. We note that the Assessing Officer has relied upon the statement of Shri Ankit Bagri for making the addition in respect of the special advance received from M/s Caplin Dealcom Pvt. Ltd. as well as other parties. The relevant part of the statement as reproduced by the Assessing Officer in the assessment order in questions No. 6,8 and 13 are as under:
"Q.6. Please explain the nature of business done by you.
Ans. I along with Late Sumit Kejriwal, who was an accomplished accommodation entry operator of Kolkata, was engaged in the business 120 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT of providing accommodation entries through 'jama kharchi/shell companies, exclusively created for the purpose of providing accommodation entries, to various beneficiaries in lieu of commission. Late Sumit Kejriwal who resided at Regent Court, Block-2, Flat No. 3D, V.I.P. Road, P.S. Baguiati, Dist.- North 24 Parganas, Kolkata-700059, has died on 07/04/2012. I am submitting herewith the photocopy of death certificate of Shri Sumit Kejriwal as enclosure. Although the companies formed by us have different addresses but they were being maintained from our office located at the following address:
9/12, N.S. Road, 3rd Floor, Block-C, Kolkata-700001.
Although almost all of the companies controlled by me and Late Sumit Kejriwal have already been sold to various beneficiaries groups but still the office premise is being maintained.
Q.8 Please state the name of the companies/proprietorship firms managed/controlled by you and also state who are the other directors/proprietors in these companies/proprietorship firms.
Ans. Presently, I do not control any company/proprietorship concern.
However, before the demise of my partner, Shri Sumit Kejriwal, around ten to twelve companies including Rajat Polypack Pvt. Ltd., Caplin DEalcom Pvt. Ltd., Pabla Leasing Pvt. Ltd., Karni Synlex Pvt. Ltd. and Westport Export Pvt. Ltd were being controlled by both of us. The books of accounts of those companies were maintained in the computers in our office. As already stated above, almost all of the companies controlled by me and Late Sumit Kejriwal have already been sold to various beneficiary groups. However, I would like to mention that the directors in the above mentioned companies were nothing but the dummy directors who were mostly our friends, associates and staffs 121 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT who lend their names for directorship in lieu of some remuneration which we provided them. Some of the names are as follows:
1. Shri Anand Kumar Khetan;
2. Shri Koushik Ghosh;
3. Shri Rajiv Maheswari;
4. Shri Anil Modi;
5. Shri Manish Kejriwal:
Further, I would also like to mention that Shri Sumit Kejriwal was also himself a direction in few of the companies.
Q.13. It has been observed from the attachments of Form 2s of Mahabir Group of companies that equity shares were allotted to you company in the following manner over the years:
In the case of Mahabir Danwar Jewellers Pvt. Ltd.
Sl.No. Name of the Date of F.Y. A.Y. Total No. Amount
company allotment of shares including
premium
(Rs.)
1. Rajat Polypack 31.03.2010 2009-10 2010-11 4000 20,00,000/-
Pvt. Ltd.
2. Caplin Dealcom 31.03.2010 2009-10 2010-11 4000 20,00,000/-
Pvt. Ltd.
3. Pabla Leasing & 31.03.2010 2009-10 2010-11 6000 30,00,000/-
Finance Pvt. Ltd.
4. Westport Export 31.03.2010 2009-10 2010-11 3000 15,00,000/-
Pvt. Ltd.
5. Caplin Dealcom 31.03.2009 2008-09 2009-10 2000 10,00,000/-
Pvt. Ltd.
6. Pabla Leasing & 31.03.2009 2008-09 2009-10 2000 10,00,000/-
Finance Pvt. Ltd.
7. Karni Syntex Pvt. 31.03.2008 2007-08 2008-09 5000 10,00,000/-
Ltd.
8. Caplin Dealcom 31.03.2008 2007-08 2008-09 10000 20,00,000/-
Pvt. Ltd.
In the case of Mahabir Danwar Jewellers Pvt. Ltd.
9. Pabla Leasing & 31.03.2010 2009-10 2010-11 5000 5,00,000/-
Finance Pvt. Ltd.
10. Pabla Leasing & 31.03.2009 2008-09 2009-10 10000 10,00,000/-
Finance Pvt. Ltd.
11. Caplin Dealcom 31.03.2009 2008-09 2009-10 10000 10,00,000/-
Pvt. Ltd.
12. Karni Syntex Pvt. 28.03.2008 2006-07 2007-08 10000 5,00,000/-
Ltd.
KIK Jewellers Pvt. Ltd.
13. Rajat Polypack 31.03.2010 2009-10 2010-11 20000 20,00,000/-
Pvt. Ltd.
Total 1,85,00,000/-
Please explain the same.
122 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
Ans. Over the years, accommodation entries in the form of share capital have
been provided to Mahabir Group of Companies in lieu of commission to the tune of Rs. 0.10 per hundred.
In reply to question No. 6, Shri Ankit Bagri has explained the nature of business and submitted that he alongwith Shri Sumit Kejriwal were providing accommodation entries against the cash. However, Shri Sumit Kejriwal died on 07/4/2012. In reply to question No. 8, he has given the specific answer that he does not control any company or proprietorship concern. Before death of Shri Sumit Kejriwal, they were controlling around 10 to 12 companies, one of which was M/s Caplin Dealcom Pvt. Ltd.. This is the only incriminating statement of Shri Ankit Bagri. In response to question No. 13, it is clear that all the details of the alleged accommodation entries were in respect of A.Y. 2007-08 to 2010-11 and for a particular group M/s Mahabir Group of companies. In the entire statement, there is no allegation of any accommodation entry provided to the assessee. Further we find that the assessee has produced plethora of material comprising of financial statement, ITR, confirmation, memorandum of understanding for special deposit, affidavit of Director, decision of Hon'ble Kolkata High Court, assessment orders passed u/s 143(3) for various assessment years as well as other details including ROC 123 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT master data, NBFC registration certificate. Details of the documents produced by the assessee is as under:
S. No. Particulars PB pg - Vol
II/A.Y 2013-14
1 Copy of Ack. of ITR of AY 2013-14 551
2 Copy of Balance sheet of AY 2013-14 along with 552-560
Annexure
3 Copy of relevant page of bank statement showing the 561-562
entry of payment made to assessee.
4 Confirmation of deposit given to assessee from books 563-567
of accounts of party.
5 Confirmation of deposit given to assessee from books 568-574
of accounts of assessee.
6 Copy of memorandum of understanding executed 575-579
between the assessee and M/s Caplin Dealcomm Pvt.
Ltd for the transaction of finance in form of deposits 7 Copy of affidavit of Kavita Jain director of company. 580-583 8 Order passed by Calcutta High Court regarding 584-605 amalgamation of other companies with this company.
9 Copy of balance sheet of company of 31.03.2010, 606-612 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016.
10 Copy of assessment order passed in the case of above 613-636 named company for AY 2006-07, 2008-09, 2009-10, 2010-11 and 2014-15 11 Copy of ROC master data. 637-638 12 NBFC Registration Certificate 639 13 Copy of PAN card. 640 14 Copy of Certificate of Incorporation 641 15 Copy of summon no. 4560 dated 16.10.2017 and 642-644 reminder notice no. 1583 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961 16 Copy of reply submitted by company in response to 645-647 notice/summon issued to it Along with dispatched proof Thus, the assessee has produced all the relevant supporting documentary evidence to establish the identity, creditworthiness of the creditors as well 124 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT as the genuineness of the transaction which is through the banking channel. The Assessing Officer has not brought on record any discrepancy either in the books of account or in the details of bank accounts of the creditors or the assessee to show that the transaction is nothing but assessee's own unaccounted money has routed back in the garb of special deposit. We further note that an identical issue was considered by this Tribunal in the case of Kota Dall Mill (supra) at para 26 as under:
"26. We have considered the rival submissions as well as the relevant material on record. The AO has given the identical finding for all the assessment years which is based on the report of the Investigation Wing Kolkata as well as the statement recorded by the DDIT Kolkata. We note that the surrounding circumstances and the facts are identical as for the A.Y. 2010-11 as recorded by the AO as well as the ld. CIT (A). The ld. CIT (A) has turned down the request of cross examination in para 3.12 to 3.13 at pages 188 to 190 as under :-
"3.12 In my considered view, the technical objections raised by the Appellant in respect of loan from Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. as above, are of no avail to the appellant due to following undisputed facts:
i. It is undisputed fact that the Income Tax Department has made tremendous investigations in such shell companies of Kolkata, Mumbai and Delhi providing accommodation entry and statements made by several accommodation entry providers have become virtually in public domain. It is no argument that the AO did not provide such statement before the assessment or in any of the notices. These facts were well known to the appellant group and ignorance is mere pretence.
125 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT ii. Moreover, such statements are so vocal and undeniable that as mentioned in some of the case laws above, cross-
examination of such accommodation entry provides by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for.
iii. It is undisputed fact that in the statement dated 03.07.2014 Shri Ankit Bagri and Shri Shankar BAnka had admitted to be one of such accommodation entry providers. The sum and substance of the said statement is that the concern M/s Caplin Dealcomm Private Limited, M/s VSG Leasing and Finance Co. Ltd. was engaged in the activities of providing accommodation entries and the appellant happened to be one of such beneficiary of such concern. It is also admitted fact that these operators had been running the affair of the said company.
v. The statement of Shri Ankit Bagri and Shri Shankar Bank in which name of M/s Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. respectively appeared, cannot be completely ignored solely on the legal grounds raised by the Appellant.
3.13 In view of above discussion, it is clear that the incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkata, during the assessment proceedings and all such material have been shared with the appellant at least during the remand report proceeding. In view of nation-wide known scam by the accommodation entry providers of Kolkata and elsewhere burst by the Income Tax Department, there was no need to provide opportunity for cross-examination of same accommodation entry providers. Anyway, in the rejoinder submission to remand report the appellant is absolutely silent on cross-examination and by such conduct he has forgone his right to cross-examine. Therefore, the principles of natural justice have been followed. As discussed in preceding paras, under 126 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the facts and circumstance of the case, it could not be said that AO did not followed the binding decision of the Hon'ble Supreme Court and the Hon'ble jurisdiction Court. In view of above discussion, the several other grounds raised for the issue are treated as dismissed. Therefore, in view of above facts discussed in Para 2.1, 2.4.3 to 2.4.7 and 3.1 to 3.4 & 3.12 and legal position apprised in Para 3.6 to 3.11 above, it is held that the addition made by the AO on account of unsecured loans amounting to Rs. 1,50,00,000/- and Rs. 10,88,45,000/- from M/s Caplin Dealcomm Private Limited and M/s VSG Leasing and Finance Co. Ltd. respectively, is sustainable and the same is confirmed."
Thus the ld. CIT (A) has decided the issue on identical terms as for the assessment year 2010-11. We have already given our finding on this issue and referred various decisions of Hon'ble Supreme Court, Hon'ble High Courts as well as this Tribunal. Therefore, our finding on the issue for the assessment year 2010-11 is squarely applicable as the facts and issues are identical for these years. Accordingly, we hold that the addition based on the statement of third party recorded at the back of the assessee without affording opportunity of cross examination is not sustainable in law.
27. Apart from the issue of violation of principles of natural justice, we find that on merits the assessee produced all relevant documentary evidences in support of the claim which is identical to all the other parties in respect of which the ld. CIT (A) has deleted the addition. Even for sake of completeness, we refer to the documentary evidence produced by the assessee in respect of these two companies as under :-
S. No. Particulars PB Page No.
1. M/s Caplin Dealcomm Pvt. Ltd.
• Copy of Ack. of ITR of AY 2016-17 987
• Copy of Balance sheet of AY 2016-17 988
127 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
• Copy of relevant page of bank statement 989-1008
showing the entry of payment made to
assessee.
• Confirmation of loan given to assessee from 1009-1011
books of accounts of party.
• Confirmation of loan given to assessee from 1012-1013
books of accounts of assessee.
• Copy of affidavit of Kavita Jain director of 1014-1017 company.
• Order passed by Calcutta High Court 1018-1039
regarding amalgamation of other companies in
this company
• Copy of balance sheet of company of 1040-1046
31.03.2010, 31.03.2011, 31.03.2012,
31.03.2013, 31.03.2014, 31.03.2015 and
31.03.2016.
• Copy of assessment order passed in the case of 1047-1070 above named company for AY 2006-07, 2008- 09, 2009-10, 2010-11 and 2014-15.
• Copy of ROC master data. 1071-1072
• Copy of NBFC Certificate. 1073
• Copy of PAN card. 1074
• Copy of summon no. 4560 dated 16.10.2017 1075-1077
and reminder notice no. 1583 dated 31.10.2017
issued by DDIT (Investigation), Unit-1(3),
Kolkata u/s 131 of Income Tax Act, 1961
• Copy of reply submitted by company in 1078-1080
response to notice/summon issued to it Along
with dispatched proof
2. M/s VSG Leasing and Finance Co. Ltd.
• Copy of Ack. of ITR of AY 2016-17 1144
• Copy of Balance sheet of AY 2016-17 along 1145
with annexure of Loan & Advances
• Copy of relevant page of bank statement 1146-1152
showing the entry of payment made to
assessee.
• Confirmation of loan given to assessee from 1153-1154
books of accounts of party.
• Confirmation of loan given to assessee from 1155
books of accounts of assessee.
When all the relevant details and documentary evidences produced by the assessee to establish the identity, creditworthiness and genuineness of the transactions, then the said evidences cannot be rejected on the basis of the statement without any contrary documentary evidence. We further note 128 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT that the assessments were completed under section 143(3) of M/s. Caplin Dealcomm Pvt. Ltd. and the details of which are as under :-
Name of Company Assessment Income Assessment Order year Assessed u/s 143(3) at PB pg of Vol.-III M/s Caplin Dealcomm 2008-09 1,40,710 1053-1054 Pvt. Ltd M/s Caplin Dealcomm 2009-10 1,65,600 1059-1060 Pvt. Ltd M/s Caplin Dealcomm 2010-11 1,20,000 1063-1064 Pvt. Ltd M/s Caplin Dealcomm 2014-15 2,85,945 1066-1068 Pvt. Ltd Once the party is regularly assessed to tax and orders under section 143(3) were passed by the AO, then the transactions cannot be treated as bogus once. It is manifest from the financial statements of these companies that the share capital and reserve of M/s. Caplin Dealcomm Pvt. Ltd. and M/s. VSG Leasing & Finance Co. Pvt. Ltd. as on 31st March, 2016 were Rs. 136,63,90,504/- and Rs. 97,11,26,758/- whereas the amounts given to the assessee by these two companies was Rs. 16.10 crores and Rs. 10.88 crores respectively. Thus the creditworthiness of these companies as evident from their financial statements was undisputedly sufficient to give the amounts in question to the assessee. Accordingly, having regard to the documentary evidence filed by the assessee and our findings on this issue for the assessment year 2010-11, the additions made by the AO are not sustainable and the same are deleted. This issue covers both the assessment years 2015-16 and 16-17.
The assessee has also raised Ground No. 5 regarding typographical error in the finding of the AO/CIT (A) on account of late delivery charges of Rs. 12 lacs."
129 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT The Tribunal has considered the issue on the basis of various documentary evidences as well as the assessment framed U/s 143(3) of the Act in case of M/s Caplin Dealcom Pvt. Ltd.. We further note that the assessee was persuading with the Kolkata Stock Exchange as well as the SEBI for delisting of this company and thereafter preferential shares to be issued to these parties. The ld AR has produced before us the letters of Kolkata Stock Exchange dated 01/8/2014 as well as SEBI dated 03/9/2014 whereby the approval was granted for voluntary delisting of the equity shares of the assessee. However, the SEBI has regretted the request by citing the reason that there is no provision under SEBI Act for delisting or waiver sought by the company. Hence, the explanation of the assessee that the special deposits were received as per the memorandum of understanding to issue the shares on preferential basis to these parties after delisting of the shares of the company in the stock exchange is found to be correct as the assessee has already applied to the Kolkata Stock Exchange as well as SEBI for delisting of its equity shares. Even otherwise when the creditworthiness of the party as well as genuineness of the transaction through the banking channel was established without pointing out any discrepancy either in the books of account or in the bank statement of the creditor or the assessee, the addition made merely on the basis of the statement is not sustainable. In view out finding on this issue 130 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT in case of Kota Dall Mill (supra), the addition made by the Assessing Officer is deleted.
44. Ground No. 6 of the assessee's appeal is regarding denial of benefit of telescoping, recycling and rotation of funds by rejecting the peak credit theory. This issue has been considered by us while deciding ground No. 6 of the assessee's appeal for the A.Y. 2010-11. Accordingly, in view of our finding on this issue for the A.Y. 2010-11, ground No. 6 of the assessee's appeal is infructuous.
45. In the cross appeal for the A.Y. 2013-14, the revenue has taken following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 73,00,00,000/- made by the AO u/s 68 of the IT Act on account of unexplained unsecured loans claimed to have obtained by the assessee from M/s Birla Arts Pvt. Ltd, M/s Magnate Capital Market Ltd, M/s Competent Securities Pvt. Ltd., M/s Blossom Dealers Pvt. Ltd. and M/s Bajnath Commosales Pvt. Ltd.
2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender M/s Birla Arts Pvt. Ltd, M/s Magnate Capital Market Ltd, M/s Competent Securities Pvt. Ltd, M/s Blossom Dealers Pvt. Ltd and M/s Bajnath Commosales Pvt. Ltd are not shell companies without considering the financial statements of these companies.
3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd, M/s 131 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Magnate Capital Market Ltd, M/s Competent Securities Pvt. Ltd, M/s Blossom Dealers Pvt. Ltd and M/s Bajnath Commosales Pvt. Ltd merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record.
4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Birla Arts Pvt. Ltd, M/s Magnate Capital Market Ltd, M/s Competent Securities Pvt. Ltd, M/s Blossom Dealers Pvt. Ltd and M/s Bajnath Commosales Pvt. Ltd despite the fact that the directors or Principal Officers of these companies were never produced before the Assessing Officers for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.
5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loan claimed to have obtained from M/s Birla Arts Pvt. Ltd., M/s Magnate Capital Market Ltd., M/s Competent Securities Pvt. Ltd., M/s Blossom Dealers Pvt. Ltd. and M/s Bajnath Commosales Pvt. Ltd. merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions.
6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon'ble Supreme court in Navodaya Castle (P) Ltd. Vs CIT (2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions.
132 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding the special deposit from M/s Baijnath Commosales Pvt. Ltd as genuine whereas the CIT(A) on the basis of evidences available on record held unsecured loans obtained from M/s Caplin Dealcom Private Ltd, a company in which M/s Baijnath Commonsales Pvt. Ltd amalgamated, as bogus.
8. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in considering the amalgamating companies as genuine and the resultant amalgamated company as Shell company which is a theoretical impossibility as the constituents can never be greater than the whole.
9. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 1,66,360/- made by the AO on account of depreciation on guest house building.
10. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 16,787/- made by the AO on account of excess claim of depreciation on UPS.
11. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 3,72,253/- made by the AO out of foreign travel expenses.
12. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 24,720/- made by the AO on account of professional service charges of prior years.
The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
46. Grounds No. 1 to 8 of the appeal are regarding the addition made by the Assessing Officer in respect of five creditors was deleted by the ld.
CIT(A).
133 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
47. The ld. CIT-DR has submitted that the assessee was given various opportunities but failed to produce the Principal Officer or the Directors of these companies to substantiate the genuineness of the transaction when Shri Ankit Bagri has admitted his involvement in providing accommodation entries. He has referred to the assessment order and submitted that the Assessing Officer has conducted enquiry during the assessment proceedings through the Kolkata Investigation Wing and based on the report of Kolkata Investigation Wing as well as the statement of Shri Ankit Bagri, the Assessing Officer has reached to a reasonable conclusion to hold that the transactions are nothing but bogus accommodation transaction as these companies are shell companies.
48. On the other hand, the ld AR of the assessee has submitted that the entire order of the Assessing Officer is based on the statement of Shri Ankit Bagri as well as the report of Investigation Wing, Kolkata, however, neither in the statement nor in the reports any allegation has made in respect of these transactions of loan as well as special deposits received by the assessee from these parties. The Assessing Officer has extrapolated the statement of Shri Ankit Bagri and applied the same to the other cases whereas there is no whisper about the accommodation entries from these parties. The ld. CIT(A) has deleted the addition by considering the fact that the Assessing Officer was not having any material or any statement of 134 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT the alleged entry provider or operator. The Tribunal has considered this issue in the case of Kota Dall Mill (supra) wherein all these parties including M/s Birla Arts Pvt. Ltd., Teac Consultants Pvt. Ltd., Ms/s Magnet Capital Market Ltd., M/s Competent Securities Pvt. Ltd. have been examined. As regards M/s Blossom Dealers Pvt. Ltd. and M/s Baijnath Commosales Pvt. Ltd., the ld AR has submitted that in case of M/s Baijnath Commosales Pvt. Ltd., the amount was repaid on 22/3/2013 and therefore, it was not outstanding as on 31/3/2013 relevant to the assessment year under consideration. Further the said company M/s Baijnath Commosales Pvt. Ltd., was subsequently merged with M/s Caplin Dealcom Pvt. Ltd. as per approval of the Hon'ble Kolkata High Court. He has supported the order of the ld. CIT(A). He has referred to the various documents produced by the assessee in support of the claim and to show that these companies are genuine NBFCs and were having sufficient funds to give this deposit to the assessee.
49. We have considered the rival submissions as well as relevant material on record. Out of these six parties for which the Assessing Officer made the addition, the ld. CIT(A) deleted the addition in respect of five parties which are as under:
i) M/s Birla Arts Pvt. Ltd.
ii) M/s Blossam Dealers Pvt. Ltd.
135 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
iii) M/s Competent Securities Pvt. Ltd.
iv) M/s Magnet Capital Market Ltd.
v) M/s Baijnath Commosales Pvt. Ltd.
As regards the transactions with M/s Birla Arts Pvt. Ltd., M/s Magnet Capital Market Ltd. and M/s Competent Securities Pvt. Ltd. we note that the identical transactions were considered by this Tribunal in case of Kota Dall Mill (supra) which has also been considered by us in the earlier paras of this order while deciding the issue regarding M/s Birla Arts Pvt. Ltd. and M/s Teac Consultants Pvt. Ltd.. As regards M/s Magnet Capital Market Ltd.
and M/s Competent Securities Pvt. Ltd., the transaction with these two companies have been considered by the Tribunal in the case of Kota Dall Mill (supra) in para 22, 30 and 31 as under:
"22. We have carefully perused the impugned orders of the AO as well as the ld. CIT (A) and also gone through the documents filed by the assessee in support of the claim and found that the assessee produced the identical documentary evidence as in the case of assessment year 2010-11. Even the parties are same for these years and, therefore, once the identity, creditworthiness and genuineness of the transaction in respect of one party is decided, then the same is applicable for all the subsequent years subject to condition that a sufficient fund was available with the creditor. We note that except M/s. Royal Crystal Dealers Pvt. Ltd. and M/s. Doshi Management Pvt. Ltd., additions for which were confirmed by the ld. CIT (A) for all these years on the reasoning that these companies are managed and controlled by Shri Anand Sharma, the alleged entry operator, the other creditors are common as in the preceding years. This 136 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT finding of the ld. CIT (A) is identical to the finding in respect of M/s.
Jalsagar Commerce Pvt. Ltd. for the assessment year 2010-11. Accordingly, in view of our finding on this issue, the addition sustained by the ld. CIT (A) is deleted. Rest of the parties for which the additions were deleted by the ld. CIT (A) are same for which the AO was not having any material or document to substantiate the finding of bogus accommodation entries as in the case of other parties, namely, M/s. Birla Arts Pvt. Ltd., M/s. Tech Consultants Pvt. Ltd., M/s. Sangam Distributors Pvt. Ltd. As regards the corporate partners who have introduced the capital, they remain the same for all the years and, therefore, the issue is common for all these years except the fact that for the assessment year 2014-15 only one partner, namely, M/s. Bansidhar Advisory Pvt. Ltd. introduced some capital of Rs. 13.00 lacs and for the assessment year 2013-14 only three partners introduced the capital. Therefore, in view of our finding on all these issues while deciding the cross appeals for the assessment year 2010-11, the grounds raised by the assessee and revenue for the assessment years 2011-12 and 14-15 stand disposed off on the same terms and finding of the assessment year 2011-12 is mutatis-mutandis applicable for these assessment years. ...................
....................
30. In the Revenue's cross appeal the issue on account of unsecured loans from two partners, namely, M/s. Competent Securities and M/s. Intellectual Builders for the assessment years 2015-16 and 16-17 were deleted by the ld. CIT (A) on the ground that the AO has not brought any material or documentary evidence to establish that the transactions are bogus accommodation entries as there was no statement of any person of alleged entry operator having control over these companies or managing these companies.
137 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
31. An identical issue was involved in all the assessment years of the revenue wherein the ld. CIT (A) has deleted the additions for want of any documentary evidence or any other material in support of the finding of the AO. Therefore, in view of our finding on this issue in assessment year 2010-11, the finding of the ld. CIT (A) is upheld."
We further note that the assessee produced the supporting documents in respect of each of the parties as under:
S. No. Particulars PB AY
2013-14
Page No.
M/s Blossom Dealers Pvt. Ltd
1 Copy of Ack. of ITR of AY 2013-14. 712/Vol -III
2 Copy of Balance sheet of assessment year 13- 713-720/Vol -
14 along with annexure. III
3 Copy of relevant page of bank statement 721-722/Vol -
showing the entry of payment made to III
assessee.
4 Confirmation of deposit given to assessee from 723-724/Vol -
books of accounts of party. III
5 Confirmation of deposit given to assessee from 725/Vol -III
books of accounts of assessee.
6 Copy of memorandum of understanding 726-730/Vol -
executed between the assessee and M/s III
Blossom Dealer Pvt Ltd for the transaction of
finance in form of deposits.
7 Copy of statement received from M/s Blossom 731/Vol -III
Dealers Pvt Ltd. Certifying and evidencing the
source of fund invested in assessee company.
8 Copy of affidavit of Priyanka Singh director of 732-735/Vol -
company. III
9 Copy of balance sheet of company of 736-741/Vol -
31.03.2011, 31.03.2012, 31.03.2013, III
31.03.2014, 31.03.2015 and 31.03.2016.
10 Copy of assessment order passed in the case of 742-755/Vol -
above named company for AY 2013-14 and III
2014-15.
11 Copy of ROC master data. 756/Vol -III
12 Certificate of Incorporation. 757/Vol -III
13 Copy of Pan Card. 758/Vol -III
138 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
14 Copy of summon no. 1446 dated 13.10.2017 759-762/Vol -
and reminder notice no. 1582 dated III
31.10.2017 issued by DDIT (Investigation),
Unit-1(3), Kolkata u/s 131 of Income Tax Act,
1961
15 Copy of reply submitted by company in 763-765/Vol -
response to notice/summon issued to it Along III
with dispatched proof
M/s Baijnath Commosales Pvt Ltd
1 Copy of Ack. of ITR of AY 2013-14 766/Vol -III
2 Copy of Balance sheet of AY 2013-14 along 767-774/Vol -
with Annexure III
3 Copy of relevant page of bank statement 775/Vol -III
showing the entry of payment made to
assessee.
4 Confirmation of deposit given to assessee from 776/Vol -III
books of accounts of party.
5 Confirmation of deposit given to assessee from 777/Vol -III
books of accounts of assessee.
6 Copy of statement received from M/s Baijnath 778/Vol -III
Commosales Pvt Ltd certifying resources of
fund in assessee company.
7 Copy of affidavit of Kavita Jain director of 779-784/Vol -
company. III
8 Order passed by Calcutta High Court regarding 785-806/Vol -
amalgamation of other companies with this III
company.
9 Copy of balance sheet of company of 807-810/Vol -
31.03.2010, 31.03.2011, 31.03.2012 and III
31.03.2013.
10 Copy of assessment order passed in the case of 811-816/Vol -
above named company for AY 2013-14. III
11 Copy of Pan Card. 817/Vol -III
12 Copy of ROC Data. 818/Vol -III
13 Copy of Certificate of Incorporation. 819/Vol -III
14 Copy of summon no. 1441 dated 13.10.2017 820-823/Vol -
and reminder notice no. 1587 dated III
31.10.2017 issued by DDIT (Investigation),
Unit-1(3), Kolkata u/s 131 of Income Tax Act,
1961.
15 Copy of reply submitted by company in 824-826/Vol -
response to notice/summon issued to it Along III
with dispatched proof.
M/s Birla Arts Pvt. Ltd
1 Copy of Ack. of ITR of AY 2013-14. 827/Vol -III
2 Copy of Balance sheet of AY 2013-14 along 828-833/Vol -
with Annexure. III
139 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
3 Copy of relevant page of bank statement 834-849/Vol -
showing the entry of payment made to III
assessee.
4 Confirmation of loan given to assessee from 850-851/Vol -
books of accounts of party. III
5 Confirmation of loan given to assessee from 852-854/Vol -
books of accounts of assessee. III
6 Copy of affidavit of Neelam Gautam director of 855-858/Vol -
company. III
7 Order passed by Calcutta High Court regarding 859-885/Vol -
amalgamation of other companies with this III
company
8 Copy of balance sheet of company of 886-892/Vol -
31.03.2010, 31.03.2011, 31.03.2012, III
31.03.2013, 31.03.2014, 31.03.2015 and
31.03.2016.
9 Copy of assessment order passed in the case of 893-915/Vol -
above named company for AY 2006-07, 2012- III
13, 2013-14 and 2014-15.
10 Copy of ROC master data. 916-917/Vol -
III
11 Certificate of Incorporation. 918/Vol -III
12 NBFC Registration Certificate. 919/Vol -III
13 Copy of PAN card. 920/Vol -III
M/s Magnate Capital Market Limited
1 Copy of Ack. of ITR of AY 2013-14. 472/Vol -II
2 Copy of Balance sheet of assessment year 13- 473-480/Vol -
14 along with annexure. II
3 Copy of relevant page of bank statement 481-489/Vol -
showing the entry of payment made to II
assessee.
4 Confirmation of deposit given to assessee from 490-491/Vol -
books of accounts of party. II
5 Confirmation of deposit given to assessee from 492-494/Vol -
books of accounts of assessee. II
6 Copy of memorandum of understanding 495-499/Vol -
executed between the assessee and M/s II
Magnate Capital Markets Ltd for the transaction
of finance in form of deposits
7 Copy of affidavit of Babita Kriplani director of 500-503/Vol -
company. II
8 Order passed by Calcutta High Court regarding 504-526/Vol -
amalgamation of other companies with this II
company.
9 Copy of balance sheet of company of 527-533/Vol -
31.03.2010, 31.03.2011, 31.03.2012, II
31.03.2013, 31.03.2014, 31.03.2015 and
31.03.2016.
140 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
10 Copy of assessment order passed in the case of 534-538/Vol -
above named company for AY 2014-15. II
11 Copy of ROC master data. 539-540/Vol -
II
12 Copy of PAN card. 541/Vol -II
13 Certificate of Incorporation 542/Vol -II
14 Copy of NBFC Certificate 543/Vol -II
15 Copy of summon no. 1443 dated 13.10.2017 544-547/Vol -
and reminder notice no. 1585 dated II
31.10.2017 issued by DDIT (Investigation),
Unit-1(3), Kolkata u/s 131 of Income Tax Act,
1961
16 Copy of reply submitted by company in 548-550/Vol -
response to notice/summon issued to it Along II
with dispatched proof
M/s Competent Securities Pvt Ltd
1 Copy of Ack. of ITR of AY 2013-14 648/Vol -II
2 Copy of Balance sheet of AY 2013-14 along 649-658/Vol -
with Annexure II
3 Copy of relevant page of bank statement 659-663/Vol -
showing the entry of payment made to II
assessee.
4 Confirmation of deposit given to assessee from 664/Vol -II
books of accounts of party.
5 Confirmation of deposit given to assessee from 665-666/Vol -
books of accounts of assessee. II
6 Copy of memorandum of understanding 667-671/Vol -
executed between the assesse and M/s II
Competent Securities Pvt Ltd for the
transaction of finance in form of deposits
7 Copy of affidavit of Nidhi Singh director of 672-675/Vol -
company. II
8 Copy of balance sheet of company of 676-682/Vol -
31.03.2010, 31.03.2011, 31.03.2012, II
31.03.2013, 31.03.2014, 31.03.2015 and
31.03.2016.
9 Copy of assessment order passed in the case of 683-699/Vol -
above named company for AY 2009-10 2010- II
11 and 2014-15
10 Copy of ROC master data. 700-701/Vol -
II
11 Certificate of Incorporation 702/Vol -II
12 NBFC Registration Certificate 703/Vol -II
13 Copy of PAN card. 704/Vol -II
141 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
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14 Copy of summon no. 1437 dated 13.10.2017 705-708/Vol -
and reminder notice no. 1588 dated II
31.10.2017 issued by DDIT (Investigation),
Unit-1(3), Kolkata u/s 131 of Income Tax Act,
1961
15 Copy of reply submitted by company in 709-711/Vol -
response to notice/summon issued to it Along II
with dispatched proof
a) Assessment u/s 143(3)
Name of Company Assessment Income Assessment
year Assessed Order u/s
143(3) at A.Y
2013-14
PB pg
M/s Blossom Dealers Pvt. 2013-14 5,30,978 742-745/Vol-III
Ltd.
M/s Blossom Dealers Pvt. 2014-15 14,958 749-752/Vol-III
Ltd.
M/s Baijnath Commosales 2013-14 95,745 811-813/Vol-III
Pvt. Ltd
M/s Baijnath Commosales 2014-15 Nil 816A-816B/Vol-
Pvt. Ltd III
M/s Magnate Capital 2014-15 68,330 534-535/Vol-II
Market Ltd.
M/s Competent Securities 2009-10 94,600 684-685/Vol-II
Pvt. Ltd
M/s Competent Securities 2010-11 2,08,099 690-691/Vol-II
Pvt. Ltd
M/s Competent Securities 2014-15 9,06,648 693-696/Vol-II
Pvt. Ltd
M/s Birla Arts Pvt Ltd The assessment history of M/s Birla Arts Pvt
Ltd has already been explained in para 7 above
for departmental appeal ITA No.
1101/JPR/2018 A.Y 2011-12
b) Copy of Master Data of ROC
Name of Company Status of A.Y 2013-14
Company PB pg
M/s Birla Arts Pvt. Ltd Active 939/Vol-III/
M/s Blossom Dealers Pvt. Ltd. Active 756/Vol-III
M/s Magnate Capital Market Ltd. Active 539//Vol-II
M/s Competent Securities Pvt. Ltd Active 700-701/Vol-II
M/s Baijnath Commosales Pvt. Amalgamated
Ltd
142 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 &
CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
From the details of the documents produced by the assessee, it is clear that the assessee has established its claim by documentary evidence as well as the assessment orders passed U/s 143(3) of the Act wherein all these transactions were accepted by the Assessing Officer. As per the ROC master data, the status of these companies have been shown as active and in case of M/s Baijnath Commosales Pvt. Ltd., it is also shown as amalgamated. As it is clear from the record that the scheme of amalgamation was approved by the Hon'ble High Court of Kolkata. The assessee has established the availability of funds with these companies which are NBFCs raised share capital during the various financial/assessment years, therefore, once the companies were having sufficient fund to give special deposits under the memorandum of understanding whereby the assessee has undertaken to issue the equity shares on preferential basis against these deposits after the equity shares were delisted from the stock exchange. The process of delisting was not in dispute as it was acknowledged by the Stock Exchange, Kolkata as well as by the SEBI which is an independent record and there is no scope of any manipulation by the assessee. Therefore, having regard to the documentary evidence produced by the assessee and the statement which is relied upon by the Assessing Officer is full of contradictions not establishing the case that the transactions of special deposits between the 143 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT assessee and these parties are accommodation entries. The statement itself does not give a clear picture but Shri Ankit Bagri has stated that prior to 07/4/2012 he was involved in providing accommodation entries alongwith his partner Late Shri Sumit Kejriwal but after the death of Sumit Kejriwal on 07/4/2012 he has not done any activity of providing accommodation entry. Since all these transactions are subsequent to the said date of death of Shri Sumit Kejriwal, therefore, the statement itself is not helping the case of the Assessing Officer. Even otherwise when the assessee has produced the documentary evidence in support of its claim and the Assessing Officer has not brought on record any contrary material to dispute the correctness of the documentary evidence filed by the assessee then the addition made by the Assessing Officer merely on the basis of the statement is not sustainable. Further we have already taken a view that the statement relied upon by the Assessing Officer without giving opportunity of cross examination is clear violation of principles of natural justice and consequently the addition made merely on the basis of statement is not sustainable. Even otherwise the ld. CIT(A) has deleted the addition on the ground that the Assessing Officer was not having in his possession the statement of the alleged entry providers in respect these five parties except in the case of M/s Caplin Dealcom Pvt. Ltd. Hence, in 144 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT view of the above facts and circumstances as discussed above, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue.
50. Ground No. 9 of the appeal is regarding disallowance of depreciation on guest house building. The Assessing Officer has disallowed the depreciation on guest house on the ground that the assessee has failed to establish that the guest house was used exclusively for the business purposes. On appeal, the ld CIT(A) has allowed the claim of depreciation.
51. The ld. CIT-DR has relied upon the order of the Assessing Officer and submitted that when the assessee has failed to establish that the guest house is used exclusively for business purposes, the claim was not allowable and rightly disallowed.
52. On the other hand, the ld AR of the assessee has submitted that the guest house is situated in the factory premises itself and cannot be used other than the business of the assessee. The ld. CIT(A) has considered this fact and allowed the claim.
53. We have considered the rival submissions as well as relevant material on record. Once the guest house is situated in the factory premises itself, then the use of the guest house is not in dispute. It is not a claim of deduction U/s 37(1) of the Act to consider the expenditure is 145 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT laid out wholly and exclusively for the business of the assessee. The claim of depreciation U/s 32 of the Act is allowable once the asset is put to use, therefore, the fact of the guest house is in factory premises itself not in dispute which established that the guest house is used for the business purposes of the assessee and not for any other purpose. The ld. CIT(A) has considered this issue in para 12.2 and 12.3 of its order as under:
"12.2. The A/R of the Appellant has attended the proceedings and made submissions as follows:
The company is having a building in the factory premises which is used as guest house for business customer and associate agencies. In the business of production of copper and copper alloy tubes our company has to allow inspection of products to customers before packing and dispatch. As our factory runs for 24 hours in order to make the inspection conveniently in all working hours we provide facility for our customers to stay in our premises at guest house. By the use of guest house we operate our business efficiently and establish cordial relations with tour business customers. Thus the claim of depreciation on guest house building was use of a business asset for business purpose hence allowable. The Ld AO did not appreciated the justification submitted by the Appellant Company in this respect a copy of the same is annexed herewith at Page No 114- 117 of PB-1.
The same issue was considered favorably for the Appellant Company in the appeal order no 49/14-15 dated 07.04.2016 issued by CIT(Appeals), Kota. Thus the claim of depreciation may be allowed.
12.3 I have considered the rival submission and material placed on record. It is seen that in the business of the Appellant use of the guest house building for the purpose of business cannot be denied. Therefore, following the decision of CIT (A), Kota, in appeal no. 49/14-15 dated 07.04.2016 and 146 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT justification provided by the appellant, the claim of depreciation on guest house building is allowed to the Appellant. Accordingly, this addition of Rs. 1,66,360/- is deleted."
Accordingly, in view of the facts and circumstances of the case, where the guest house is situated in the factory premises and being used for the purpose of business of the assessee, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue.
54. Ground No. 10 of the appeal is regarding restriction of depreciation on UPS from 60% to 15%. We have heard the ld. CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. At the outset we note that this Tribunal has been taking a consistent view that the UPS is an integral part of computer and therefore, eligible for depreciation @ 60%. The ld. CIT(A) after considering the various decisions has decided this issue in para 13.2 and 13.3 as under:
"13.2 The A/R of the Appellant attended the proceedings and made submissions as follows:-
The UPS is an integral part of the computer and it is entirely used for computers as its peripherals / accessories. There is no other use of UPS separately. As per many tribunal judgements including judgement of Jaipur IT AT the depreciation on UPS is allowed at the rate of depreciation of computer. The claim of depreciation of UPS as computer was justified. Our claim of depreciation @ 60% is supported by the following judgement:
1. ACIT Vs Ram Kishan Verma (2011) 30CCH 0561 Jaipur Trib 147 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
2. ITO Vs Omni Globe Information Technology India (2011)30 CCH 0217 Del Trib
3. Ushodaya Enterprises Ltd Vs ACIT (2013) 37CCH 0621 Hyderabad Trib The Ld AO did not appreciate the justification submitted by the Appellant Company in this respect a copy of the same is annexed herewith at Page No 114-117 of PB-1.
The same issue was considered favorably for the Appellant Company in the appeal order no 49/14-15 dated 07.04.2016 issued by CIT(Appeals), Kota for the AY 2011-12. Thus the claim of depreciation may be allowed.
"13.3. I have considered the rival submission and material placed on records, In my considered view, the issue remains decided in favour of the Appellant, in appellants own case for A.Y. 2011-12 in appeal no. 49/14-15 dated 07.04.2016 passed by CIT(Appeals), Kota for the A.Y. 2011-12. Further respectfully following the decision of Hon'ble Jaipur Tribunal in case of 1.ACIT Vs Ram Kishan Verma (2011) 30CCH 0561 Jaipur Trib and Others as relied upon by the A/R, the claim of depreciation at the rate of 60% on UPS is allowed to the Appellant. Accordingly, this addition of Rs. 16,787/- is deleted."
Therefore, the ld. CIT(A) has followed the decision of this Tribunal and in absence of any contrary precedent, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. Hence, this ground of the revenue's appeal stands dismissed.
55. Ground No. 11 of the appeal is regarding the disallowance of foreign travel expenses. The Assessing Officer has held that the assessee has 148 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT incurred Rs. 24,81,684/- towards foreign travel expenses in respect of the visits of the Directors. The Assessing Officer was of the view that the personal nature of expenditure cannot be ruled out and accordingly disallowed 15% of the expenditure amounting to Rs. 3,72,253/-. On appeal, the ld CIT(A) has deleted the disallowance and allowed the claim.
56. We have heard the ld. CIT-DR as well as the ld. AR of the assessee and considered the relevant material on record. The ld. CIT-DR has relied upon the order of the Assessing Officer whereas the ld. AR has submitted that the foreign travels were made only for the business purposes which is also not disputed by the Assessing Officer but the Assessing Officer has made 15% disallowance only on the ground of personal nature of expenditure. The assessee being a company and artificial person, therefore, cannot be personal expenditure of the company.
57. Having considered the rival submissions as well as relevant material on record at the outset we note that once the Assessing Officer has not pointed out specific instance of possibility of personal nature of expenditure, the ad hoc disallowance of 15% on mere possible is not justified. The ld. CIT(A) has considered this issue in para 14.1 to 14.3 as under:
"14.1 As mentioned in the assessment order at page no. 5-6, AO made disallowance of Rs. 3,72,253/- on estimate basis in respect of foreign 149 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT travelling expenditure The AO disallowed 15% of these expense on account of personal use. According to AO, these expenses are not bifurcated into business and non-business use and personal use cannot be ruled out in respect of these expenses. Accordingly, he made disallowance of Rs. 3,72,253/-.
14.2 The A/R of the Appellant attended the proceedings and made submissions as follows:
The appellant company has incurred expenses on foreign travelling to explore our product for export market to various counties. A part of foreign travelling expenses was incurred for import of machinery, spare parts of machinery and raw materials. A statement made by the company during the year under assessment has been submitted to the AO during the assessment proceedings. You are request to allow the same as business expenses and the same have been incurred during the year for the purpose of business. The Ld AO did not appreciate the justification submitted by the Appellant Company in this respect a copy of the same is annexed herewith at Page No 114- 117 of PB-1.
The same issue was considered favorably for the Appellant Company in the appeal order no 49/14-15 dated 07.04.2016 issued by CIT (Appeals), Kota for the AY2011-12. Thus the expenses may be allowed.
14.3 I have considered the rival submission and material placed on record.
In my considered view, the issue remains decided in favour of the Appellant, in appellants own case for A.Y. 2011-12 in appeal no. 49/14-15 dated 07.04.2016 passed by CIT (Appeals), Kota for the A.Y. 2011-12. In view of the said decision and further in the absence of any specific case of non-business use made by the AO, this addition of Rs. 3,72,253/- is deleted.
150 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Thus, an identical issue was decided in the A.Y. 2011-12, which was not challenged by the revenue before us. Hence, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue.
58. Ground No. 12 of the appeal is regarding disallowance of professional service charges being prior years. The Assessing Officer noted that the assessee has claimed an expenditure of Rs. 24,720/- on account of professional service charges. Since these professional service charges were paid in respect of the appeal of the assessment year 2010-11 and 2011-12 and thereby considered the same as prior period expenditure. On appeal, the ld. CIT(A) has allowed the claim by considering the fact that the appeal was decided during the year under consideration and the bill was raised by the professionals during the year under consideration.
59. We have heard the ld. CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. The ld. CIT(A) has considered the decided this issue in para 15.3 as under:
"15.3 I have considered the rival submissions and material placed on records.
It is seen from the paper book page no. 114-117, that expenditure in consideration are in relation to personal appearance vide bill dated 08.01.2013. Therefore, merely on the ground that personal appearance pertained to earlier year's assessment/other proceedings, the expenditure cannot be termed as prior period expenditure. Further the bill for the said professional services were received during the year 151 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT under consideration only, therefore, it cannot be treated as prior period expenses. In view of the reasons and findings as above, this additions of Rs. 24,720/- is deleted."
Thus, the bill for professional service was raised by the professional on 08/1/2013 who has appeared on behalf of the assessee in the appeals pending. Though the appeals were pertaining to the earlier year, however, the expenditure is crystallized only when the matter was finalized and the bill was raised by the professional service provider. Hence, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue.
60. In the appeal for A.Y. 2015-16, the assessee has raised following grounds of appeal:
"1. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in not declaring the assessment order as bad in law and void ab initio. The findings of Id CIT(A) in this regard are perverse and erroneous. It is contended that the Id. AO passed the assessment order against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore the assessment order ought to held as bad in law and deserves to be annulled.
2. That the order of the Id CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case. The addition confirmed by ld.CIT (A) deserves to be deleted.
3. On the facts and in the circumstances of the case and in law the Id. CIT (A) erred in confirming the additions made u/s 68 of the Income Tax Act, 1961 by : -
152 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
a) solely relying on the statements of some alleged accommodation entry providers recorded by some other authorities in some other cases/actions and the opportunity to cross examination was also not provided to assessee.
b) giving a contradictory finding that a doubt is raised on the identity and genuineness of the company whose name is mentioned in the statement of accommodation entry providers as well as reports of DDIT (Inv.)-Kolkatta.
c) holding that the assessee has not adduced any evidence to rebut the adverse factual finding made by the AO in the assessment order though detailed paper book for relevant AY and common paper books have been submitted, and
d) holding that incriminating material had been found during the course of search of accommodation entry provider. Further incriminating material had been gathered by issuing commission to DDIT (Inv.) Kolkatta.
4. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in confirmation the addition of Rs. 14,40,00,000/- made by Id. AO u/s 68 of Income Tax Act, 1961 on account of special deposit received from following parties and erroneously held that the identity, creditworthiness and genuineness of the under mentioned company is doubtful: -
Name of the company Amount Name of alleged entry
from whom loan operator whose
received statement were relied
Caplin Dealcom Pvt. 14,40,00,000 Shri Ankit Bagri Ltd
5. On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in rejecting the theory of peak credit and erred in not allowing the benefit of telescoping, recycling and rotation of funds.
6. The assessee prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal.
153 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
61. Ground No. 1 of the appeal is regarding violating the principles of natural justice for not granting opportunity to cross examination.
62. We have heard the ld AR as well as the ld. CIT-DR and considered the relevant material on record. This ground of appeal is common to the appeals of assessee for the A.Y. 2010-11 to 2012-13 as well as the in the C.O. of the assessee, therefore, in view of our finding on this issue for the A.Y. 2010-11 as well as the C.O. of the assessee for the A.Y. 2011-12 and 2012-13, the same is decided in favour of the assessee and against the revenue.
63. Grounds No. 2 to 5 of the appeal are regarding the addition made by the Assessing Officer on account of unsecured loan from M/s Caplin Dealcom Pvt. Ltd.
64. We have heard the ld AR as well as the ld. CIT-DR and considered the relevant material on record. The Assessing Officer has made this addition based on the statement of Shri Ankit Bagri as it was made in the A.Y. 2013-14. In view of our finding on this issue of amount received from M/s Caplin Dealcom Pvt. Ltd. for the A.Y. 2013-14, the addition made by the Assessing Officer is deleted.
154 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
65. Ground No. 6 of the assessee's appeal is regarding denial of benefit of telescoping, recycling and rotation of funds by rejecting the peak credit theory. This issue has been considered by us while deciding ground No. 6 of the assessee's appeal for the A.Y. 2010-11. Accordingly, in view of our finding on this issue for the A.Y. 2010-11, ground No. 6 of the assessee's appeal is infructuous.
66. In the cross appeal for the A.Y. 2015-16, the revenue has taken following grounds of appeal:
"1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 12,50,00,000/- made by the AO u/s 68 of the IT Act on account of unexplained unsecured loans claimed to have obtained by the assessee from M/s Magnate Capital Market Ltd.
2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the alleged lender M/s Magnate Capital Market Ltd. is not shell company without considering the financial statements of this company.
3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Magnate Capital Market Ltd. merely for the reason that evidences in the form of statement on oath of the relevant entry operators were not available on record.
4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans claimed to have obtained from M/s Magnate Capital Market Ltd. despite the fact that the director or Principal Officer of this company was never produced before the Assessing Officer for examination despite number of opportunities provided by the AO 155 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.
5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loan claimed to have obtained from M/s Magnate Capital Market Ltd., merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions.
6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans by observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon'ble Supreme court in Navodaya Castle (P) Ltd. Vs CIT (2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions.
7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 1,34,751/- made by the AO on account of depreciation on guest house building.
8. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 2,668/- made by the AO on account of excess claim of depreciation on UPS.
09. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 2,79,133/- made by the AO out of foreign travel expenses.
10. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs.15,000/-
156 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT made by the AO on account of professional service charges of prior years.
11. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 58,770/- made by the AO on account of prior period expenses.
The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
67. Ground Nos. 1 to 6 of the appeal are regarding the addition made by the Assessing Officer U/s 68 of the act on account of unsecured loan received from M/s Magnate Capital Market Ltd. This issue of identity, creditworthiness of the creditor and genuineness of the transaction was considered by us while deciding the identical issue in the appeal of the revenue for the A.Y. 2013-14. Accordingly, in view our finding on this issue in the A.Y. 2013-14 as well as the decision of the Tribunal dated 31/12/2018 in the case of Kota Dall Mill (supra) we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, these grounds of the revenue's appeal stand dismissed.
68. Ground No. 7 of the appeal is regarding the disallowance made by the Assessing Officer on account of depreciation on guest house which was deleted by the ld. CIT(A). This issue is common to the issue raised by the revenue for the A.Y. 2013-14. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013- 157 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
14. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
69. Ground No. 8 of the appeal is regarding the disallowance of higher depreciation on UPS. This issue is common to the issue raised by the revenue for the A.Y. 2013-14. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14.
Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
70. Ground No. 9 of the appeal is regarding the disallowance on account of foreign travel expenses. This issue is common to the issue raised by the revenue for the A.Y. 2013-14. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14.
Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
71. Ground No. 10 of the appeal is regarding disallowance on account of professional service charges. This issue is common to the issue raised by the revenue for the A.Y. 2013-14. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-
14. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
158 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
72. Ground No. 11 of the appeal is regarding the disallowance on account of prior period expenditure.
73. The Assessing Officer noted that the assessee company has claimed prior period expenses of Rs. 58,770/- which is not allowable for the assessment year under consideration. In response to the show cause notice, the assessee submitted that it has paid the demand of entry tax relating to financial year 2006-07 and 2007-08 in the year 2011-12 and debited to recoverable account on account of appeal was pending with Commercial Taxes Department. The matter was decided against the assessee during the year under consideration and consequently the assessee has claimed the said amount as expenses. The Assessing Officer was not satisfied with the explanation of the assessee and made the addition on this account. On appeal, the ld. CIT(A) has allowed the claim of the assessee.
74. Before us, the ld CIT-DR has submitted that once the expenditure is pertaining to the prior period being relating to the F.Y. 2006-07 and 2007- 08 then the same cannot be allowed for the year under consideration. He has relied upon the order of the Assessing Officer.
75. On the other hand, the ld AR of the assessee has submitted that an identical issue was decided by the ld. CIT(A) for the A.Y. 2011-12 in favour 159 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT of the assessee and the revenue has not challenged the same, therefore, the ld. CIT(A) has allowed this claim by following the earlier decision. He has supported the order of the ld. CIT(A).
76. We have considered the rival submissions as well as relevant material on record. There is no dispute that this demand of entry tax pertains to the F.Y. 2006-07 and 2007-08, however, since the appeal against the demand was pending before the appellate authority and only after the conclusion of the appeal, the assessee has finally debited the said expenditure in the P&L account as it was earlier kept under the recoverable account. The ld. CIT(A) has considered this issue in para 12.2 as under:
"12.2 I have considered the rival submissions and material placed on records. It is seen from the paper book page no. No 144-146, that expenditure in consideration are in relation to earlier expenses billed during the year under consideration. The same issue was considered favorably for the Appellant Company in the appeal order no 49/14-15 dated 07.04.2016 issued by CIT(Appeals), Kota for the A.Y. 2011-12 a copy of which is annexed herewith at Page no.148-161 of PB. Following the same reasoning and findings as above, this additions of Rs. 58,770/- is deleted."
The ld. CIT(A) has relied upon the order for the A.Y. 2011-12 and the said order of the ld. CIT(A) allowing the claim for the A.Y. 2011-12 has not been challenged by the revenue. Accordingly, we do not find any error or 160 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT illegality in the impugned order of the ld. CIT(A) qua this issue. Hence, this ground of revenue's appeal is dismissed.
77. In the appeal for the A.Y. 2016-17, the revenue has raised following grounds:
"1. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of Rs. 65,18,820/- made by the AO on account of ineligible claim of non-recoverable IEX charges made by the assessee when the conditions of section 36(2)(i) are not satisfied.
2. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting disallowance of Rs. 1,21,274/- made by the AO on account of depreciation on guest house building.
3. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the disallowance of Rs. 1,074/- made by the AO on account of excess claim of depreciation on UPS.
4. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the disallowance of Rs. 2,27,487/- made by the AO on account of foreign travel expenses.
5. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the disallowance of Rs. 25,190/- made by the AO on account of professional service charges.
6. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the disallowance of Rs. 42,000/- made by the AO on account of prior period expenses.
7. Whether on the facts and circumstances of the case and in law the CIT(A) was justified in deleting the disallowance of Rs. 1,64,836/- made by the AO out of telephone & mobile phone charges.
161 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT "The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
78. Ground No. 1 of the appeal is regarding disallowance of non-
recoverable electricity charges paid to IEX of Rs. 65,18,820/- written off.
The assessee has been purchasing electricity from open access and making advance payments to Jaiput Vidyut Vitran Ltd. (JVVNL), however, the actual consumption of electricity in the earlier years was less than the purchase of electricity by the assessee from open access and that has resulted excess amount remained due. Since the assessee could not recover the said excess amount paid for purchase of the electricity as there was a less consumption in the earlier years, therefore, the assessee has written off the balance amount total of Rs. 65,18,820/- during the year under consideration. The Assessing Officer has disallowed the said claim and made the addition of the amount by holding that non-recoverable IEX expenses are not incurred during the current financial year. The Assessing Officer was of the view that mere writing off the debt in the books of account would not suffice for the purpose of claiming deduction of bad debts. Since IEX charges are not in the nature of debt and expenses pertained to the earlier year i.e. A.Y. 2011-12 and A.Y. 2012-13, therefore, the same is not allowable for the year under consideration. On appeal, the ld. CIT(A) has allowed the claim of the assessee.
162 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
79. Before us, the ld. CIT-DR has submitted that there is no dispute that these payments were made by the assessee in the earlier years for purchase of electricity and therefore the expenditure pertains to the earlier year and not for the year under consideration. Further this amount written off by the assessee is not a bad debts but it is only an expenditure incurred by the assessee in the earlier years. Hence, the claim is not allowable for the year under consideration being the prior period expenditure. He has relied upon the order of the Assessing Officer.
80. On the other hand, the ld AR of the assessee has submitted that as per the process of buying energy from open access the intended buyer and seller shall have to go through an entity who has been admitted by the Power Exchange as a registered member. The assessee was a registered "Grid Connect Client" of Indian Energy Exchange" and its transaction were executed on exchange through exchange registered member M/s Parshavath Power Projects P Ltd. The power will flow through the existing STU/CTU network depending on the location of the entity's injection / drawl point. In the case of assessee, the existing STU as "Jaipur Vidyut Vitran Nigam Limited". The assessee used to inform its daily requirement for a day in advance to M/s Parshavath Power Projects P Ltd.
who in turn was buying energy from IEX on assessee's behalf for the next day's requirement. The assessee has been paying advance money for the 163 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT electricity purchased for the next date, therefore, the purchases were made on estimated requirement while actual consumption was not always same and consequently some units remained underutilized. As the seller was injecting all sold energy on the grid point of JVVNL, therefore, the charges for underutilized energy was to be refunded by the JVVNL. It was also responsibility of the exchange registered member M/s Parshavath Power Projects P Ltd. to arrange the refund of underutilized energy but despite the best efforts of the assessee it could not get the refund of excess charges in respect of underutilized energy. The assessee has made all possible efforts and prolonged follow up with JVVNL but could not succeed in getting the refund of the amount and finally the said amount was written off during the year under consideration. The ld AR has further submitted that the expenditure was incurred for the purpose of business is not in dispute but the Assessing Officer has disallowed only on the ground that it was incurred for the earlier years and not for the year under consideration. In support of his contention, he has relied upon the decision of Kolkata Benches of the Tribunal dated 26/4/2018 in the case of Kesoram Industries Limited Vs Addl.CIT 2018 (5) TMI 420 -ITAT, Kolkata.
81. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee has made payments for purchase of electricity from open access through IEX. The 164 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT details of payment made by the assessee for purchase of electricity and actual consumption of the electricity during the F.Y. 2011-12and 2012-13 are as under:
Financial Year Payment made Transferred in Balance due for IEX Trading Electrical Expenses 2011 - 12 1,56,53,576/- 1,30,47,104/- 26,06,472/- 2012-13 1,74,18,236/- 1,35,05,889/- 39,12,347/-
Total 3,30,71,812/- 2,65,52,993/- 65,18,819/-
Thus, it is clear that the payment made by the assessee for the A.Y. 2011- 12 and 2012-13 is not in dispute that a total amount of Rs. 3,30,71,812/-
was made against which the assessee has consumed the electricity of Rs.
2,65,52,993/- and the actual consumption in amounts were claimed in the P&L account for the A.Y. 2012-13 and 2013-14 respectively. There is under utilization of the electricity by the assessee for these two years to the extent of total amount of Rs. 65,18,819/-. The assessee was under the believe that the payment towards the underutilized energy will be refunded but finally it was learnt by the assessee that the said amount would not be refunded to the assessee. Therefore, the assessee has finally written off the said amount during the year under consideration. We note that the payment made by the assessee for purchase of electricity from open access is otherwise an allowable expenditure being laid out for the purpose of business of the assessee. The only dispute is whether the excess payment made by the assessee over and above the consumption of 165 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT electricity can be allowed for the year under consideration as written off amount. Once the said expenditure is an allowable claim for the respective years during which the payment was made for purchase of electricity then there is no bar for allowing the said excess amount paid by the assessee which could not be recovered due to the complications involved in the process of purchase of energy from open source and transmission of the same through various intermediaries and written off. Even otherwise the claim of the assessee is revenue neutral as the assessee has also paid maximum marginal rate of tax for the assessment year 2012-13 and 2013- 14 during which the payment was made. Once the expenditure is otherwise an allowable business expenditure then the non-recoverable amount was finally written off by the assessee is allowable as business loss incurred during the course of business of the assessee. The electricity is an essential requirement of the assessee for carrying out the manufacturing activity and therefore, the expenditure incurred for purchase of electricity cannot be disallowed merely on technical grounds. The ld. CIT(A) has decided this issue in para 3.3 as under:
"3.3 I have considered the rival submission and material placed on record. It is seen that in the written off of Non recoverable IEX expenses is actually the advance payment made to JVVL in previous years for purchases of electricity from open access. There is no dispute that the payments were made in relation to business expenditure and the genuineness of the payment is also not in doubt. There is also no doubt that the written off amount was not recoverable to the appellant company. Since the advance 166 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT payment it not constitute any expenses at the time of its payment and the same constitute and charged to expenses as and when the service or goods against such payment is received and the same is also charged to expenses in the year in which such service or goods is received. Therefore the written off of such advance in case of non-recovery or non-adjustment in subsequent year cannot be linked from the year in which the payment of the same was made. The written off of such advances cannot be treated as pertaining to previous years merely on the ground that the payment of the same was made in previous years and the same is not pertaining for the year under consideration. In the case of the applicant the advance payment was to be recovered back from JVVNL which could not be received, therefore the same written off during the year. No person can expect that the advance given to someone will not recovered and for recovery of the same some efforts are to be made, therefore generally the advance/debts cannot be written off in the same year. The same are written off in the year when the applicant after all its efforts feels that the same cannot be recovered. Therefore it is not justify to hold that since the advances were given in previous years, therefore the same pertain to earlier year and company would have claimed it in relevant assessment year more so when in the relevant assessment year the applicant company was expecting the recovery or such advance. Further in the case of written off of debts/business advance the written off the same in books of accounts is sufficient and the same is treated as loss for the applicant company in the year in which the same is written off. In view of above the addition of Rs. 65,18,820/- made is hereby deleted. Therefore the ground No. 2 of appeal is allowed."
The Kolkata Benches of the Tribunal in the case of Kesoram Industries Ltd.
Vs. Addl.CIT (supra) while considering the issue of non-recoverable advance written off as held in paras 13 to 15 as under:
"13. Now we take up revenue's appeal in ITA 1722/Kol/2012 preferred by the revenue. Ground No. 1 is against the action of the Ld. CIT(A) in deleting the disallowance of Rs. 1,65,748/- made on account of advances written off. Briefly stated the facts of the case are that the assessee company had written off certain debit balances from its balance sheet aggregating to 167 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT Rs. 1,65,748/- and debited it to its profit and loss account being no longer recoverable. The advances written off comprised of the unadjusted balances of supplies of raw materials and stores which had remained outstanding over a long period of time which were raw materials/items of stores and the amount due from excise authorities and according to the assessee, which was also no longer recoverable to it. Before the A.O. the break-up of advances written off as aforesaid was furnished. The A.O. observed that the amounts in question were not receivable as trading debts but were outstanding advances and deposits therefore, the claim of the assessee was untenable and these sums did not satisfy the conditions prescribed in section 36(2) read with section 36(l)(vii) of the Act. On appeal, the Ld. CIT(A)-VI, Kolkata following the order of his predecessor for A.Y. 2006-07, deleted the disallowance made by the A.O. Aggrieved the Revenue is before us.
14. We have heard both the parties and perused the records. We note that the issue under dispute is squarely covered by the decision of this Tribunal in assessee's own case in ITA No. 931/Kol/2012 dated 29.02.2016 for A.Y. 2005-06 wherein on identical facts and circumstances held as under:
"8.3 We have heard the rival submissions and perused the materials available on record. We find from the facts of the case that the deposits and advances were given in the ordinary course of business and were lying in the books of the assessee company for quite a long time. The some were considered irrecoverable by the assessee and had written off the same in Asst Year 2005-06 and hence the same is to be considered as a trading loss u/s 28 of the Act. We hold that the Learned CITA) had rightly deleted the addition made in this regard. Accordingly, the ground no. 1 raised by the revenue is dismissed.
15. The facts in the year under dispute are analogous to that in the earlier years and since no change in a .v or facts could be pointed out by the revenue so respectfully following the order of the Tribunal (supra), we 168 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT find no infirmity in the impugned order of Ld. CIT(A), in this regard. Accordingly Ground No.1 raised by the Revenue is dismissed."
Accordingly, in view of the facts and circumstances of the case, we do not find any reason to interfere with the order of the ld. CIT(A) in allowing the claim of the assessee. Hence, this ground of the revenue's appeal is dismissed.
82. Ground No. 2 of the appeal is regarding the disallowance made by the Assessing Officer on account of depreciation on guest house which was deleted by the ld. CIT(A). This issue is common to the issue raised by the revenue for the A.Y. 2013-14 and 2015-16. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14 and 2015-16. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
83. Ground No. 3 of the appeal is regarding the disallowance of higher depreciation on UPS. This issue is common to the issue raised by the revenue for the A.Y. 2013-14 and 2015-16. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14 and 2015-16. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
169 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
84. Ground No. 4 of the appeal is regarding the disallowance on account of foreign travel expenses. This issue is common to the issue raised by the revenue for the A.Y. 2013-14 and 2015-16. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14 and 2015-16. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
85. Ground No. 05 of the appeal is regarding disallowance on account of professional service charges. This issue is common to the issue raised by the revenue for the A.Y. 2013-14 and 2015-16. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2013-14 and 2015-16. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
86. Ground No. 6 of the appeal is regarding the disallowance of prior period expenses. This issue is common to the issue raised by the revenue for the 2015-16. We have considered the decided this issue in favour of the assessee and against the revenue in the A.Y. 2015-16. Accordingly this ground of revenue's appeal stands disposed off in favour of the assessee and against the revenue.
87. Ground No. 7 of the appeal is regarding the disallowance of telephone and mobile phone charges.
170 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
88. The Assessing Officer has not discussed this issue in the assessment order, however, in computation of income, the Assessing Officer has made the disallowance of Rs. 1,64,836/- on account of telephone and mobile charges. On appeal, the ld. CIT(A) has deleted the said disallowance by holding that it is not justified.
89. We have heard the ld. CIT-DR as well as the ld AR of the assessee and considered the relevant material on record. It appears that the Assessing Officer has made partial disallowance of telephone and mobile expenditure on the ground of personal use. However, the assessee being a public limited company, the expenditure cannot be held as personal in nature. The ld. CIT(A) has considered this issue in para 9.3 as under:
"9.3 I have considered the rival submission and material placed on record. It is seen that there is no discussion/finding in the assessment order regarding the addition so made. In view of any finding in the assessment order regarding addition so made the impugned addition is not justifiable. Therefore the addition of Rs. 1,64,836/- is deleted. Therefore the ground No. 8 and 9 of appeal is allowed."
Even otherwise in case of a company if any employee is enjoying the facility of telephone of the company, the same would be treated as perquisite which is subject to fringe benefit tax. Therefore, no disallowance can be made on account of personal element of expenditure. Hence, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue.
171 ITA Nos. 1024 to 1026, 1100 to 1104 & 1230/JP/2018 & CO 38 & 39/JP/2018 Multimetals Ltd, Vs DCIT
90. In the result all the appeals of the assessee are partly allowed, cross objections of the assessee are allowed and all the appeal of the revenue are dismissed.
Order pronounced in the open court on 29th January, 2019.
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vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Multimetals Limited, Kota.
2. izR;FkhZ@ The Respondent- The D.C.I.T., Central Circle, Kota.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA Nos. 1024 to 1026, 1100 to 1004 & 1230/JP/2018 & CO 38 & 39/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar