Since regular assessment for the year under consideration remained unabated as on date of search, same could not be interfered with while framing assessment u/s153A in absence of incriminating material unearthed during search

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Since regular assessment for the year under consideration remained unabated as on date of search, same could not be interfered with while framing assessment u/s153A in absence of incriminating material unearthed during search

short overview : Completed assessment could not be interfered with while framing assessment under section 153A in the absence of incriminating material unearthed during search.

AO pursuant to search conducted at assessee’s premises framed assessment under section 153A and made addition under section 68. Assessee challenged this on the ground of no incriminating material found during search.

it is held that  Since regular assessment for the year under consideration remained unabated as on date of search, therefore, same could not be interfered with while framing assessment under section 153A in the absence of incriminating material unearthed during search.

Decision: In assessee favour.

Relied on: CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom) : 2016 TaxPub(DT) 3900 (Bom-HC), CIT-II, Thane v. Continental Warehousing Corporation (Nhava Sheva) Ltd., All Cargo Global Logistics Ltd. (2015) 374 ITR 645 (Bom) : 2015 TaxPub(DT) 2182 (Bom-HC)

Referred: CIT v. Morani Automotives (P) Ltd. (2014) 264 CTR 86 (Raj) : 2014 TaxPub(DT) 0493 (Raj-HC), CIT v. Haresh D. Mehta (2017) 251 Taxman 346 (Bom) ; (2018) 407 ITR 492 (Bom) : 2017 TaxPub(DT) 4137 (Bom-HC), CIT v. S. M. Aggarwal (2007) 293 ITR 43 (Del) : 2007 TaxPub(DT) 1120 (Del-HC), Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) : 1980 TaxPub(DT) 1130 (SC), Ayaaubkhan Noorkhan Pathan v. State of Maharashtra, AIR 2013 SC 58, Pr. CIT v. Meeta Gutgutia, prop. M/s. Ferns “N” Petals (2017) 395 ITR 526 (Del) : 2017 TaxPub(DT) 1767 (Del-HC), and CIT v. Kabul Chawla (2016) 380 ITR 573 (Del) : 2015 TaxPub(DT) 3486 (Del-HC).

IN THE ITAT, JODHPUR BENCH

R.C. SHARMA, A.M. & PAWAN SINGH, J.M.

Dy. CIT v. Pacific Industries Ltd., Pacificleasing and Research Ltd.

ITA Nos. 311, 321, 322, 323, 324, 331 & 332/Jodh/2018

A.Ys. 2011-12, 2014-15 & 2015-16

18 January, 2019

Departement by: K. C. Badhok, Departmental Representative

Assessee by: Prakul Khurana and Mukesh Soni, Authorised Representative

ORDER

Pawan Singh, J.M.

This group of five appeals/cross-appeals are directed against the separate order of the Commissioner (Appeals)-2, Udaipur out of which three appeals by the Revenue for the assessment years 2011-12, 2014-15 and 2015-16 in M/s. Pacific Leasing and Research Ltd. and one cross-appeal by the assessee therein for the assessment year 2011-12. For the assessment year 2011-12, only the Revenue’s appeal in M/s. Pacific Industrial Ltd. All appeals are related with the same group and the parties have raised certain common grounds of appeal, therefore, with the consent of parties all appeals were heard together and are decided by the common order for the sake of brevity and convenience.

  1. First, we are taking the appeals for the assessment year 2011-12 in M/s. Pacific Leasing and Research Ltd. The Revenue in its appeal inITA No. 331/Jodh/2018, has raised the following grounds of appeal :–
  2. Whether on the facts and in the circumstances of the case and in taw the Commissioner (Appeals) was justified in deleting the addition of Rs. 7,00,00,000 out of the total addition of Rs. 8,24,50,000 made by the assessing officer under section 68 of the Income Tax Act on account of unsecured loans obtained by the asses see.
  3. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification.
  4. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established.
  5. The assessee in its cross-appeal inITA No. 311/Jodh/2018 has raised the following grounds of appeal :–
  6. Under the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in not holding the assessmentOrder, dated 29-12-2017as bad in law, perverse, arbitrary, without jurisdiction and illegal.
  7. Under the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in upholding the addition of Rs. 1,24,50,000 under section 68 of the Act by relying upon the statement of third panics despite discharging of burden of proof by the appellant under section 68 of the Act.
  8. Under the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in upholding the addition of Rs. 1,24,50,000 by not providing the opportunity of cross-examination of the persons, whose statements were relied upon for confirming the addition of Rs. 1,24,50,000 under section 68 of the Act.
  9. Under the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in upholding the addition of Rs. 1,24,50,000 under section 68 of the Act in the absence of any incriminating material found during the search proceedings.
  10. Under the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in maintaining the interest liability under sections 234A, 234B, 234C and 234D of the Income Tax Act, 1961.
  11. Brief facts of the case are that the assessee is a public limited company engaged in the business of leasing and finance. For the assessment year 2011-12, the assessee filed its return of income on 30-9-2011 declaring a total income at Rs. 1,18,580. A search and seizure action under section 132 was carried out on 26-8-2015 at the residential and business premises of the assessee including other business group, viz., M/s. Pacific Industry, Pacific Export, Kapil Agarwal, Smt. Kariika Agarwal, J.P. Agarwal, Gitanjali Investech Holding India (P) Ltd. (all the assessee’s group). During the search action, Shri J.P. Agarwal in his statement recorded under section 132(4) of the Act admitted of taking accommodation entries in the form of long-term capital gain (LTCG). Consequent of the search, a notice under section 153A was issued to the assessee on 22-3-2016. In response to the notice, the assessee filed its return of income declaring an income of Rs. 1,18,580 on 26-3-2016, declaring the same income as declared while filing the original return of income under section 139. The assessment was completed under section 153A read with section 143(3) on 29-12-2017. The assessing officer while passing the assessment order made the addition on account of unsecured loan received by the assessee from the following eight parties aggregating to Rs. 8,24,50,000 :–
Sl. No. Name of parties Amount of loan (Rs. )
1. Bankebihari Commercial (P) Ltd. 25,00,000
2. Desire Vincom (P) Ltd. 4,50,000
3. Dream Vally Sales (P) Ltd. 50,00,000
4. MVS Leasing (P) Ltd. 5,50,00,000
5. Silverlake Traders (P) Ltd. 5,00,00,000
6. Sunview Retails (P) Ltd. 1,00,00,000
7. Trend Tradecorn (P) Ltd. 20,00,000
8. Zigma Commtrade (P) Ltd. 25,00,000
TOTAL 8,24,50,000
  1. During the assessment proceeding, the assessing officer asked the assessee to furnish the details of unsecured loan. The assessee furnished its reply along with the documentary evidence to substantiate the identity of the loan creditor, creditworthiness and genuineness of the loan transaction, vide its reply, dated 16-2-2017. The assessing officer issued notice under section 131/133(6) to the creditors. The assessing officer also got conducted the verification of the creditors through the Deputy Director of Income Tax, Kolkata. The Deputy Director of Income Tax, Kolkata on making investigation, through inspector, who visited at the given address reported that no such company exists there. The assessing officer made the addition under section 68 on the basis of report of the Deputy Director of Income Tax, Kolkatta, holding that unsecured loan shown in the books of account of the assessee-company are not verified and that the assessee failed to establish the genuineness and creditworthiness of the creditor despite giving sufficient opportunity. On appeal before the learned Commissioner (Appeals), the addition of Rs. 7 crores out of the total addition of Rs. 8.24 crores was deleted, and the remaining addition of Rs. 1.24 crores in respect of five creditors namely (i) Bankebihari Commercial (P) Ltd., (ii) Desire Vincom (P) Ltd., (iii) Silverlake Traders (P) Ltd., (iv) Trend Tradecom (P) Ltd., (v) Zigma Commtrade (P) Ltd. Therefore, aggrieved by the order of the learned Commissioner (Appeals), both the parties have filed their respective appeals raising the grounds of appeal as referred to above.
  2. We have heard the submissions of the learned Authorised Representative of the assessee and the learned Departmental Representative for the Revenue and perused the material available on record. Ground No. 1 in the assessee’s appeal relates to the validity of the assessment order. The learned Authorised Representative of the assessee submits that reassessment was made by the assessing officer pursuant to the search action carried out on 26-8-2015 under section 132 of the Act at the entire assessee’s group. During the search action, no incriminating material was found by the search team, however, the assessing officer made addition on account of share capital or unsecured loan under section 68 of the Act. The learned Authorised Representative submits that one of the reasons for making assessment under section 153A was that the statement of the alleged accommodation entry provider were recorded under section 131/133 in the year 2014 and 2015 wherein, such person alleged to have admitted that they provided accommodation entry in the form of long-term capital gains or unsecured loan. The said statements were not related to the assessee. Such statement has no evidentiary value. No cross-examination of such person was provided to the assessee. The original assessment for the year under consideration was already completed and the addition in reassessment under section 153A is invalid in the absence of any incriminating material found during the search. The learned Authorised Representative further submits that the addition in the unabated assessment cannot be made in the absence of incriminating material unearthed during the search. No such incriminating material for making addition on account of share application was found during the search, therefore, the entire additions in the assessment order on account of share application is liable to be deleted. In support of his submission, the learned Authorised Representative relied upon the decision of the Delhi Tribunal inAnurag Dalmia v. Dy. CIT in ITA Nos. 5395 and 5396/Delhi/2017, dated 15-2-2018, the Visakhapatnam Tribunal in G. Koteshwara Rao v. Dy. CIT (2015) 64 taxmann.com 159 (Vizag) : 2016 TaxPub(DT) 70 (Visakhapatnam-Trib), the Jaipur Tribunal in Narattan Kothari v. Asst. CIT in ITA No. 425/JP/2017, dated 13-12-2017, the Jodhpur Tribunal in Adarsh Co-operative Bank v. Asst. CIT in ITA Nos. 452 and 453/Jodh/2015, dated 19-6-2017, the Hon’ble Bombay High Court in CIT v. Gurinder Singh Bawa in ITA No. 1839 of 2013, dated 5-10-2015-(2016) 386 ITR 483 (Bom) : 2016 TaxPub(DT) 3900 (Bom-HC), All Cargo Global Logistics v. Dy. CIT (2012) 18 ITR (Trib) 106 (Mumbai) (SB) ; 23 taxmann.com 103 (Mum) (SB) : 2012 TaxPub(DT) 2464 (Mum-Trib), which was affirmed by the Hon’ble Bombay High Court in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) : 2015 TaxPub(DT) 2182 (Bom-HC).
  3. In alternative and without prejudice to the contention, the learned Authorised Representative submits that they have produced all requisite details documents, like ; PAN, balance-sheet, confirmation of account to substantiate the identity, creditworthiness and genuineness of lender company. All the transactions were done through banking channel and there is no cash deposit. The statement recorded at the back of the assessee, which were never share with the assessee and no opportunity of cross-examination were provided, thus such statement cannot be used against the assessee, thus the additions made on the basis of third party information is liable to be deleted.
  4. In other alternative submission, the learned Authorised Representative supported the order of the learned Commissioner (Appeals) in deleting the addition on account of unsecured loan. The learned Authorised Representative submits that the requisite details were furnished by the assessee which was properly appreciated by the learned Commissioner (Appeals), the transactions were channelised through banking transaction. The lender company duly complied. The learned Authorised Representative submits that the entire addition made by the assessing officer is liable to be deleted. Further, in support of the above submission, the learned Authorised Representative relied upon the following decisions :–

(i) CIT v. Morani Automotives (P) Ltd. (2014) 264 CTR 86 (Raj) : 2014 TaxPub(DT) 0493 (Raj-HC).

(ii) CIT v. Haresh D. Mehta (2017) 251 Taxman 346 (Bom) ; (2018) 407 ITR 492 (Bom) : 2017 TaxPub(DT) 4137 (Bom-HC).

(iii) CIT v. S. M. Aggarwal (2007) 293 ITR 43 (Del) : 2007 TaxPub(DT) 1120 (Del-HC).

(iv) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) : 1980 TaxPub(DT) 1130 (SC).

(v) Ayaaubkhan Noorkhan Pathan v. State of Maharashtra, AIR 2013 SC 58.

(vi) Pr. CIT v. Meeta Gutgutia, prop. M/s. Ferns “N” Petals (2017) 395 ITR 526 (Del) : 2017 TaxPub(DT) 1767 (Del-HC)

(vii) CIT v. Kabul Chawla (2016) 380 ITR 573 (Del) : 2015 TaxPub(DT) 3486 (Del-HC)

  1. On the other hand, the learned Departmental Representative for the Revenue supported the order of the assessing officer. The learned Departmental Representative further submits that the assessee has not challenged the validity of assessment, either during the assessment or during the first appellate stage.
  2. In the rejoinder submission, the learned Authorised Representative of the assessee submits that during the assessment proceeding, the assessee has raised specific objection that the original assessment was already completed under section 143(3) or intimation under section 143(1) was issued or the time for issuance of notice under section 143(2) was already lapsed when the notice under section 153A was issued. The assessee also raised the objection that no incriminating material qua the addition was found in the search. This fact is duly recorded by the assessing officer in para 5.7 at page Nos. 4 to 8 of the assessment order. The learned Authorised Representative further submits that the assessee raised the ground of appeal before the learned Commissioner (Appeals) that the assessmentOrder, dated 29-12-2017 is without jurisdiction and bad inlaw.
  3. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. We have also deliberated on the various case law referred to and relied on by the lower authorities. It is an admitted fact that a search was carried out at the business premises of the assessee as well as directors on 26-8-2015. The assessing officer during the assessment nowhere recorded that in the search action any incriminating material related with the share application money was recovered or seized. The assessing officer has referred to that statement of Shri J.P. Agarwal was recorded who had admitted to have obtained accommodation entry in the form of long-term capital gains in his individual capacity only. There is no reference in the entire assessment order that Shri J.P. Agarwal ever admitted about the receipt of share application money. The impugned assessment year under consideration is 2011-12 and the period for completion of assessment has already expired when the search was conducted. The assessing officer made the addition of the alleged share application money in the assessment year 2011-12, which is beyond his jurisdiction in the absence of incriminating material found during the search.
  4. The Hon’ble Bombay High Court inContinental Warehousing Corporation (Nhava Sheva) Ltd. (supra) held that once the assessment has attained finality for a particular year, i.e., not pending when the same cannot be a subject to tax in proceeding under section 153A. The Hon’ble court held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search. Similar view was taken by the Hon’ble Bombay High Court in CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom) : 2016 TaxPub(DT) 3900 (Bom-HC).
  5. Therefore, considering the factual and legal discussion, we find that the assessment for the assessment year 2011-12 was already completed when search action under section 132 was carried out at the premises of the assessee. No incriminating material found during the search in respect of the addition made by the assessing officer, therefore, the addition made by the assessing officer in the impugned assessment year is without jurisdiction. Thus, the legal ground raised by the assessee is allowed and the assessment order is held as invalid, consequent upon the entire addition made therein are directed to be deleted.
  6. As we have held that the addition in the assessment order is invalid, therefore, the discussions on alternative submission of the assessee on the merits as well as on other grounds of appeal have become academic.
  7. In the result, the appeal of the assessee for the assessment year 2011-12 is allowed consequently the appeal filed by the Revenue is dismissed

ITA No. 324/Jodh/2018 for assessment year 2014-15 by the Revenue

  1. The Revenue has raised the following grounds of appeal :–

“1. Whether on the facts and in the circumstances of the case and in law the Commissioner (Appeals) was justified in deleting the addition of Rs. 1,75,00,000 made by the assessing officer under section 68 of the Income Tax Act on account of unsecured loans obtained by the assessee.

  1. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification.
  2. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established before the assessing officer.”
  3. Brief facts of the case for the appeal under consideration are that consequent of search in the assessee’s group on 26-8-2015, a notice under section 153A was served upon the assessee on 22-3-2016 to file the return of income for the assessment year 2014-15. The assessee filed its return of income on 26-3-2016 declaring nil income. The assessee filed its original return under section 139 on 22-10-2014 declaring nil income. The assessing officer during the reassessment proceedings under section 153A noted that Shri J.P. Aggarwal voluntary surrendered the accommodation entries in his end in the form of long-term capital gains as unaccounted income. The assessing officer further noted that the assessee has received unsecured loan from the entities who are engaged in providing accommodation entries in form of long-term capital gains, share premium and unsecured loan. The assessee has shown the unsecured loan from four of such parties aggregating of Rs. 1.75 crores, i.e., Rs. 25 lakhs from Glaze Construction (P) Ltd., Rs. 50 lakhs from Grow Supplier (P) Ltd., Rs. 50 lakhs from Nihon Commodities (P) Ltd. and Rs. 50 lakhs from VSG Leasing and Finance (P) Ltd. The assessee was asked to furnish confirmation of party to prove identity, genuineness of transaction and creditworthiness of creditor. The assessee furnished the confirmation of all the parties. The assessing officer asked the assessee to produce the competent person of the creditor along with the relevant documents and information. The assessee filed its reply on 27-11-2017. In the reply besides the other contention, the assessee contended that the original assessment has already been completed under section 143(1) or under section 143(3) and time for issuance of notice under section 143(2) has elapsed. In the regular assessment for the assessment year under consideration has been examined with the relevant document and after examining the material the assessment from the assessment years 2010-11 to 2015-16 were completed. The assessee also contended that no incriminating material was found during the search, therefore, no addition in the completed assessment unless incriminating material came in possession of the assessing officer, can be made. The assessee also submitted that they have already furnished the confirmation and copy of the account of each of the respective creditors along with the Income Tax return, balance-sheet of the said creditor, in their reply in response to the notice under section 131 on 10-11-2015 and on 8-6-2016. The assessee also relied upon certain case law. The contention of the assessee was not accepted by the assessing officer holding that the Deputy Director of Income Tax, Kolkata had made investigation and the entities from which the assessee has obtained unsecured loan are Kolkata base are shell companies. The assessing officer made the addition aggregate of the amount of unsecured loan. On appeal before the learned Commissioner (Appeals), the entire addition was deleted by the learned Commissioner (Appeals). The learned Commissioner (Appeals) deleted the entire addition after seeking remand report from the assessing officer. The learned Commissioner (Appeals) concluded that the assessee discharged its burden under section 68. No adverse finding of any investigation conducted by the Department in relation to the assessee and in the absence of any adverse finding to rebut the evidences furnished by the assessee, the addition of Rs. 1.75 crores is unjustified. Thus, aggrieved by the order of learned Commissioner (Appeals), the Revenue has filed the present appeal before us.
  4. We have heard the learned Departmental Representative for the Revenue and the learned Authorised Representative of the assessee and gone through the orders of the authorities below. Though the Revenue has raised as many as three grounds of appeal, however, in our view, the sole ground of appeal is the deletion of the addition under section 68. The learned Departmental Representative for the Revenue supported the order of the assessing officer. The learned Departmental Representative further submits that the assessee failed to discharge his onus to prove the identity, creditworthy and genuineness of transaction.
  5. On the other hand, the learned Authorised Representative of the assessee submits that he adopts his submission, put forth in appeal for the assessment year 2011-12 as the addition in the impugned year under consideration is also not based on incriminating material found during the search, the assessment for the relevant assessment year, i.e., 2014-15 was already completed as regular assessment. The assessing officer has nowhere referred that addition is based on any incriminating material found during the search. On the merits, the learned Authorised Representative supports the order of the learned Commissioner (Appeals). In support of his submission, the learned Authorised Representative relied upon the decision which is already relied on in appeal for the assessment year 2011-12.
  6. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. The learned Authorised Representative for the assessee vehemently argued that the additions under section 68 are not based on any incriminating material found during the search. We have noted that the assessee has similar plea before the learned Commissioner (Appeals). The learned Commissioner (Appeals) rejected the said grounds of appeal, however, the learned Commissioner (Appeals) granted relief to the assessee on the merits of. Therefore, we are of the view that the assessee can raise such plea by taking the course of rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963.
  7. The Hon’ble Gujarat High Court inPr. CIT v. Sun Pharmaceuticals Industries Ltd. (2018) 408 ITR 517 (Guj) : 2017 TaxPub(DT) 4244 (Guj-HC) : (2017) 86 taxmann.com 148 (Guj) held that, though the assessee has not appealed, can defend the order appealed against on any ground decided against him by the lower authority, whose order is otherwise in his favour.
  8. The Hon’ble Bombay High Court inSkol Breweries Ltd. v. Asst. CIT in ITA No. 34 of 2009, dated 19-2-2009 held that rule 27 specifically provides that it is open to the appellant in respect of ground which had been held against him to support the order of any of the grounds decided against him. If the issue of jurisdiction is held in favour of the appellant then even though on the merits the order may have been against the assessee-appellant, yet the appeal paper by the Revenue will have to be dismissed if lack of jurisdiction is established. Admittedly the assessing officer nowhere in the assessment order referred that the addition made by him is based on incriminating material gathered during the search action, therefore in our view the addition is not sustainable.
  9. Even we have examined the order of the assessing officer as well as the learned Commissioner (Appeals) on the merits. The assessing officer made the addition under section 68 on taking view that in order to verify the genuineness of creditors issued a commission under section 131(1)(d) was issued to the Deputy Director of Income Tax, Kolkata with the request to issue summons to the principal officer of the creditors company and to furnish spot verification through inspector. The assessing officer received the enquiry report from the Deputy Director of Income Tax, Kolkata wherein it was disclosed that some of the entry operators are controlling and managing all affairs of the business activities of the lender companies which are engaged in providing accommodation entries. The assessing officer on the basis of the report of the Deputy Director of Income Tax, Kolkata made an addition of Rs. 1.75 crores. Before the learned Commissioner (Appeals), the assessee urged that the assessee has discharged his burden/onus by filing confirmation, Income Tax return, balance-sheet and bank statement and other document. The assessee further urged that the assessing officer merely relied upon the statement of third party without providing opportunity of cross-examination. The assessee also submits that the spot verification was claimed to have been made on 6-12-2017 and on the same date commission/notice was issued to the lender company for their personal appearance. The assessing officer has not taken the compliance of the lender companies. On the submission of the assessee, the learned Commissioner (Appeals) sought the remand report of the assessing officer. The learned Commissioner (Appeals) after seeking supplementary report of the assessing officer and the reply of the assessee and after considering the contents of the remand reports and the reply of the assessee deleted the addition with the following observations :–

“4.3.3 I have gone through the material placed on record and I find that the assessing officer has not issued any summon/notice under section 131/133(6) of the Act to Glaze Construction (P) Ltd, Grove Suppliers (P) Ltd., Nihon Commodities (P) Ltd. and VSG Leasing and Finance (P) Ltd. whereas the appellant in discharge of its onus under section 68 of the Act has filed confirmation of accounts as well as bank statements reflecting the transactions with other substantiating documents, which are available at page Nos. 56-230 of the paper book and also in common paper book and further common paper book filed separately. From these documentary evidences placed on record identity, creditworthiness and genuineness of trans actions 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) : 1985 TaxPub(DT) 445 (Pat-HC), the Hon’ble Patna High Court has held ‘if the loans are given by an account payee cheque, it amounts to identification of the parties and discharge of burden by the borrower’. In view of the above, it is clear that the appellant discharged its burden under section 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the Department in relation to this company. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the appellant, I find that this addition of Rs. 1,75,00,000 is unjustified; firstly, on the ground that no notice was issued/no inquiries made to rebut the evidences filed by the appellant and secondly, on the ground that the appellant duly discharged its burden casted upon under section 68 of the Act to explain the nature and source of the transactions by proving the identity, creditworthiness of the creditor and the genuineness of the transaction. Notably, the transaction is duly verifiable from the confirmation of accounts with supporting bank statements filed in the paper book and has been carried out through banking channel only and thus, the appellant has duly proved the identity, creditworthiness and genuineness of the transaction.

4.3.4 Further, it is seen that the appellant during assessment submitted substantiating evidences as referred to in para No. 3.19 of its submission above which include balance-sheet, Income Tax return, copy of the relevant bank statement, AOA/MOA, confirmation of accounts, etc., (paper book Nos. 56-230). From the perusal of these documentary evidences, it is seen that the transactions have been done through banking channels and on the date of making of loans, there is balance available in the account of the borrower, which proves its creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of the creditor at the time of issuing cheques/RTGS in favour of the assessee. There fore, in view of the settled judicial precedent in the case of CIT v. Varinder Rawlley (2014) 366 ITR 232 (P&H) : 2014 TaxPub(DT) 3818 (P&H-HC), CIT v. Vijay Kumar Jain (2014) 221 Taxman 180, CIT v. Victor Electrodes Ltd. (2010) 329 ITR 271 (Del) : 2010 TaxPub(DT) 1927 (Del-HC), Addl. CIT v. Bahri Bros (P) Ltd. (1985) 154 ITR 244 (Pat) : 1985 TaxPub(DT) 445 (Pat-HC) and others as referred to by the appellant, I am of the considered view that the appellant duly discharged its burden casted upon it under section 68 of the Act. It is further seen that no summon/notice was issued to the lender companies namely, Glaze Construction (P) Ltd, Grove Suppliers (P) Ltd., Nihon Commodities (P) Ltd. and VSG Leasing and Finance (P) Ltd. asking them to confirm the transactions of loans undertaken with the appellant pertaining to the year under consideration.

4.3.5 The assessing officer during assessment proceedings took negative inference from the statement of Shri J.P. Agarwal recorded during search under section 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 J.P. Agarwal and his disclosure made in his statement, notably, the disclosure made was in his personal capacity only and with respect to long-term capital gains only and not in respect of any other transactions be it be receipt of unsecured loans. Therefore, I find that in the absence of any nexus of the statement of Shri J.P. Agarwal with the appellant or its total income, this basis of addition adopted by the assessing officer is farfetched and cannot be concurred.

4.3.6 Further, the assessing officer has treated the various companies from whom unsecured loans were received as shell companies based on initial investigation carried out behind the back of the appellant. In the instance case, the assessing officer has considered only part of the investigation and not full outcome of the investigation carried out. It is seen that in the report, dated 21-12-2017, the Deputy Director of Income Tax, (Investigation) has forwarded its report on compliances made by the lender companies, however, this report has not been considered by the assessing officer. The said report (paper book Nos. 1-258) of common paper book beyond doubt establishes the identity, creditworthiness and genuineness of the transaction with Glaze Construction (P) Ltd. and others and thus support the direct evidences brought on record by the appellant which remained uncontroverted by the assessing officer. It is further seen that the assessing officer has not brought any specific defect I discrepancies in the direct evidence brought on record by the appellant. The assessing officer 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 assessing officer is itself not sufficient to prove beyond doubt that the 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 under section 68 of the Act in view of the settled judicial precedents.

4.3.7 In my considered view of the undersigned, 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.

4.3.8 Similarly, I find that various observations of the assessing officer on the balance-sheet/Income Tax return of the lender companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations/observations of the assessing officer are misconceived and premature only and in view the submission made by the appellant in his written submissions in para Nos. 3.26 to 3.33 above, the same does not lead anywhere to draw any adverse inference against the appellant. Further, the various case law relied upon by the assessing officer are distinguishable from the facts of the present case as categorically countered by the appellant in his written submissions in para Nos. 3.36 to 3.43 above.

4.3.9 It is a settled judicial position that under the Income Tax law primary burden under section 68 of the Act is on the appellant and once this burden is discharged under section 68 of the Act, no addition under section 68 of the Act is justifiable in the hands of the asses see in view of the judgments in case of Shree Barkha Synthetics Ltd. v. Asst. CIT (2006) 283 ITR 377 (Raj) : 2006 TaxPub(DT) 608 (Raj-HC), CIT v. Morani Automotives (P) Ltd. (2014) 264 CTR 86 (Raj) : 2014 TaxPub(DT) 0493 (Raj-HC), CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), CIT v. Mark Hospitals (P) Ltd. (2015) 373 ITR 115 (Mad) : 2015 TaxPub(DT) 2072 (Mad-HC), CIT v. Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj) : 2014 TaxPub(DT) 1890 (Raj-HC), CIT v. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom) : 2011 TaxPub(DT) 96 (Bom-HC), CIT v. Patel Maheshbhai Dahyabhai (2014) 222 Taxman 153 (Guj) : 2014 TaxPub(DT) 1807 (Guj-HC), Pr. CIT v. G and G Pharma India Ltd. (2016) 384 ITR 147 (Del) : 2015 TaxPub(DT) 4054 (Del-HC) referred to above which have been followed recent by Hon’ble Delhi Tribunal in the case of ITO v. Softline Creations (P) Ltd. in ITA No. 744/Delhi/2012 vide its Order, dated 10-2-2016 (2016) 51 ITR (Trib) 460 (Del) : 2016 TaxPub(DT) 4648 (Del-Trib). Further the Hon’ble Apex Court as well as the High Court has held that once the identity of the creditor is established, the Department is free to reopen the assessment of creditor and no addition can be made in the hands of the borrower as rightly held in the case of CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR (St.) 5 (SC): 2009 TaxPub(DT) 261 (SC), CIT v. Rock Fort Metal and Minerals Ltd. (2011) 198 Taxman 497 (Delhi) : 2011 TaxPub(DT) 457 (Del-HC), CIT v. Divine Leasing and Finance Ltd. (2008) 299 ITR 268 (Delhi) : 2008 TaxPub(DT) 400 (Del-HC), CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC) and others on this question of law.

4.3.10 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. Victor Electrodes Ltd. (2010) 329 ITR 271 (Del) : 2010 TaxPub(DT) 1927 (Del-HC), the appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instant case, the appellant has co-operated in assessment by showing his willing to produce the directors of the lender companies and some directors/officer were also produced before the assessing officer. Thus, in view of the judicial precedents referred to above, under the facts and circumstances of the present case it is untenable to make an addition for the alleged non-appearance by the concerned person before the authorities though they complied with the notices/summon issued to them.

4.3.11 In the present case in hand, I find that the assessing officer asked the assessee to produce the lender companies without verifying the facts of lending money from respective jurisdiction the assessing officer and without verifying their returns of in income and balance-sheet wherein the transactions are reported, accordingly the assessing officer has not followed the principles laid down under section 68 of the Act. The Hon’ble Gujarat High Court in the case of CIT v. Ranchhod Jivabhai Nakhava (2012) 21 taxmann.com 159 (Guj.) : 2012 TaxPub(DT) 2351 (Guj-HC) 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 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 instant case before me, the assessing officer has not followed the due procedure of law under section 68 of the Act There fore, requiring the assessee to produce the directors of the lender company was not legally tenable in view of the judgment of the Gujarat High Court (supra).

4.3.12 It must be mentioned that the unsecured loans from Glaze Construction (P) Ltd. Nihon Commodities (P) Ltd. and VSG Leasing and Finance (P) Ltd. are paid back as confirmed by the assessing officer in his supplementary remand report, dated 4-4-2018 and there is not a single statement or report to implicate Grove Suppliers (P) Ltd. to hold them as shell company as held by the assessing officer on the basis of initial, half cooked, inquiry report of the Deputy Director of Income Tax (Investigation), Unit-4(2), Kolkata. Moreover, with the abundant evidences discussed above and all concerns, subjected to verification by issuing commission under section 131(1)(d), found existing, the blame of shell company on depositors is not justified.

4.3.13 It is noted that no clinching evidence has been brought on record that any unaccounted income was routed through unsecured loans by the appellant company as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in the case of the appellant. Further, the assessing officer has relied on the third party statement without proving any nexus with the person whose statement was recorded with the appellant-company. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of an incriminating material found during search to rebut the evidences filed by the appellant, the impugned addition made in respect of unsecured loan under section 68 of the Act is legally untanable and unjustified.

4.3.14 In view of the above discussion of the relevant facts and following the several ratios on the subject from the Hon’ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition of Rs. 1,75,00,000 is not sustainable and hence the same stand deleted. Thus, the ground Nos. 2, 3 and 7 of appeal stand allowed.”

  1. We have seen that the learned Commissioner (Appeals) considered the all documentary evidences furnished by the assessee, remand reports including the second remand report and supplementary remand report of the assessing officer and passed elaborate order, which in our view does not require any further interference. No contrary facts or law is brought to our notice to take a different. Therefore, we affirm the order of the learned Commissioner (Appeals).
  2. In the result, the appeal of the Revenue is dismissed.

ITA No. 332/Jodh/2018 for the assessment year 2015-16 by the Revenue

  1. The Revenue has raised the following grounds of appeal :–

“1. Whether on the facts and in the circumstance case and in law the Commissioner (Appeals) was justified in deleting the addition of Rs. 3,75,00,000 made by the assessing officer under section 63 of the Income Tax Act on account of unsecured loans obtained by the assessee.

  1. Whether on the facts and circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification.
  2. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established before the assessing officer.
  3. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the addition of Rs. 38,34,910 made by the Income Tax Officer by disallowing the claim of interest expenses on unsecured loans treated as bogus by the assessing officer.”
  4. We have noted that ground Nos. 1 to 3 is identical to the ground of appeal raised in appeal for the assessment year 2014-15, except variation of figure. In appeal for the assessment year 2014-15, we have already affirmed the order of the learned Commissioner (Appeals), thus, following the principle of consistency, these grounds of appeal are also dismissed with similar observation.
  5. Ground No. 4 relates to deleting the consequential interest expenses on the corresponding addition/deletion of Rs. 3.75 crores. As we have already affirmed the finding of the learned Commissioner (Appeals) on ground Nos. 1 to 3, therefore, this ground of appeal being consequential to the addition of unsecured loan are also dismissed.
  6. In the result, the appeal of the Revenue is dismissed.

ITA No. 321/Jodh/2018 by the Revenue for the assessment year 2011-12 (Pacific industrial Limited, Mumbai). The Revenue has raised the following grounds of appeal :–

“1. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the addition of Rs. 7,00,00,000 made by the assessing officer under section 68 of the Income Tax Act on account of unsecured loans obtained by the assessee.

  1. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification.
  2. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was instilled in deleting the additions when the creditworthiness of the alleged creditor was not established as the alleged creditor had shown meagre income in its returns of income which was not commensurate with the loans claimed to have been obtained from it.”
  3. Brief facts of the case are that the assessee is a company filed its return of income for the assessment year 2011-12 on 28-9-2011 declaring nil income. A search action as referred to above was carried out in the assessee’s group on 26-8-2015. Consequent upon a notice under section 153A was served upon the assessee. In response to the notice under section 153A, the assessee furnished its return of income on 5-2-2016 declaring nil income. The assessing officer completed the assessment under section 153A read with section 143(3) on 31-12-2017. The assessing officer while passing the assessment order made addition of Rs. 7 crores under section 68 on account of unsecured loan. During the assessment, the assessing officer noted that the assessee has received unsecured loan of Rs. 7 crores from M/s. MVS Leasing (P) Ltd. The assessing officer asked the assessee to prove the identity and genuineness of transaction and creditworthy of the lender. The assessee furnished the confirmation of the loan. The assessing officer on his observation that during search and as well as the post-search action Shri J.P. Agarwal, who is the key person of the group made statement about the accommodation entry in the form of long-term capital gains. The assessee vide its reply, dated 27-11-2017 objected that the assessment for the years 2010-11 to 2016-17 already completed either under section 143(3) or section 143(1) or the time for issuance of notice under section 143(2) has already expired and the assessment will not abate. As there is no incriminating material was recovered during the search, therefore, no addition on account of unsecured loan can be made. The assessee also contended that in the regular assessment, the issue was examined and was accepted. The contention of the assessee was not accepted by the assessing officer, the assessing officer on his observation as we have already noted in the assessee’s group case (supra) made addition under section 68 of Rs. 7 crores on the basis of report of the Deputy Director of Income Tax, Kolkata.
  4. On appeal before the learned Commissioner (Appeals), the entire addition was deleted. The learned Commissioner (Appeals) deleted the addition on his observation that there is no evidence on record that any unaccounted money was routed through the unsecured loans by the assessee-company as no evidence as to receipt/payment of cash for receipt of unsecured loan were found during the course of search on the assessee. The learned Commissioner (Appeals) also conclude that mere suspicious however, strong may be cannot take place of evidence. Thus, aggrieved by the order of the learned Commissioner (Appeals), the Revenue has filed the present appeal before us.
  5. We have heard the learned Authorised Representative of the assessee and the learned Departmental Representative for the Revenue and perused the material available on record. The learned Departmental Representative for the Revenue supported the order of the assessing officer and adopted the same submission as submitted in the assessee’s group case as referred to above. Per contra, the learned Authorised Representative also adopted the similar submission as made in the assessee’s group case, i.e., inPacific Leasing and Research Ltd. (supra).
  6. We have considered the submissions of the parties and gone through the order of the authority below. We have also deliberated on various case law relied on by the lower authorities. We have noted that the ground of appeal raised by the Revenue is similar as raised by the Revenue inITA No. 331/Jodh/2018, the only variation in the ground of appeal is that in the said case, the addition was made on account of share application, however in the present case addition relates to unsecured loan. On the identical facts we have already dismissed the appeal of the Revenue, therefore, by following the principle of consistency, the ground of appeal raised by the Revenue are dismissed with similar observation.
  7. We may also add that the addition was made by the assessing officer in the absence of incriminating material found during the course of search action and in the absence of any incriminating material no addition in the unabated assessment is permissible. Therefore, the submission of the assessee is also accepted in dismissing the appeal of the Revenue in view of rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963.
  8. In the result, the appeal of the Revenue is dismissed.

ITA No. 322/Jodh/2018 by the Revenue for the assessment year 2014-15 (Pacific industrial Limited, Mumbai). The Revenue has raised the following grounds of appeal :–

“1. Whether on the facts and in the circumstances of case and in law, the Commissioner (Appeals) was justified in deleting the addition of Rs. 75,00,000 made by the assessing officer under section 68 of the Income Tax Act on account of unsecured loans obtained by the assessee.

  1. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification.
  2. Whether on the facts and in the circumstances of the case and in law, the Commissioner (Appeals) was instilled in deleting the additions when the creditworthiness of the alleged creditor was not established before the assessing officer.”
  3. We have noted that the ground of appeal raised by the Revenue is identical to the ground of appeal raised inITA No. 321/Jodh/2018. The facts of the year under consideration are almost identical except variation of figure. As we have already dismissed the appeal of the Revenue and confirmed the order of the learned Commissioner (Appeals) on identical facts, therefore, this appeal is also dismissed with the similar observation.
  4. In the result, the appeal of the Revenue is dismissed.

ITA No. 323/Jodh/2018 by the Revenue for the assessment year 2015-16 (Pacific industrial Limited, Mumbai). The Revenue has raised the following grounds of appeal :–

  1. Ground Nos. 1 to 3 relates to deleting the addition of Rs. 5.15 crores under section 68 of the Act on account of unsecured loan.
  2. Ground No. 4 relates to deleting the addition of Rs. 1082 lakhs of interest expenses on addition under section 68.
  3. We have noted that the assessee has raised identical grounds of appeal except variation of figure of unsecured loan under section 68 in place of share application money as raised inITA No. 332/Jodh/2018 in the assessee’s group case, which we have already dismissed affirming the order of the learned Commissioner (Appeals). Therefore, the appeal filed by the Revenue is also dismissed with the similar observation.
  4. In the result, the appeal of the Revenue is dismissed.

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