DCIT, CENTRAL CIRCLE-02, NEW DELHI vs. REWIN CERAMICS P.LTD, NEW DELHI

The Revenue’s latter appeal ITA No.2461/Del/2022 seeks to revive the Assessing Officer’s action adding section 68 unexplained cash credits of Rs.6,24,56,500/- in his assessment framed on 30.12.2019 and reversed in the CIT(A)’s order as under: “5.2.2. I have carefully considered the submissions of the appellant as well as the assessment order. Firstly regarding the contention that documents found during search from the possession of third person cannot be used in the proceeding u/s 153A of the Income Tax Act and such documents, if at all relevant, should be considered in proceedings u/s 153C as held by the juri ictional High (HUF) ITA no 23/2021 dated 12/02/2021, it is observed that the impugned documents were seized from the office of Sh. Achal Kumar, CA, which is also the registered office of the appellant. Therefore, documents seized from its registered office are seized from its own premises and cannot be said to be seized from premises of a third party. Therefore, this contention is not tenable. Further, regarding the contention of the appellant that the documents seized from Sh. Achal Kumar, CA do not constitute evidence regarding unexplained cash credit being obtained by the assessee in the form of repayment of loans, it has been submitted that the said seized documents are listed in a chart at para 5 (page 2 and 3) of the assessment order and also at para 5.1 (page 4) of the assessment order, and none of these are related to the receipt of non-genuine cash credits by the appellant. In this regard, the documents relied upon by the AO as incriminating material, are analysed as follows:

2.3. From the perusal of the above it is observed that it has been mentioned that the said chart is related to clients of Shri Achal kumar with regard to accommodation entries in the form of loans, donations, income and expenses. As such, these notings are not related to non-genuine repayments of advances/investment received by the assessee. The AO has also mentioned that details of transactions pertaining to the appellant are also recorded in the said sheet. However, he has not given any details of such transactions pertaining to the appellant, let alone establishing such transactions to be related to receipt of non-genuine repayment of advances/investment by the appellant company during the year under consideration. It is further noted that the same chart containing the same evidences at S.No.1 to 6 therein has been cited as evidence by the AO in the assessment orders passed u/s 153A/143(3) for A.Ys. 2010-11, 2011-12, 2012-13, 2015-16 and 2016-17 in the case of M/s Aparajita Homes Pvt. Ltd., as well as in the orders passed in the case of the appellant for A.Ys. 2010-11, 2012-13 and 2017-18, in a very casual manner without pinpointing evidences specifically relevant to the assessee in question and to the issue in question.

2.4. From the perusal of the above it is observed that the said noting is related to Aparajita Foundation with regard

2.5. From the perusal of the above it is observed that the said noting is related to Anita Jha with regard to details of her properties and these notings are neither related to non- genuine repayments of advances received nor related to the appellant company.

2.6. From the perusal of the above it is observed that the said noting is related to details of properties held by M/s Aparajita Homes and is neither related to non-genuine repayments of advances received nor related to the appellant company.

2.7. From the perusal of the above it is observed that the said noting is related to Aparajita Properties with regard to details of properties held by the said company and these

2.8. From the perusal of the above it is observed that the said noting is related to certain entities and it is not established by the AO to be either related to non-genuine repayments of advances received or related to the appellant company.

2.9. From the perusal of notings mentioned at page no. 4 of impugned order, it is noted that an excel sheet with the title "PJ" was found in the laptop of CA Achal kumar. The AO has remarked that "this sheet contained details of entries in the form of bank transfers against cash in the books of various entities managed and controlled by Smt. Anita Jha, Rewin Ceramics Pvt Ltd being one of them. On further analysis of the books of account of Rewin it has been found that cash was not accounted for and transfer by various shell entities in books of Rewin was an arrangement to bring the unaccounted income of Rewin into its books of account". The AO has made general allegations against various group entities without specifying the basis of such allegations. The AO has also not specified as to which bank transfers were obtained against cash by the appellant, let alone establishing the same by citing appropriate evidences. The AO has further observed at para 5.1 that "the amount mentioned in the said sheet was used to provide accommodation entries in the firm Rewin Ceramics Put. Limited. It is worthwhile to mention here, that the most of the credits to the bank account of Rewin was through various shell entities such as Zane and Malvinimpex also, upon analysis of tally data of M/s Rewin Ceramics Pvt. Ltd. The total receipts as per day book of Rewin Ceramics was ITA Nos.2460 & 2461/Del/2022

2.10 Further, at para 5.4, the AO has noted that "I have carefully gone through the written submission filed by AR of the assessee and found not convincing for the reason that the financial analysis of the companies which had invested in M/s Rewin Ceramics Pvt. Ltd, in the form of share capital and share premium shows that the investor companies are not doing any actual business and engaged in the business of providing accommodation entries to the beneficiaries as against the unaccounted income of the beneficiaries." Here, the AO has discussed that the investor companies, who have invested in the share capital of the assesee company are not doing any actual business and are engaged in providing accommodation entries to the beneficiaries. It is difficult to understand the relevance of this discussion since the issue at hand is totally different, being related to the repayments of advances/investments made earlier by the assessee. The AO has proceeded to state that "The assessee company had routed its own unaccounted income in the books of account in the through recovery and obtaining bogus share capital and share premium from various shell entities. These findings supported by the incriminating documents found and seized during the course of search proceedings as discussed above. Hence, it is clearly established that the recovery of loans and advances during the year under consideration is also related to the accommodation entries as against unaccounted income given to the entry provider for the year under consideration." Here, the AO has included recovery of amounts in the same bracket as obtaining bogus share capital from various shell entities. The AO has not specified any basis or evidence for such inference and has simply stated that such findings are supported by the incriminating documents found during search, whereas it has already been held that none of the documents/evidences found during search support the finding that the receipt of repayment of advances was non-genuine. The AO has indulged in making vague allegations without pinpointing any specific evidence which proves such allegations. Moreover, the AO has failed to gather adverse material by conducting inquiries u/s 133(6) or field inquiries through the Inspector, or recording statements of Directors of investee companies/entities u/s 131 and thereafter to confront the adverse material to the assessee. The AO has taken none of these steps, which if seen in conjunction with the lack of adverse material gathered during the search, leads to the conclusion that the AO did not have any kind

Since the addition of Rs.6,24,56,500/- has already been held to be untenable on the grounds of juri iction as well as merits, the following grounds/contentions (Ground Nos. 2 and 3) of the appellant are not adjudicated since these are rendered academic in nature:-

Ground no. 5 is general in nature and does not require specific adjudication.”

Suffice to say, it has already come on record that the impugned sum in fact represents repayments of the assessee’s advances/investments made to the party(ies) concerned in the preceding assessment years. Even the Revenue is fair enough in not disputing all this in the CIT(A)’s above extracted findings that the very fact stand duly admitted by the Assessing Officer in paragraph 5.4 to ITA Nos.2460 & 2461/Del/2022

6 in the assessment order. This being the clinching factual position, we are constrained to hold that the learned Assessing Officer had erred in law and on facts in treating the assessee’s receipts of repayment of the above amount in the impugned assessment year as unexplained cash credits which has been rightly deleted in the lower appellate proceedings. We thus affirm the learned CIT(A)’s findings to this effect in very terms. This Revenue’s latter appeal ITA No. 2461/Del/2022 also fails therefore.