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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
These appeals by the Revenue and cross These appeals by the Revenue and cross-objections by the objections by the assessee are directed against assessee are directed against a common order dated 27.07.2022 common order dated 27.07.2022 passed by the Ld. Commissioner of Income passed by the Ld. Commissioner of Income-tax (Appeals) tax (Appeals)-53, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013 Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013-14 to Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013 2020-21 respectively. The facts and the issue ectively. The facts and the issues raised in grounds of raised in grounds of appeal appeal appeal being being being common common common in in in all all all these these these appeals appeals appeals and and and cross cross- cross objections,therefore, same were heard together and disposed off by same were heard together and disposed off by same were heard together and disposed off by way of this consolidated order for convenience and way of this consolidated order for convenience and avoid avoid repetition of facts.
2. The Ld. CIT(A) has adjudicated the appeal for assessment year The Ld. CIT(A) has adjudicated the appeal for assessment year The Ld. CIT(A) has adjudicated the appeal for assessment year 2013-14 and result of the same has been followed in other 14 and result of the same has been followed in other 14 and result of the same has been followed in other assessment assessment assessment years years years being common being common being common facts facts facts and and and circumstances. circumstances. circumstances. Accordingly, we also take up the appeal of the Revenue for AY 2013 Accordingly, we also take up the appeal of the Revenue for AY 2013- Accordingly, we also take up the appeal of the Revenue for AY 2013
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 4 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 14 and cross-objection of the assessee for AY 2013 bjection of the assessee for AY 2013-14. The grounds 14. The grounds raised by the Revenue in its appeal for AY 2013 raised by the Revenue in its appeal for AY 2013-14 are reproduced as under:
1. Whether on the facts and circumstances of the case and in law, Whether on the facts and circumstances of the case and in law, Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additionof Rs. 48,04,750/ the Ld. CIT(A) erred in deleting the additionof Rs. 48,04,750/- on the Ld. CIT(A) erred in deleting the additionof Rs. 48,04,750/ account of bogus purchase ignoring the fact that the assessee account of bogus purchase ignoring the fact that the assessee account of bogus purchase ignoring the fact that the assessee failed failed failed to to to prove prove prove the the the genuineness genuineness genuineness of of of purchases, purchases, purchases, andany andany andany expenditure in respect of which payments by account payee expenditure in respect of which payments by account payee expenditure in respect of which payments by account payee cheques is not enough evidence to prove the genuineness of the cheques is not enough evidence to prove the genuineness of the cheques is not enough evidence to prove the genuineness of the transaction?"
2. Whether on the facts and circumstances of the case and in law, ther on the facts and circumstances of the case and in law, ther on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 2,86,53,687 the Ld. CIT(A) is justified in deleting the addition of 2,86,53,687- the Ld. CIT(A) is justified in deleting the addition of 2,86,53,687 ws. 68 of the Act in respect of unsecured loans and ignoring the ws. 68 of the Act in respect of unsecured loans and ignoring the ws. 68 of the Act in respect of unsecured loans and ignoring the facts that the identity of the parties, the genuineness of the facts that the identity of the parties, the genuineness of the facts that the identity of the parties, the genuineness of the transaction, and the credit transaction, and the credit-worthiness of the parties have not worthiness of the parties have not been proved to the satisfaction of the 40, so as to discharge the been proved to the satisfaction of the 40, so as to discharge the been proved to the satisfaction of the 40, so as to discharge the primary onus?" 3. *Whether on the facts and circumstances of the case and in law, *Whether on the facts and circumstances of the case and in law, *Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowan the Ld. CIT(A) erred in deleting the disallowance of interest ce of interest expenses of Rs. 1,42, 15,496/ expenses of Rs. 1,42, 15,496/- on the unsecured loans when the on the unsecured loans when the said unsecured loans were found to be non said unsecured loans were found to be non-genuine as the genuine as the assessee has not proved the genuineness of the transaction, the assessee has not proved the genuineness of the transaction, the assessee has not proved the genuineness of the transaction, the identity of the creditors, and credit identity of the creditors, and credit-worthiness of the parties?" arties?" 2.1 The ground raised by the assessee in its cross The ground raised by the assessee in its cross-objection are objection are reproduced as under:
On the facts and circumstances of the case and in law, the search On the facts and circumstances of the case and in law, the search On the facts and circumstances of the case and in law, the search was conducted on November 6, 2019 and notice us 153 A can be was conducted on November 6, 2019 and notice us 153 A can be was conducted on November 6, 2019 and notice us 153 A can be issued for six years preceding issued for six years preceding the year of search, for notice beyond the year of search, for notice beyond six years certain conditions has to be satisfied which is not being six years certain conditions has to be satisfied which is not being six years certain conditions has to be satisfied which is not being satisfied and hence the proceedings u/s 153 A is void and bad in satisfied and hence the proceedings u/s 153 A is void and bad in satisfied and hence the proceedings u/s 153 A is void and bad in law.
2. On the facts and circumstances of the case and in law, the order 2. On the facts and circumstances of the case and in law, the order 2. On the facts and circumstances of the case and in law, the order passed by the AO under the provisions of section 153A r.w.s. 143(3) e AO under the provisions of section 153A r.w.s. 143(3) e AO under the provisions of section 153A r.w.s. 143(3) of the Act dated September 30, 2021 is time barred and thus, bad of the Act dated September 30, 2021 is time barred and thus, bad- of the Act dated September 30, 2021 is time barred and thus, bad in-law.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 5 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
3. On the facts and circumstances of the case and in law, the AO 3. On the facts and circumstances of the case and in law, the AO 3. On the facts and circumstances of the case and in law, the AO erred in initiating proceedings and passing an order under sec erred in initiating proceedings and passing an order under section erred in initiating proceedings and passing an order under sec 153A of the Act without appreciating the fact that neither there was 153A of the Act without appreciating the fact that neither there was 153A of the Act without appreciating the fact that neither there was any incriminating material found during search nor was there any any incriminating material found during search nor was there any any incriminating material found during search nor was there any reference to any incriminating material by the AO in his order and reference to any incriminating material by the AO in his order and reference to any incriminating material by the AO in his order and thus, addition and/or disallowance cannot be made thus, addition and/or disallowance cannot be made in the thus, addition and/or disallowance cannot be made proceedings us 153A of the Act in absence of any incriminating proceedings us 153A of the Act in absence of any incriminating proceedings us 153A of the Act in absence of any incriminating material being found during search. material being found during search.
4. On the facts and circumstances of the case and in law, the Id AO 4. On the facts and circumstances of the case and in law, the Id AO 4. On the facts and circumstances of the case and in law, the Id AO erred in filing second appeal evenafter no adverse comment was erred in filing second appeal evenafter no adverse comment was erred in filing second appeal evenafter no adverse comment was found in the remand report u/s 46 A of the act. 5. On the facts and circumstances of the case and in law, the CIT (A) 5. On the facts and circumstances of the case and in law, the CIT (A) 5. On the facts and circumstances of the case and in law, the CIT (A) rightly deleted the addition made on the point of purchases... rightly deleted the addition made on the point of purchases... rightly deleted the addition made on the point of purchases... 6. On the facts and circumstances of the case and in law, the CIT (A) On the facts and circumstances of the case and in law, the CIT (A) On the facts and circumstances of the case and in law, the CIT (A) rightly deleted the addi rightly deleted the addition made on the point of unsecured loan, tion made on the point of unsecured loan, which was repaid and therefore cannot be added u/s 68 of the act. which was repaid and therefore cannot be added u/s 68 of the act. which was repaid and therefore cannot be added u/s 68 of the act. 7. On the facts and circumstances of the case and in law, the CIT' 7. On the facts and circumstances of the case and in law, the CIT' 7. On the facts and circumstances of the case and in law, the CIT' (A) rightly deleted the addition made on the point of interest on (A) rightly deleted the addition made on the point of interest on (A) rightly deleted the addition made on the point of interest on unsecured loan, which is only consequential. which is only consequential. 8. On the facts and circumstances of the case and in law, the CIT' 8. On the facts and circumstances of the case and in law, the CIT' 8. On the facts and circumstances of the case and in law, the CIT' (A) rightly allowed the credit for TDS. (A) rightly allowed the credit for TDS. 3. Briefly stated, facts of the case are that Briefly stated, facts of the case are that for the year under or the year under consideration, the assessee the assessee company executed works works contracts including civil contracts for civil contracts for Local Authorities like Bombay s like Bombay Municipal Corporation (BMC), Municipal Corporation (BMC), and Municipal Corporation of Greater and Municipal Corporation of Greater Mumbai ( MCGM) etc. Mumbai ( MCGM) etc. The assessee filed its original return of The assessee filed its original return of income declaring total income at Rs.7 income declaring total income at Rs.7,79,23,750/- u/s 139(1) u/s 139(1) of the Income-tax Act, 1961 (in short ‘the Act’). Subsequently, tax Act, 1961 (in short ‘the Act’). Subsequently, a search tax Act, 1961 (in short ‘the Act’). Subsequently, and seizure action u/s 132 of the Act was carried out in the and seizure action u/s 132 of the Act was carried out in the and seizure action u/s 132 of the Act was carried out in the cases of the assessee assessee Group on 06.11.2019. Consequent to the Consequent to the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 6 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors search, assessment proceedings proceedings u/s 153A of the Act were initiated u/s 153A of the Act were initiated by way of issue of notice notice(s) dated 02.01.2021 for AY 2013 for AY 2013-14 to 2020-21. In response, the assessee filed return of income declaring In response, the assessee filed return of income declaring In response, the assessee filed return of income declaring total income of Rs.7,79,23,750/ total income of Rs.7,79,23,750/- for AY 2013-14.The assessee also 14.The assessee also filed return of income for other assessment years. e for other assessment years. The assessment The assessment u/s 153A r.w.s. 143(3) of the Act u/s 153A r.w.s. 143(3) of the Act for AY 2013-14 was completed on was completed on 30.09.2021 assessing total income at Rs.11,13,82,190/ total income at Rs.11,13,82,190/-. The addition/disallowances made by the Assessing Officer included addition/disallowances made by the Assessing Officer included addition/disallowances made by the Assessing Officer included disallowance of bogus p disallowance of bogus purchase of Rs.48,04,750/- and unexplained and unexplained cash credit u/s 68 of Rs.2,86,53,687/ cash credit u/s 68 of Rs.2,86,53,687/-. On further appeal, the Ld. . On further appeal, the Ld. CIT(A) allowed part relief to the assessee. CIT(A) allowed part relief to the assessee.
3.1 The addition for bogus purchases bogus purchases in various assessment years in various assessment years was made by the Assessing officer in was made by the Assessing officer in respect of purchases made respect of purchases made from 13 parties. Though, the Ld. CIT(A) rejected the contention of Though, the Ld. CIT(A) rejected the contention of Though, the Ld. CIT(A) rejected the contention of the assessee that there was no incriminating material vis the assessee that there was no incriminating material vis-à-vis the assessee that there was no incriminating material vis addition of bogus purchases, purchases, but deleted the addition in respect of deleted the addition in respect of four purchase parties and in re purchase parties and in respect of balance 9 parties sustained parties sustained addition @ 5% of the purchase addition @ 5% of the purchase amount. In respect of issue of . In respect of issue of unexplained cash credit u/s 68 of the Act, unexplained cash credit u/s 68 of the Act, the Assessing Officer the Assessing Officer made addition in respect of 29 parties for various assessment years. made addition in respect of 29 parties for various assessment years. made addition in respect of 29 parties for various assessment years. The Ld. CIT(A) held that he Ld. CIT(A) held that in view of no incriminating material no incriminating material qua the addition, same can’t be sustained the addition, same can’t be sustained, following the decision of following the decision of Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Continental Continental warehousing corporation reported in corporation reported in 58 taxmann.com 78 58 taxmann.com 78
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 7 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors On merit, the Ld. CIT(A) he Ld. CIT(A) held that no loan entries were appearing in entries were appearing in the books of accounts of the assessee the books of accounts of the assessee in respect of 11 parties parties, hence addition was not sustainable not sustainable in respect of those parties in respect of those parties. In respect of remaining 18 parties, the Ld. CIT(A) held that of remaining 18 parties, the Ld. CIT(A) held that the assessee had assessee had discharged its onus u/s onus u/s 68 of the Act and therefore, 68 of the Act and therefore, no addition could have been made in respect of those 18 parties. The Assessing The Assessing Officer has also made addition addition in few assessments years in respect years in respect of bogus sub contract of bogus sub contract expenses incurred, which has been deleted , which has been deleted by the ld CIT(A). The Ld CIT(A) also rejected the grounds raised by . The Ld CIT(A) also rejected the grounds raised by . The Ld CIT(A) also rejected the grounds raised by the assessee challenging the validity of assessment on the ground the assessee challenging the validity of assessment on the ground the assessee challenging the validity of assessment on the ground that same were barred by limitation and assessment year 2013 that same were barred by limitation and assessment year 2013-14 that same were barred by limitation and assessment year 2013 being beyond period of six financial years excluding the financial beyond period of six financial years excluding the financial beyond period of six financial years excluding the financial year in which the search was carried out. which the search was carried out.
4. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in the finding of the Ld. CIT(A), the Revenue is in the finding of the Ld. CIT(A), the Revenue is in appeal whereas the assessee is by way of cross appeal whereas the assessee is by way of cross-objection as objection as reproduced above.
5. In ground No. one of the cross ground No. one of the cross objections, the assessee has the assessee has raised an issue that notice under section 153A of the Act could be issue that notice under section 153A of the Act could be issue that notice under section 153A of the Act could be issued for a period of six assessment years preceding the issued for a period of six assessment years preceding the issued for a period of six assessment years preceding the assessment year corresponding to financial year in which search assessment year corresponding to financial year in which search assessment year corresponding to financial year in which search was conducted, and the assessment year under consideration being was conducted, and the assessment year under consideration being was conducted, and the assessment year under consideration being beyond said period of six assessment period of six assessment years, therefore years, therefore, the assessment made u/s 153A of the Act is void assessment made u/s 153A of the Act is void-ab-initio.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 8 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 5.1 The learned couns nsel supported the ground and submitted that l supported the ground and submitted that the Assessing Officer was not justified in completing the assessment the Assessing Officer was not justified in completing the assessment the Assessing Officer was not justified in completing the assessment for the year under consideration under the provisions of the section onsideration under the provisions of the section onsideration under the provisions of the section 153A of the Act being beyond six ct being beyond six assessment years provided under years provided under the section 153A of the the section 153A of the Act.
5.2 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on r dispute and perused the relevant material on record. We find that ecord. We find that under the provisions of the section 153 under the provisions of the section 153A of the Act, ct, prior to 1/04/2017 assessment could have been made assessment could have been made only only for the six assessment years but with effect from 01/04/2017, the Finance with effect from 01/04/2017, the Finance Act with effect from 01/04/2017, the Finance 2017 has amended the provisions to include furthe amended the provisions to include further relevant amended the provisions to include furthe assessment year or years assessment year or years, which could be extended up to 10 , which could be extended up to 10 assessment years subject to ceiling of undisclosed income assessment years subject to ceiling of undisclosed income. The assessment years subject to ceiling of undisclosed income word ‘relevant assessment year relevant assessment year’(s) has been defined defined by way of proviso and Explanation xplanation-1 to section 153A of the Act, which , which, for ready reference, is reproduced as under: is reproduced as under:
“Provided also that no notice for assessment or reassessment that no notice for assessment or reassessment that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant shall be issued by the Assessing Officer for the relevant shall be issued by the Assessing Officer for the relevant assessment year or years unless assessment year or years unless- (a) the Assessing Officer has in his possession books of account or (a) the Assessing Officer has in his possession books of account or (a) the Assessing Officer has in his possession books of account or otherdocuments or evidence which reveal that the income, otherdocuments or evidence which reveal that the income, otherdocuments or evidence which reveal that the income, represented in the form of asset, which has escaped assessment represented in the form of asset, which has escaped assessment represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in th amounts to or is likely to amount to fifty lakh rupees or more in the amounts to or is likely to amount to fifty lakh rupees or more in th relevant assessment assessment year or in aggregate in the relevant year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped (b) the income referred to in clause (a) or part thereof has escaped (b) the income referred to in clause (a) or part thereof has escaped assessassessment for such year or years; and assessassessment for such year or years; and Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 9 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
(c) the search under section 132 is initiated or requisition und (c) the search under section 132 is initiated or requisition under (c) the search under section 132 is initiated or requisition und section 132A is made on or after the 1st day of April, 2017. section 132A is made on or after the 1st day of April, 2017. Explanation 1 -For the purposes of this sub For the purposes of this sub-section, the expression section, the expression "relevant assessment year" shall mean an assessment year "relevant assessment year" shall mean an assessment year "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in preceding the assessment year relevant to the previous year in preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls h search is conducted or requisition is made which falls h search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment beyond six assessment years but not later than ten assessment beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous years from the end of the assessment year relevant to the previous years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. year in which search is conducted or requisition is made.” 5.3 In view of the above provisions of the above provisions, wherever search under section wherever search under section 132 of the Act is initiated or requisition under section 132 ct is initiated or requisition under section 132A of the ct is initiated or requisition under section 132 Act is made after the 01/04/2017 and the escape after the 01/04/2017 and the escaped income is likely income is likely to be ₹ 50 lakh or more 50 lakh or more, notice under section 153A of the , notice under section 153A of the Act could be issued up to 10 assessment years from the end of the be issued up to 10 assessment years from the end of the be issued up to 10 assessment years from the end of the assessment year relevant to the previous year in assessment year relevant to the previous year in which which search is conducted or requisition is made. We find that in the conducted or requisition is made. We find that in the instant instant case search was conducted on 06/11/2019 and income assessed conducted on 06/11/2019 and income assessed for conducted on 06/11/2019 and income assessed instant assessment year instant assessment year i.e. AY 2013-14 is more than 50 lakhs, is more than 50 lakhs, therefore notice under section 153A of the therefore notice under section 153A of the Act could have been ct could have been issued up to the 10 assessment year issued up to the 10 assessment years preceding the assessment preceding the assessment year 20-21. Therefore, the Assessing Officer has validly issued 21. Therefore, the Assessing Officer has validly issued 21. Therefore, the Assessing Officer has validly issued notice u/s 153A of the u/s 153A of the Act in respect of the instant assessment year in respect of the instant assessment year 2013-14. Thus, the ground he ground No. one of the cross objections of the one of the cross objections of the assessee is accordingly dismissed. assessee is accordingly dismissed.
In the ground no he ground no 2 of the cross objections, the assessee has the assessee has assailed the assessment or assailed the assessment order on the ground that order passed u/s der on the ground that order passed u/s 153A of the Act is barred by limitation. 153A of the Act is barred by limitation.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 10 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 6.1 The Ld. Counsel of the assessee submitted that Counsel of the assessee submitted that in view of Counsel of the assessee submitted that powers conferred by subsection 1 of section 3 of powers conferred by subsection 1 of section 3 of Taxation and other axation and other laws (relaxation of certain laws (relaxation of certain provisions) ordinance, 2020, by ordinance, 2020, by way of notification issued, the time limit the time limit for passing the assessment order passing the assessment order was extended up to 30/09/2021. He submitted that though the 30/09/2021. He submitted that though the 30/09/2021. He submitted that though the assessment order is dated 30/09/2021, however the assessee s dated 30/09/2021, however the assessee s dated 30/09/2021, however the assessee gathered from the Income ncome-tax Departmental portal (website) (website) that no order was passed or issued on 30/09/2021 till 12:13 AM in the order was passed or issued on 30/09/2021 till 12:13 AM in the order was passed or issued on 30/09/2021 till 12:13 AM in the night. The assessee claim night. The assessee claimed to have enclosed a screenshot of the to have enclosed a screenshot of the portal to its submission filed before us to its submission filed before us, however no such screenshot , however no such screenshot has been found.
6.2 The learned Departmental epartmental Representative (DR) submitted that submitted that the case of the assessee was centralized with Central case of the assessee was centralized with Central Circle, which Circle, which are not on the faceless mode and are not on the faceless mode and orders have been passed by the orders have been passed by the Assessing Officer in physical mode in physical mode. Thereafter, the assessment . Thereafter, the assessment order might have been ave been uploaded on the Income-tax tax department portal after some gap of time and after some gap of time and it might have been possible that it might have been possible that same could not have reflect reflected on the Income-tax portal immediately immediately after midnight of 30/09/2021. He submitted that after midnight of 30/09/2021. He submitted that the the allegation that assessment order has been passed after limitation of expiry that assessment order has been passed after limitation of expiry that assessment order has been passed after limitation of expiry period are bald allegation period are bald allegation of the assessee without any any substantive evidence and therefore same evidence and therefore same are liable to be rejected.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 11 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 6.3 We have heard rival rival submissions on the issue in dispute. In on the issue in dispute. In our opinion, the requirement of the law is that assessment order opinion, the requirement of the law is that assessment order opinion, the requirement of the law is that assessment order should be passed prior to expiry of limitation period should be passed prior to expiry of limitation period. As far as should be passed prior to expiry of limitation period limitation period is concerned, there is no dispute and limitation period is concerned, there is no dispute and that is limitation period is concerned, there is no dispute and admitted as on 30/9/20201. The contention of the assessee is that 30/9/20201. The contention of the assessee is that 30/9/20201. The contention of the assessee is that impugned assessment order was not uploaded on income impugned assessment order was not uploaded on income-tax portal impugned assessment order was not uploaded on income immediately after expiry of immediately after expiry of limitation i.e. midnight of 30/09/2021. midnight of 30/09/2021. In our opinion, merely In our opinion, merely not uploading the instant assessment order not uploading the instant assessment order on the income tax portal by 12.13 AM on 1/10/2021, it cann on the income tax portal by 12.13 AM on 1/10/2021, it cannot be on the income tax portal by 12.13 AM on 1/10/2021, it cann established that assessment order was not passed within the period assessment order was not passed within the period assessment order was not passed within the period of limitation. If the assessment order is served within a reasonable f limitation. If the assessment order is served within a reasonable f limitation. If the assessment order is served within a reasonable period from the expiry of the limitation of passing the assessment period from the expiry of the limitation of passing the assessment period from the expiry of the limitation of passing the assessment order, it is presumed that same order, it is presumed that same was passed within the period in the period of the limitation. The assessee has not brought on record any evidence limitation. The assessee has not brought on record any evidence limitation. The assessee has not brought on record any evidence that said assessment order was received beyond that said assessment order was received beyond a a reasonable period from the expiry of the limitation. In absence of any such period from the expiry of the limitation. In absence of any such period from the expiry of the limitation. In absence of any such documentary evidences, the allegations of the documentary evidences, the allegations of the assessee are rejected. assessee are rejected. The ground No. 2 (two two) of the cross objections of the assessee is of the assessee is accordingly dismissed. accordingly dismissed.
7. The ground 1 of the appeal of the Revenue relates to addition The ground 1 of the appeal of the Revenue relates to addition The ground 1 of the appeal of the Revenue relates to addition of Rs.48,04,750/- which which was made by the Assessing Officer on made by the Assessing Officer on account of bogus purchases. account of bogus purchases. In the ground No. 3 (three) of the cross objections, the assessee has raised the issue that without aid of any objections, the assessee has raised the issue that without aid of any objections, the assessee has raised the issue that without aid of any incriminating material no addition could have been made in case of incriminating material no addition could have been made in case of incriminating material no addition could have been made in case of Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 12 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors completed assessment. This ground has been raised by the ment. This ground has been raised by the ment. This ground has been raised by the assessee with reference to the addition of bogus purchases assessee with reference to the addition of bogus purchases also. assessee with reference to the addition of bogus purchases 7.1. The facts qua the issue The facts qua the issue-in-dispute are that the assessee has dispute are that the assessee has shown purchase expenses of Rs.18,12,07,840/ shown purchase expenses of Rs.18,12,07,840/- during the year during the year under consideration. D under consideration. During the course of the search proceedings, uring the course of the search proceedings, the search team thoroughly examined the purchases of the assessee the search team thoroughly examined the purchases of the assessee the search team thoroughly examined the purchases of the assessee and key persons of the assessee rsons of the assessee company were asked to company were asked to substantiate those purchases by way of filing complete address purchases by way of filing complete address pf purchases by way of filing complete address supplier, PAN of supplier, of supplier, purchase order, ledger account of supplier, invoice/bills, bills, delivery delivery challans challans, lorry lorry receipts, receipts consumption register, purchase and consumption reconciliation consumption register, purchase and consumption reconciliation consumption register, purchase and consumption reconciliation statement and bank statement etc. statement and bank statement etc. The Authorised officer officer of search team, from examination of the do rom examination of the documentary evidences shown by the shown by the assessee, noted certain laps certain lapses in claim of purchases expenses in claim of purchases expenses. The search team identified identified and short listed 13 parties,which ,which were having deficiencies viz. viz. (i) the purchase bills were prepared using (i) the purchase bills were prepared using same style format / font, (ii) bills were not cont font, (ii) bills were not containting type and nting type and vehicle of the lorry use for transportation, delivery address, signature vehicle of the lorry use for transportation, delivery address, signature vehicle of the lorry use for transportation, delivery address, signature of employee or delivery (iii) invoices issued were not containing employee or delivery (iii) invoices issued were not containing employee or delivery (iii) invoices issued were not containing mandatory PAN (iv) no e mandatory PAN (iv) no e-way bill, delivery challan, stock register et way bill, delivery challan, stock register etc. For the period of assessment year 2013 assessment year 2013-14 to 2020- -21, the 13 parties were identified identified namely: V.H Enterprises, Vimalnath V.H Enterprises, Vimalnath Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 13 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Enterprises, , , Hitesh Hitesh Hitesh K. K. K. Shah Shah Shah (HUF), (HUF), (HUF), Maharashtra Maharashtra Maharashtra Pile Pile Pile Foundation, Jay Khodiyar Enterprises, Vimalnath Associates Foundation, Jay Khodiyar Enterprises, Vimalnath Associates Foundation, Jay Khodiyar Enterprises, Vimalnath Associates and Diyan Corporation. and Diyan Corporation.A chart of purchases from above parties A chart of purchases from above parties recorded in books of account is reproduced as under: recorded in books of account is reproduced as under:
Name of FY 2012-13 FY2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2018 FY 2019-20 Sellers VH 20,49,491 30,32,100 16,26,193 18,30,019 15,68,280 65,56,050 65,56,050 80,09,332 Enterprises Vimalnath 10,07,776 32,25,653 16,57,681 22,65,013 22,09,095 64,33,341 64,33,341 31,00,940 Corporation Navkar 39,94,616 39,94,616 23,87,388 Corporation Mahavir 43,29,180 25,59,607 25,59,607 18,88,312 Enterprises Bhavya 34,52,173 34,52,173 22,06,521 Enterprises Rishabh 9,89,718 19,17,347 36,49,805 25,67,970 38,37,494 82,83,929 1,03,74,183 1,03,74,183 47,15,958 Corporation Rushabh 5,52,061 15,78,169 42,68,362 14,10,472 39,29,810 91,53,471 1,00,15,119 1,00,15,119 46,79,707 Trading Co.
Bharti 1,61,14,589 2,41,60,848 1,11,90,753 3,55,02,056 7,00,04,319 5,23,62,604 5,23,62,604 2,07,29,385 Enterprises Hitesh K 32,62,971 32,84,910 31,88,0983 13,27,273 31,38,601 73,28,364 1,03,97,840 1,03,97,840 44,57,489 Maharashtra 21,88,490 64,68,451 Pile Foundation Jay Khodiyar 64,86,857 1,33,78,824 35,24,070 Enterprises Vimalnath 36,10,050 17,62,298 19,40,968 14,13,598 58,81,762 58,81,762 35,81,809 Associates Divya 31,01,660 23,04,423 22,59,068 16,87,727 65,10,522 65,10,522 30,24,057 Corporation Total 48,04,750 2,81,40,783 6,34,33,887 3,64,33,887 6,20,57,929 10,15,48,783 11,80,27,822 11,80,27,822 5,41,81,058
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 14 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 7.2 During the course of search proceedings, During the course of search proceedings, simultaneous survey simultaneous survey proceeding were carried out at the premises proceeding were carried out at the premises of above supplier of above supplier parties and statement of proprietor statement of proprietor /partner/director of th director of those entities were recorded on oath entities were recorded on oath, which included (i) sh Vinod H Shah ( , which included (i) sh Vinod H Shah ( Karta of Vimalnath HUF Proprietor Karta of Vimalnath HUF Proprietor of M/s Vimalnath Corporation M/s Vimalnath Corporation (ii) Smt Khushboo Shah ( Proprietor of M/s VH Enterprises (iii) Sh (ii) Smt Khushboo Shah ( Proprietor of M/s VH Enterprises (iii) Sh (ii) Smt Khushboo Shah ( Proprietor of M/s VH Enterprises (iii) Sh Nishil Madhani , key person of Vimalnath Associates and Diyan Nishil Madhani , key person of Vimalnath Associates and Diyan Nishil Madhani , key person of Vimalnath Associates and Diyan Corporation and ( iv) sh Kantilal D jain , proprietor of M/s navkar Corporation and ( iv) sh Kantilal D jain , proprietor of M/s navkar Corporation and ( iv) sh Kantilal D jain , proprietor of M/s navkar Corporation and key person of Ma Corporation and key person of Mahavir Enterprises and Bhavya havir Enterprises and Bhavya Enterprises. During survey at the premises of M/s Navkar During survey at the premises of M/s Navkar During survey at the premises of M/s Navkar Corporation, Corporation, the the survey survey team team found found ‘WhatsApp WhatsApp messages’ messages exchanged between the key persons of the assessee and sh Kantilal exchanged between the key persons of the assessee and sh Kantilal exchanged between the key persons of the assessee and sh Kantilal D jain. The individuals s whose statement were recorded rded stated that they had issued bogus bills to the assessee company issued bogus bills to the assessee company without actual without actual delivery of goods or material. The Assessing Officer has reproduced material. The Assessing Officer has reproduced material. The Assessing Officer has reproduced statement of the relevant persons statement of the relevant persons of supplier companies of supplier companies from page 7 to 20 of the assessment order 7 to 20 of the assessment order. In the assessment order e assessment order, the Assessing Officer has noted that Assessing Officer has noted that three parties were not found at the were not found at the places of their business mentioned in bills. The inspectors of the places of their business mentioned in bills. The inspectors of the places of their business mentioned in bills. The inspectors of the income-tax department, who were deputed for verifying their place tax department, who were deputed for verifying their place tax department, who were deputed for verifying their place of business submitted that bus of business submitted that business premises of M/s Rushabh iness premises of M/s Rushabh Corporation, Rushabh Trading Company and M/s Hitesh K shah Rushabh Trading Company and M/s Hitesh K shah Rushabh Trading Company and M/s Hitesh K shah were found closed and persons in neighborhood denied of a were found closed and persons in neighborhood denied of any were found closed and persons in neighborhood denied of a Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 15 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors business activity carried business activity carried out from those places. In case of from those places. In case of ‘Kohudiyar Enterprises Kohudiyar Enterprises’ also the Inspector reported that no entity or that no entity or business was found to be running from the address of that party as found to be running from the address of that party as found to be running from the address of that party and nearby people denied of having any knowledge of said entity. denied of having any knowledge of said entity. denied of having any knowledge of said entity. The office of ‘M/s Maharashtra pile foundation Maharashtra pile foundation’ was found to be was found to be closed for a very longtime. closed for a very longtime.
7.3 The statements of persons of persons recorded during survey proceedings recorded during survey proceedings and evidences gathered by the gathered by the Inspectors of the income nspectors of the income-tax departments were duly confronted to the representative of the were duly confronted to the representative of the were duly confronted to the representative of the assessee-company i.e. Director S i.e. Director Sh. Nirmal Madhani on 10/11/2019 Nirmal Madhani on 10/11/2019 (i.e. during the course of search proceedings he course of search proceedings).
7.4 In view of observation In view of observations made and material gathered and material gathered during the search proceedings, the Assessing Officer search proceedings, the Assessing Officer during assessment during assessment proceedings on 15/09/2021, asked proceedings on 15/09/2021, asked the assessee to produce those the assessee to produce those purchase parties for verificatio purchase parties for verification. The assessee, however, assessee, however,submitted that it had already supplied PAN of the supplier and sample invoice already supplied PAN of the supplier and sample invoice already supplied PAN of the supplier and sample invoice copies. In absence of documentary evidence n absence of documentary evidences in support support of delivery of goods and observations recorded during search proceedings, the of goods and observations recorded during search proceedings, the of goods and observations recorded during search proceedings, the Assessing Officer held that the purchases ld that the purchases amounting to Rs. amounting to Rs. 5,41,81,050/- in respect of th in respect of those 13 parties for assessment year se 13 parties for assessment year 2013-14 to 2020-21 as unexplained bogus purchases. 21 as unexplained bogus purchases. In the year 21 as unexplained bogus purchases. under consideration addition of Rs. 48, 04,750/ under consideration addition of Rs. 48, 04,750/- was made by the was made by the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 16 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Assessing officer against bogus purchases. Assessing officer against bogus purchases. The relevant finding for The relevant finding for the year under consideration is reproduced as under: the year under consideration is reproduced as under:
“7.9 In the instant case, there is specific information as well as 7.9 In the instant case, there is specific information as well as 7.9 In the instant case, there is specific information as well as independent enquiries. To summarize the above arguments, the independent enquiries. To summarize the above arguments, the independent enquiries. To summarize the above arguments, the assessee fails on the following ee fails on the following grounds: a) The assessee did not produce the parties which was asked a) The assessee did not produce the parties which was asked a) The assessee did not produce the parties which was asked specifically vide show cause dated 15.09.2021 The primary onus is specifically vide show cause dated 15.09.2021 The primary onus is specifically vide show cause dated 15.09.2021 The primary onus is on the assessee to establish the genuineness of the purchases on the assessee to establish the genuineness of the purchases on the assessee to establish the genuineness of the purchases claimed by it. As per section 10 claimed by it. As per section 101, 102 and 106 of the Evidence Act, 1, 102 and 106 of the Evidence Act, the onus lies upon the assessee to prove all the claims including the onus lies upon the assessee to prove all the claims including the onus lies upon the assessee to prove all the claims including purchases to the satisfaction of the AO, which was not discharged purchases to the satisfaction of the AO, which was not discharged purchases to the satisfaction of the AO, which was not discharged by the assessee as it failed to produce the parties from whom by the assessee as it failed to produce the parties from whom by the assessee as it failed to produce the parties from whom purchases were made. Since purchases were made. Since the primary facts are in the the primary facts are in the knowledge of the assessee, it is its duty to provide the correct knowledge of the assessee, it is its duty to provide the correct knowledge of the assessee, it is its duty to provide the correct address or contact modes of the alleged suppliers. This view is address or contact modes of the alleged suppliers. This view is address or contact modes of the alleged suppliers. This view is supported by the decision of Hon supported by the decision of Hon’ble Raj High Court of India (2002) ble Raj High Court of India (2002) 178 CTR (Raj) 420 MP High Cou 178 CTR (Raj) 420 MP High Court in the case of VISP(P) vs.CIT rt in the case of VISP(P) vs.CIT Indore (2004) 186 CTR 218(MP) Indore (2004) 186 CTR 218(MP). b) Mere filing of copies of purchase bills without any documentary b) Mere filing of copies of purchase bills without any documentary b) Mere filing of copies of purchase bills without any documentary evidences in support of purchases and payment through account evidences in support of purchases and payment through account evidences in support of purchases and payment through account payee cheque cannot be conclusive in a case where genuineness payee cheque cannot be conclusive in a case where genuineness of payee cheque cannot be conclusive in a case where genuineness transaction is in question. transaction is in question. c) In the case of bogus purchase cases, the ratio laid down by the c) In the case of bogus purchase cases, the ratio laid down by the c) In the case of bogus purchase cases, the ratio laid down by the Apex Court, Jurisdictional High Court and Gujarat High Court in Apex Court, Jurisdictional High Court and Gujarat High Court in Apex Court, Jurisdictional High Court and Gujarat High Court in the following cases, need special mention considering the facts of the following cases, need special mention considering the facts of the following cases, need special mention considering the facts of the case. i) M/s. NK Protein Limited (reported at 84 taxmann.com 195 ) M/s. NK Protein Limited (reported at 84 taxmann.com 195 &292 ) M/s. NK Protein Limited (reported at 84 taxmann.com 195 CTR 354 (SC) ii) NikunjEximp Enterprises (in writ petition no 2860, order dt. ) NikunjEximp Enterprises (in writ petition no 2860, order dt. ) NikunjEximp Enterprises (in writ petition no 2860, order dt. 18.6.2014) (Bombay High Court.) 18.6.2014) (Bombay High Court.) iii) CIT V/S N K Industries (in Tax Appeal No.240 of 2009 vide iii) CIT V/S N K Industries (in Tax Appeal No.240 of 2009 vide iii) CIT V/S N K Industries (in Tax Appeal No.240 of 2009 vide order dated 26.2.201 order dated 26.2.2016 (Gujarat High Court) subsequent decision in 6. (Gujarat High Court) subsequent decision in the case of CIT V/S Simit P. Seth356JTR 451 (Guj. H.C). the case of CIT V/S Simit P. Seth356JTR 451 (Guj. H.C).
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 17 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Thus, undisputed fact is that the purchases claimed to have been Thus, undisputed fact is that the purchases claimed to have been Thus, undisputed fact is that the purchases claimed to have been made from theseparties remained unverified. made from theseparties remained unverified. 7.10 After carefully going through the legal 10 After carefully going through the legal instances available on instances available on this issue the onus lay upon the assessee to prove the genuineness this issue the onus lay upon the assessee to prove the genuineness this issue the onus lay upon the assessee to prove the genuineness of the transaction when it claimed that the purchases are genuine. of the transaction when it claimed that the purchases are genuine. of the transaction when it claimed that the purchases are genuine. From the above case laws and the discussion on investigation, it is From the above case laws and the discussion on investigation, it is From the above case laws and the discussion on investigation, it is crystal clear that – (1) The primary onus is on the assessee to establish the imary onus is on the assessee to establish the imary onus is on the assessee to establish the genuineness of the purchasesclaimed by it; genuineness of the purchasesclaimed by it; ii) Since the primary facts are in the knowledge of the assessee it is ) Since the primary facts are in the knowledge of the assessee it is ) Since the primary facts are in the knowledge of the assessee it is his duty toprovide the correct address or contact modes of the his duty toprovide the correct address or contact modes of the his duty toprovide the correct address or contact modes of the alleged suppliers; iii) If the investigation done by the Department leads to doubt investigation done by the Department leads to doubt investigation done by the Department leads to doubt regarding the genuineness of the purchases it is incumbent on the regarding the genuineness of the purchases it is incumbent on the regarding the genuineness of the purchases it is incumbent on the assessee to produce the parties along with necessary documents to assessee to produce the parties along with necessary documents to assessee to produce the parties along with necessary documents to establish the genuineness of the transaction establish the genuineness of the transaction. (iv) Payment by account pa (iv) Payment by account payee cheque is not sacrosanct. (v) No proof by way of challaa/documentary evidence for payment (v) No proof by way of challaa/documentary evidence for payment (v) No proof by way of challaa/documentary evidence for payment of VAT is filed. (vi) Though it is true that sales cannot be affected without it is true that sales cannot be affected without it is true that sales cannot be affected without corresponding purchases, in the absence of stock register, books of corresponding purchases, in the absence of stock register, books of corresponding purchases, in the absence of stock register, books of accounts it is not possible to verify which goods were sold to the accounts it is not possible to verify which goods were sold to the accounts it is not possible to verify which goods were sold to the parties whose sales confirmation was submitted by the assessee. parties whose sales confirmation was submitted by the assessee. parties whose sales confirmation was submitted by the assessee. Assessee is also unable to co e is also unable to co-relate the same. 7.11 In view of the above discussion, it is clearly explained that the 7.11 In view of the above discussion, it is clearly explained that the 7.11 In view of the above discussion, it is clearly explained that the assessee has claimed bogus purchase to inflate the expenses and assessee has claimed bogus purchase to inflate the expenses and assessee has claimed bogus purchase to inflate the expenses and to reduce the taxable income. Thus, bogus purchase expenses of Rs to reduce the taxable income. Thus, bogus purchase expenses of Rs to reduce the taxable income. Thus, bogus purchase expenses of Rs 48,04,750/-, claimed as purchases from the bogus parties, as aimed as purchases from the bogus parties, as aimed as purchases from the bogus parties, as discussed above in FY 2012 discussed above in FY 2012-13 relevant to AY 2013-14 is hereby 14 is hereby disallowed and is added to the total income of the assessee in AY disallowed and is added to the total income of the assessee in AY disallowed and is added to the total income of the assessee in AY 2013-14 as bogus expense Penalty U/S 271(1) 14 as bogus expense Penalty U/S 271(1) © rws 274 of the rws 274 of the Act, is initiate for concealment of Income concealment of Income.” 7.5 On further appeal before the Ld. CIT(A), the assessee On further appeal before the Ld. CIT(A), the assessee On further appeal before the Ld. CIT(A), the assessee submitted that it had filed copy of income filed copy of income-tax return, invoices along invoices along
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 18 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors with delivery challan and ledger account with delivery challan and ledger account, bank statement etc bank statement etc before the Assessing officer. It was submi . It was submitted by the assessee before the Ld by the assessee before the Ld CIT(A) that all those supplier parties had supplier parties had also separately also separately filed their copy of Income-tax return tax return, invoice along with delivery challan invoice along with delivery challan, ledger account, sample sample copy along with transport bills transport bills, bank statement, VAT registrati VAT registration certificate etc before the Assessing before the Assessing officer on 22.09.2021.
7.6 During the appellate proceedings, the assessee filed various During the appellate proceedings, the assessee filed various During the appellate proceedings, the assessee filed various documents as additional evidence which were sent by the Ld. CIT(A) documents as additional evidence which were sent by the Ld. CIT(A) documents as additional evidence which were sent by the Ld. CIT(A) to the Assessing Officer calling for remand report. The Ld. to the Assessing Officer calling for remand report. The Ld. CIT(A) in to the Assessing Officer calling for remand report. The Ld. the impugned order has reproduced summary of the remand report as reproduced summary of the remand report as reproduced summary of the remand report during assessment proceedings proceedings, which for ready reference, for ready reference, is reproduced as under:
Sr. Name Remarks No. 1 Rushabh Rushabh Trading Trading 1. Party appeared before this office a and statement Co. Co. (Proprietor (Proprietor was recorded, Hitesh Hitesh Kantilal Kantilal 2. The assessee has not submitted stock book and 2. The assessee has not submitted stock book and Shah) purchase order, and ME TAX replied in his purchase order, and ME TAX replied in his statement that he received order from client through statement that he received order from client through telephonic conversation and place order with the telephonic conversation and place order with the vendors of material and supply the goods to client ial and supply the goods to client directly at their sites. As the stock si not stored at directly at their sites. As the stock si not stored at any place by the assessee and hence, not any place by the assessee and hence, not maintained any stock.
3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 19 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors inspectors and submitted report. As per the spectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
4. Copy of the statement enclosed. The Ld. CIT(A) 4. Copy of the statement enclosed. The Ld. CIT(A) may decide the case on merits based on the above may decide the case on merits based on the above facts. 2 Rushabh 1. Party appeared before this office hand statement Party appeared before this office hand statement Corporation was recorded (Proprietor (Proprietor Reema Reema 2. The assessee has not submitted stock book and 2. The assessee has not submitted stock book and Hitesh Shah purchase order, and replied in his statement that he purchase order, and replied in his statement that he received order from client through telephonic received order from client through telephonic conversation and place order with the vendors of conversation and place order with the vendors material and supply the goods to client directly at material and supply the goods to client directly at their sites. As the stock si not stored at any place their sites. As the stock si not stored at any place by the assessee and hence, not maintained any by the assessee and hence, not maintained any stock.
3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently b inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
4. Copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts.
3. Hitesh Hitesh Kantilal Kantilal 1. Party appeared before this office and statement fore this office and statement Shah (HUF) was recorded 2. The assessee has not submitted stock book and 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he purchase order, and replied in his statement that he received order from client through telephonic received order from client through telephonic conversation and place order with the vendors of conversation and place order with the vendors of material and supply the goods to client directly at pply the goods to client directly at their sites. As the stock si not stored at any place their sites. As the stock si not stored at any place by the assesse and hence, not maintained any maintained any stock.
3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 20 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors inspectors and submitted report. As per the and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
4. Copy of the statement enclosed. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts. 4 Vimalnath 1. Party has not attended the office. Corporation 2. The assessee has not submitted stock book. e assessee has not submitted stock book.
Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
4. The statement of th The statement of the party was recorded during the was recorded during the search action, the same search action, the same may be considered for the may be considered for the present present proceeding proceeding enclosed. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts.
5. Maharashtra Maharashtra Pile Pile 1. Party has not attended the office. Foundation 2. The assessee has not submitted stock book and The assessee has not submitted stock book and purchase order. 3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise. 4. The statement of the party was recorded during 4. The statement of the party was recorded during the search action, the same may be considered for the search action, the same may be considered for the present proceeding enclosed. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 21 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors on the above facts.
6. V. H. Enterprises 1. The assessee failed to produce the party. uce the party.
2. The party has not submitted stock book, 2. The party has not submitted stock book, purchase order and purchase bills.
3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. party was found at the premise. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts.
7. Jay Jay Khodiyar Khodiyar 1. Party appeared before this office and statement 1. Party appeared before this office and statement Enterprises was recorded.
The assessee has not stock book and purchase 2. The assessee has not stock book and purchase order and replied in his statement that he received plied in his statement that he received order from client through telephonic conversation order from client through telephonic conversation and place order with the vendors of material and and place order with the vendors of material and supply the goods to client directly at their sites. As supply the goods to client directly at their sites. As the stock is not stored at any place by the assessee the stock is not stored at any place by the assessee and hence not maintained any stock book. not maintained any stock book.
5. Party provided its contact Party provided its contact number number & & address address in in statement, the copy of the statement, the copy of the statement enclosed. statement enclosed. The Ld.CIT(A) may decide the case on merits based on merits based on the above facts. 8. Vimalnath 1. Party has not attended the office. 2. The office. 2. The Associates assessee has not submitted stock book. assessee has not submitted stock book. 3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 22 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
4. The statement of the party was recorded during statement of the party was recorded during the search action, the same may be considered for the search action, the same may be considered for the present proceeding enclosed. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts. 9. Diyan Corporation 1. Party has not attended the office. 2. The assessee has not submittedstock book. 2. The assessee has not submittedstock book. 3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise. 4. The statement of the party was recorded during of the party was recorded during the search action, the same may be considered for the search action, the same may be considered for the present proceeding. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts. 10. Mahavir Enterprise 1. The assessee failed to produce the party. 1. The assessee failed to produce the party. 2. The party has not submitted stock book. party has not submitted stock book. 3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by the statement, which was verified independently by the inspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise.
6. The statement of the par The statement of the party wasrecorded wasrecorded during during the the search action, the same search action, the same may be considered for the may be considered for the present proceeding. present proceeding. The Ld.CIT(A) may decide the caseon merits based The Ld.CIT(A) may decide the caseon merits based on the above facts.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 23 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
1. Party has not attended the office. 11 Navkar Enterprises Party has not attended the office.
2. The assessee has not submitted The assessee has not submitted stock book and purchase order. 3. Party provided its contact number & address Party provided its contact number & address in in statement statement which which was was verified verified independently independently by by the the inspectors inspectors and and submitted report. As per the inspector report, submitted report. As per the inspector report, party was found at the premise. party was found at the premise. 4. The statement of the party was re The statement of the party was recorded during the search action, the same may be during the search action, the same may be considered for the present proceeding. considered for the present proceeding. The Ld. CIT(A) may decide the case on merits The Ld. CIT(A) may decide the case on merits based on the above facts. 12. Bhavya Enterprises 1. Party has not attended the office. 2. The assessee has not submitted stock book. stock book. 3. Party provided its contact number & address in 3. Party provided its contact number & address in statement, which was verified independently by statement, which was verified independently by theinspectors and submitted report. As per the inspectors and submitted report. As per the inspector report, party was found at the premise. inspector report, party was found at the premise. 4. The statement of the party was recorded during 4. The statement of the party was recorded during the search action, the same may be considered for the search action, the same may be considered for the present proceeding. The Ld.CIT(A) may decide the case on merits based The Ld.CIT(A) may decide the case on merits based on the above facts. 7.7 The CIT(A) has noted that out of The CIT(A) has noted that out of 13 parties, 4 parties namely parties namely Rushabh Corporation, Rushabh Trading Co. Bhar Rushabh Corporation, Rushabh Trading Co. Bharti Enterprises, ti Enterprises, Hitesh K. Shah (HUF), Jay Khodiyar Enterprises Hitesh K. Shah (HUF), Jay Khodiyar Enterprises had had appeared before the Assessing Officer and their statement were recorded before the Assessing Officer and their statement were recorded, and before the Assessing Officer and their statement were recorded no adverse comment has been given by the Assessing Officer. no adverse comment has been given by the Assessing Officer. In no adverse comment has been given by the Assessing Officer. respect of Vimalnath Corporation, V.H. Enterpris Vimalnath Corporation, V.H. Enterprises and Mahavir es and Mahavir Enterprises, though they did not attend though they did not attend before the Assessing the Assessing
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 24 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Officer however they had submitted all the details Officer however they had submitted all the details. In respect of n respect of Maharashtra Pile Foundation, Vimalnath Associates Diyan Maharashtra Pile Foundation, Vimalnath Associates Diyan Maharashtra Pile Foundation, Vimalnath Associates Diyan Corporation Navkar Corporation Corporation Navkar Corporation, the ld CIT(A) noted that , the ld CIT(A) noted that the parties submitted name and address which were verified by the parties submitted name and address which were verified by the parties submitted name and address which were verified by the Inspector of the Department. Inspector of the Department. Regarding one party namely Bharti Regarding one party namely Bharti Enterprises, no comments are available in remand report. Enterprises, no comments are available in remand report. Enterprises, no comments are available in remand report.
7.8 Before the Ld. CIT(A), the assessee submitted that during the Before the Ld. CIT(A), the assessee submitted that during the Before the Ld. CIT(A), the assessee submitted that during the period the assessee iod the assessee executed project work on behalf of the project work on behalf of the Government Agencies including MCGM. The project was duly Government Agencies including MCGM. The project was duly Government Agencies including MCGM. The project was duly monitored and checked by MCGM and only after satisfaction the checked by MCGM and only after satisfaction the checked by MCGM and only after satisfaction the MCGM payment was made was made to the assessee. The assessee to the assessee. The assessee further submitted that withou without purchase material and payment to the t purchase material and payment to the labour contractor, the project could not have been completed. labour contractor, the project could not have been completed. labour contractor, the project could not have been completed.
7.9 It was further submitted that It was further submitted that all necessary records regarding all necessary records regarding purchases were maintained and purchases were duly recorded in purchases were maintained and purchases were duly recorded in purchases were maintained and purchases were duly recorded in books of account and paymen payment for the purchase material was made t for the purchase material was made by account payee cheque. by account payee cheque.
7.10 The assessee further submitted that during the course of The assessee further submitted that during the course of The assessee further submitted that during the course of search no incriminating material search no incriminating material was found with respect to with respect to disallowance of purchase and therefore in absence of any disallowance of purchase and therefore in absence of any disallowance of purchase and therefore in absence of any incriminating material disallowance aterial disallowance of purchases made by the purchases made by the Assessing Officer is not justified. The assessee further submitted Assessing Officer is not justified. The assessee further submitted Assessing Officer is not justified. The assessee further submitted that disallowance was made on the basis of the that disallowance was made on the basis of the third-party that disallowance was made on the basis of the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 25 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors information without any further scrutiny by the Assessing Officer information without any further scrutiny by the Assessing Officer information without any further scrutiny by the Assessing Officer and therefore, same was not justified. e was not justified. The assessee further he assessee further submitted that no cross submitted that no cross-examination of those parties was was provided to the assessee and therefore, addition should be deleted on that to the assessee and therefore, addition should be deleted on that to the assessee and therefore, addition should be deleted on that ground also.
7.11 The Ld CIT(A) adjudicated the legal issue challenging the The Ld CIT(A) adjudicated the legal issue challenging the The Ld CIT(A) adjudicated the legal issue challenging the addition as well as on merit. On the legal issue that addition could on as well as on merit. On the legal issue that addition could on as well as on merit. On the legal issue that addition could not have been made without the aid of incriminating material in not have been made without the aid of incriminating material in not have been made without the aid of incriminating material in completed assessment, the Ld CIT(A) rejected the contention of the completed assessment, the Ld CIT(A) rejected the contention of the completed assessment, the Ld CIT(A) rejected the contention of the assessee, and thus assessee is by way of ground No. 3 raised i assessee, and thus assessee is by way of ground No. 3 raised in assessee, and thus assessee is by way of ground No. 3 raised i Cross objections.
8.0 The Ld. CIT(A) rejected the contention of the assessee that The Ld. CIT(A) rejected the contention of the assessee that The Ld. CIT(A) rejected the contention of the assessee that there was no incriminating material found vis there was no incriminating material found vis-à-vis the addition of vis the addition of the bogus purchases. The relevant finding of the Ld. CIT(A) is the bogus purchases. The relevant finding of the Ld. CIT(A) is the bogus purchases. The relevant finding of the Ld. CIT(A) is reproduced as under:
“7.3.4 The appellant has submitted that no incriminating material 7.3.4 The appellant has submitted that no incriminating material 7.3.4 The appellant has submitted that no incriminating material with respect to bogus purchases was found during search with respect to bogus purchases was found during search with respect to bogus purchases was found during search proceedings, therefore, disallowances of purchases could not be proceedings, therefore, disallowances of purchases could not be proceedings, therefore, disallowances of purchases could not be made in the unabated assessment year. The facts of the case are made in the unabated assessment year. The facts of the case are made in the unabated assessment year. The facts of the case are that during the search proceedings, statement of Shri Shri Vinod H. ring the search proceedings, statement of Shri Shri Vinod H. ring the search proceedings, statement of Shri Shri Vinod H. Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V.Shah Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V.Shah Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V.Shah (Proprietor of V.H. Enterprises), Kantilal D. Jain (Proprietor of M/s. (Proprietor of V.H. Enterprises), Kantilal D. Jain (Proprietor of M/s. (Proprietor of V.H. Enterprises), Kantilal D. Jain (Proprietor of M/s. Navkar Corporation and Bhavya Enterprises) and Shri Nishil Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Navkar Corporation and Bhavya Enterprises) and Shri Nishil Madhani (key person of Vimalnath Associates & Divya Corporation), Madhani (key person of Vimalnath Associates & Divya Corporation), Madhani (key person of Vimalnath Associates & Divya Corporation), were recorded and they had admitted that they had provided bogus were recorded and they had admitted that they had provided bogus were recorded and they had admitted that they had provided bogus bills of purchases to the appellant company. These statements were bills of purchases to the appellant company. These statements were bills of purchases to the appellant company. These statements were confronted to Shri Nirmal Madhani, Director, who could confronted to Shri Nirmal Madhani, Director, who could not confronted to Shri Nirmal Madhani, Director, who could controvert the facts narrated in those statements. Thus, there was controvert the facts narrated in those statements. Thus, there was controvert the facts narrated in those statements. Thus, there was Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 26 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors incriminating material found during the search and the AO has incriminating material found during the search and the AO has incriminating material found during the search and the AO has disallowed purchase based on such statements. Therefore, this disallowed purchase based on such statements. Therefore, this disallowed purchase based on such statements. Therefore, this argument of the assessee is rejected. argument of the assessee is rejected.” 8.1 As far as the issu As far as the issue of incriminating material is concerned the e of incriminating material is concerned the Ld. DR before us, submitted that during the course of search Ld. DR before us, submitted that during the course of search Ld. DR before us, submitted that during the course of search proceedings statement and other material of the supplier proceedings statement and other material of the supplier parties, proceedings statement and other material of the supplier Inspector report regarding their non report regarding their non-existent at address etc. were existent at address etc. were obtained and which were duly confronted to the assessee. In view of h were duly confronted to the assessee. In view of h were duly confronted to the assessee. In view of those information gathered, the gathered, the books of accounts of the assessee books of accounts of the assessee were having false claim of purchase expenditure and therefore were having false claim of purchase expenditure and therefore were having false claim of purchase expenditure and therefore seizure of regular books of accounts indicating falsity of the seizure of regular books of accounts indicating falsity of the seizure of regular books of accounts indicating falsity of the transaction made, constitute constitute incriminating material found found. The Ld. CIT(A) also upheld existence of incriminating material in view of CIT(A) also upheld existence of incriminating material in view of CIT(A) also upheld existence of incriminating material in view of information gathered regarding purchase during the course of information gathered regarding purchase during the course of information gathered regarding purchase during the course of search proceedings. The contention of the assessee, however is that search proceedings. The contention of the assessee, however is that search proceedings. The contention of the assessee, however is that no incriminating material was found from the premises of the minating material was found from the premises of the minating material was found from the premises of the assessee vis-à-vis the purchases from those 13 parties. vis the purchases from those 13 parties.
8.2 We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. dispute and perused the relevant material on record. In the case of In the case of Continental warehousing corporation (supra), warehousing corporation (supra), the Hon’ble the Hon’ble Bombay High Court held that if the assessments Bombay High Court held that if the assessments of any assessment of any assessment year are pending as on the date of pending as on the date of search,same will get same will get abated due to search action and the assessing officer can make any addition the assessing officer can make any addition in the assessing officer can make any addition those assessment year( sment year(s) based on the facts and circumstances of on the facts and circumstances of the case, not necessarily only based on incriminating material the case, not necessarily only based on incriminating material. the case, not necessarily only based on incriminating material
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 27 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors But, assessment years in relation to But, assessment years in relation to which, the assessments assessments are already completed as on the date of already completed as on the date of search, those are unabated those are unabated assessmentsand, in those cases, and, in those cases, no addition could have have been made except based on incriminating material found during the course of except based on incriminating material found during the course of except based on incriminating material found during the course of search. In the case of the In the case of the assessee, the AY 2020-21 and AY 2019 21 and AY 2019-20 are two abated assessments and for the remaining assessment are two abated assessments and for the remaining assessment are two abated assessments and for the remaining assessment years, no addition could have been made without the aid of no addition could have been made without the aid of no addition could have been made without the aid of incriminating material. incriminating material.Thus, the issue now for examination examination before us is whether there was any incriminating material qua the addition us is whether there was any incriminating material qua the addition us is whether there was any incriminating material qua the addition of bogus purchase in the year under purchase in the year under consideration?
8.3 The word ‘ Incr The word ‘ Incriminating Material’ has not been defined in iminating Material’ has not been defined in the Act but in context of the provisions of the Act incriminating the Act but in context of the provisions of the Act incriminating the Act but in context of the provisions of the Act incriminating material can be in the form of evidences which were not explained material can be in the form of evidences which were not explained material can be in the form of evidences which were not explained for the purpose of filing return of income like loose paper for the purpose of filing return of income like loose paper(s) or for the purpose of filing return of income like loose paper document containing transaction of income which were not aining transaction of income which were not aining transaction of income which were not reported for tax purpose or transaction of expense of excessive reported for tax purpose or transaction of expense of excessive reported for tax purpose or transaction of expense of excessive claim,the assets like cash, jewellary etc claim,the assets like cash, jewellary etc. acquired though acquired though unaccounted sources of income, false entries in books of account, unaccounted sources of income, false entries in books of account, unaccounted sources of income, false entries in books of account, absence of regular book absence of regular books of accounts and other records, statements s of accounts and other records, statements admitted undisclosed income etc. In other admitted undisclosed income etc. In other words, any evidence any evidence whether oral or documentary whether oral or documentary found, which indicate evasion of found, which indicate evasion of taxable income, can be termed as can be termed as ‘incriminating material’. It is not material’. It is not necessary that all the seized material may be incriminating. In the necessary that all the seized material may be incriminating. In the necessary that all the seized material may be incriminating. In the case of Param Dairy Ltd in ITA 37/2021 & ITA 41/ Param Dairy Ltd in ITA 37/2021 & ITA 41/2021, the Param Dairy Ltd in ITA 37/2021 & ITA 41/
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 28 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Hon’ble High Court of Delhi has held that regular books of account Hon’ble High Court of Delhi has held that regular books of account Hon’ble High Court of Delhi has held that regular books of account of the assessee by no stretch of imaginat of the assessee by no stretch of imagination could be treated as ion could be treated as incriminating material to form the basis of incriminating material to form the basis of framing assessment u/s assessment u/s 153A of the Act. In case of B Kishore Kumar Vs DCIT (2014) 52 In case of B Kishore Kumar Vs DCIT (2014) 52 In case of B Kishore Kumar Vs DCIT (2014) 52 taxmann.com 449 (Madras), taxmann.com 449 (Madras), the Hon’ble Madras High Court held the Hon’ble Madras High Court held that when there is a clear and categoric, that when there is a clear and categoric, voluntary admission of the voluntary admission of the undisclosed income by the assessee undisclosed income by the assessee himself, there is no necessity to there is no necessity to scrutinize the documents and that would scrutinize the documents and that would constitute a good piece of a good piece of evidence. A SLP filed against the said decision of the evidence. A SLP filed against the said decision of the Hon’ble evidence. A SLP filed against the said decision of the Madras High Court has been dis gh Court has been dismissed by the Hon’ble missed by the Hon’ble Supreme Court as reported in (2015) 62 taxmann.com 215 (2015) 62 taxmann.com 215. In the case of In the case of CIT vs Harjeev Aggarwal CIT vs Harjeev Aggarwal in ITA 8/2004 before the Hon’ble before the Hon’ble Delhi High High Court Court following following questions questions of of law law were were framed framed for for consideration: "1. Whether the Income Tax "1. Whether the Income Tax Appellate Tribunal was correct in law in deleting Appellate Tribunal was correct in law in deleting the addition of Rs.74 lacs paid by the Assessee in cash for the purchase of the addition of Rs.74 lacs paid by the Assessee in cash for the purchase of the addition of Rs.74 lacs paid by the Assessee in cash for the purchase of property bearing No.C property bearing No.C-104, Naraina Vihar, Delhi? 2. Whether the Income Tax Appellate Tribunal was correct in law in holding 2. Whether the Income Tax Appellate Tribunal was correct in law in holding 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the provisions of Section he provisions of Section 158 BB of the Income Tax Act, 1961 were not 158 BB of the Income Tax Act, 1961 were not applicable to the facts of the case? applicable to the facts of the case? 3. Whether the Income Tax Appellate Tribunal was correct in law in holding 3. Whether the Income Tax Appellate Tribunal was correct in law in holding 3. Whether the Income Tax Appellate Tribunal was correct in law in holding that the genuineness of the investment made for the purchase of property that the genuineness of the investment made for the purchase of property that the genuineness of the investment made for the purchase of property bearing No.C-104, Naraina Vihar, Delhi was to be considered in the hands of 104, Naraina Vihar, Delhi was to be considered in the hands of 104, Naraina Vihar, Delhi was to be considered in the hands of the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?" the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?" the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?" 8.4 The Hon’ble high court though answered the questions of law The Hon’ble high court though answered the questions of law The Hon’ble high court though answered the questions of law in favour of revenue but gave observation on th in favour of revenue but gave observation on the issue whether e issue whether
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 29 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors statement on stand alone basis can be an incriminating material. alone basis can be an incriminating material. alone basis can be an incriminating material. The relevant observation The relevant observations are reproduced as under:
In view of the settled legal position, the first and foremost issue to be 19. In view of the settled legal position, the first and foremost issue to be 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded unde addressed is whether a statement recorded under Section 132 Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the would by itself be sufficient to assess the income, as disclosed by the Assessee would by itself be sufficient to assess the income, as disclosed by the in its statement, under the Provisions of Chapter XIV in its statement, under the Provisions of Chapter XIV-B of the Act. B of the Act.
20. In our view, a plain 20. In our view, a plain reading of Section 158BB(1) of the Act does not of the Act does not contemplate computing of undisclosed income solely on the basis of a contemplate computing of undisclosed income solely on the basis of a contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result statement recorded during the search. The words "evidence found as a result statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search ould not take within its sweep statements recorded during search ould not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly and seizure operations. However, the statements recorded would certainly and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or constitute information and if such information is relatable to the evidence or constitute information and if such information is relatable to the evidence or material found during search, the same material found during search, the same could certainly be used in evidence in could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the any proceedings under the Act as expressly mandated by virtue of the any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) Section 132(4) of the Act. However, such statements on a of the Act. However, such statements on a standalone basis without standalone basis without reference to any other material discovered during reference to any other material discovered during search and seizure operations would not empower the AO to make a block search and seizure operations would not empower the AO to make a block search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during assessment merely because any admission was made by the Assessee during assessment merely because any admission was made by the Assessee during search operation. search operation.
A plain reading of 21. A plain reading of Section 132 (4) of the Act indicates that the authorized (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in officer is empowered to examine on oath any person who is found in officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, possession or control of any books of accounts, documents, money, bullion, possession or control of any books of accounts, documents, money, bullion, jewellery or any other val jewellery or any other valuable article or thing. The explanation to uable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax (4), which was inserted by the Direct Tax Laws (Amendment) Act Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, furth w.e.f. 1st April, 1989, further clarifies that a person may be examined not only er clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of in respect of the books of accounts or other documents found as a result of in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any search but also in respect of all matters relevant for the purposes of any search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the investigation connected with any proceeding under the Act. However, as stated Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in earlier, a statement on oath can only be recorded of a person who is found in earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention possession of books of accounts, documents, assets, etc. Plainly, the intention possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of of the Parliament is to permit such examination only where the books of of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the ccounts, documents and assets possessed by a person are relevant for the ccounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions purposes of the investigation being undertaken. Now, if the provisions purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) Section 132(4) of the Act are read in the context of Section 158BB(1) Section 158BB(1) read with Section 158B(b) Section 158B(b) of the Act, it is at once clear that a statement recorded of the Act, it is at once clear that a statement recorded under Section 132(4) Section 132(4) of the Act can be used in evidence for making a block of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence assessment only if the said statement is made in the context of other evidence assessment only if the said statement is made in the context of other evidence
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 30 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors or material discovered during the search. A statement of a person, which is or material discovered during the search. A statement of a person, which is or material discovered during the search. A statement of a person, which is not relatable to any incriminati not relatable to any incriminating document or material found during search ng document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The and seizure operation cannot, by itself, trigger a block assessment. The and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of undisclosed income of an Assessee has to be computed on the basis of undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded evidence and material found during search. The statement recorded evidence and material found during search. The statement recorded under Section 132(4) Section 132(4) of the Act may also be used for making the assessment, of the Act may also be used for making the assessment, but only to the extent it is relatable to the but only to the extent it is relatable to the incriminating evidence/material incriminating evidence/material unearthed or found during search. In other words, there unearthed or found during search. In other words, there must be a nexus must be a nexus between the statement recorded and the evidence/material found during between the statement recorded and the evidence/material found during between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. search in order to for an assessment to be based on the statement recorded. search in order to for an assessment to be based on the statement recorded. 8.5 Similarly, in the decision dated Similarly, in the decision dated 12/02/2021 in 12/02/2021 in case of PCIT(Central) Vs Anand Kunar Jain PCIT(Central) Vs Anand Kunar Jain (HUF) in ITA 23/2021 ITA 23/2021, following question of law have been raised following question of law have been raised before Hon’ble Delhi before Hon’ble Delhi High Court:
The Revenue is aggrieved with the aforesaid The Revenue is aggrieved with the aforesaid The Revenue is aggrieved with the aforesaid impugned order and has filed the present impugned order and has filed the present impugned order and has filed the present appeal under Section 260A of the Act, proposing appeal under Section 260A of the Act, proposing appeal under Section 260A of the Act, proposing the the following following questions questions of law: a. Whether the ITAT is justified in deleting the a. Whether the ITAT is justified in deleting the a. Whether the ITAT is justified in deleting the additions made on account of bogus long term additions made on account of bogus long term additions made on account of bogus long term capital gain on the ground that the evidences capital gain on the ground that the evidences capital gain on the ground that the evidences found during search at the premises of entry found during search at the premises of entry found during search at the premises of entry provider cannot be the basis for making provider cannot be the basis for making provider cannot be the basis for making additions in assessment complet additions in assessment completed u/S. 153A ed u/S. 153A in the case of beneficiary ignoring the vital fact in the case of beneficiary ignoring the vital fact in the case of beneficiary ignoring the vital fact that there was a common search u/s 132 that there was a common search u/s 132 that there was a common search u/s 132 conducted on the same day in both the cases of conducted on the same day in both the cases of conducted on the same day in both the cases of Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 31 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
the the the entry entry entry provider provider provider and and and the the the beneficiary? beneficiary? beneficiary? b. Whether ITAT was justified in holding that b. Whether ITAT was justified in holding that b. Whether ITAT was justified in holding that mere failure of cros mere failure of cross examination of entry s examination of entry operator is fatal when copy of statement was operator is fatal when copy of statement was operator is fatal when copy of statement was provided to the Assessee and Assessee failed to provided to the Assessee and Assessee failed to provided to the Assessee and Assessee failed to discharge discharge discharge the the the onus onus onus of of of providing providing providing the the the genuineness of LTCG especially in view of the genuineness of LTCG especially in view of the genuineness of LTCG especially in view of the apex court decision in the case of State of UP vs. apex court decision in the case of State of UP vs. apex court decision in the case of State of UP vs. Sudhir Sudhir Kumar Singh [AIR 2020 SC 5215]? Kumar Singh [AIR 2020 SC 5215]?
8.6 The Hon’ble High Court answered that no substantial The Hon’ble High Court answered that no substantial The Hon’ble High Court answered that no substantial question arise for consideration and hence dismissed the question arise for consideration and hence dismissed the question arise for consideration and hence dismissed the appeal. The relevant observation of the Hon’ble High Court are appeal. The relevant observation of the Hon’ble High Court are appeal. The relevant observation of the Hon’ble High Court are reproduced as under: reproduced as under:
Now, coming to the as 10. Now, coming to the aspect viz the invocation of section pect viz the invocation of section 153A on the basis of the statement recorded in search 153A on the basis of the statement recorded in search 153A on the basis of the statement recorded in search action action action against against against a a a third third third person. person. person. We We We ITA 23/2021 and connected matters Page 11 of 11 ITA 23/2021 and connected matters Page 11 of 11 ITA 23/2021 and connected matters Page 11 of 11 may note that the AO has used this statement on oath may note that the AO has used this statement on oath may note that the AO has used this statement on oath recorded in the course of search recorded in the course of search conducted in the case of a conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for third party (i.e., search of Pradeep Kumar Jindal) for third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per making the additions in the hands of the assessee. As per making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be the mandate of Section 153C, if this statement was to be the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or construed as an incriminating material belonging to or construed as an incriminating material belonging to or Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 32 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors pertaining to a person other than person searched (as taining to a person other than person searched (as taining to a person other than person searched (as referred to in Section 153A), then the only legal recourse referred to in Section 153A), then the only legal recourse referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of available to the department was to proceed in terms of available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the Section 153C of the Act by handing over the same to the Section 153C of the Act by handing over the same to the AO who has jurisdiction over such p AO who has jurisdiction over such person. Here, the erson. Here, the assessment has been framed under section 153A on the assessment has been framed under section 153A on the assessment has been framed under section 153A on the basis basis basis of of of alleged alleged alleged incriminating incriminating incriminating material material material (being (being (being the the the statement recorded under 132(4) of the Act). As noted statement recorded under 132(4) of the Act). As noted statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross above, the Assessee had no opportunity to cross-examine above, the Assessee had no opportunity to cross the said witness, but tha the said witness, but that apart, the mandatory procedure t apart, the mandatory procedure under section 153C has not been followed. On this count under section 153C has not been followed. On this count under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. alone, we find no perversity in the view taken by the ITAT. alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law Therefore, we do not find any substantial question of law Therefore, we do not find any substantial question of law that that that requires requires requires our our our consideration. consideration. consideration.
Accordingly, 11. Accordingly, the present appeals, along with all the present appeals, along with all pending applications, are dismissed. pending applications, are dismissed.
8.7 In the light of above position of law, when we examine the facts In the light of above position of law, when we examine the facts In the light of above position of law, when we examine the facts of the instant case , we find that case , we find that the (a) information in the form of information in the form of statement of the supplier parties, statement of the supplier parties, (b) absence of evidence in support nce of evidence in support of transport/delivery of material etc of transport/delivery of material etc. from the assessee during the from the assessee during the course of search proceeding, proceeding,(c) none found at the premises of the none found at the premises of the supplier parties by the Inspector during verification etc. supplier parties by the Inspector during verification etc. evidences, supplier parties by the Inspector during verification etc. when seen in totality constitute material which is incriminating in when seen in totality constitute material which is incriminating in when seen in totality constitute material which is incriminating in nature. The entries in books of account regarding purchase are The entries in books of account regarding purchase are The entries in books of account regarding purchase are Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 33 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors false, which also becomes an incriminating material for the purpose false, which also becomes an incriminating material for the purpose false, which also becomes an incriminating material for the purpose of invoking provisions of section 153A of the Act. of invoking provisions of section 153A of the Act.
8.8 Therefore, we uphold the finding of the Ld. CIT(A) that qua the Therefore, we uphold the finding of the Ld. CIT(A) that qua the Therefore, we uphold the finding of the Ld. CIT(A) that qua the addition of bogus purchase their existed incriminating material. The addition of bogus purchase their existed incriminating material. The addition of bogus purchase their existed incriminating material. The cross-objection No. 3 of the assessee with respect to qua the bogus of the assessee with respect to qua the bogus of the assessee with respect to qua the bogus purchases is accordingly disallowed. accordingly disallowed.
9.0 On the merit of addition for bogus purchase, t of addition for bogus purchase, the Ld. CIT(A) he Ld. CIT(A) after considering submission of the assessee held that 4 parties after considering submission of the assessee held that 4 parties after considering submission of the assessee held that 4 parties which were duly produced before the Assessing Officer which were duly produced before the Assessing Officer, no addition could have been sustained. The relevant finding of the Ld. CIT(A) is could have been sustained. The relevant finding of the Ld. CIT(A) is could have been sustained. The relevant finding of the Ld. CIT(A) is reproduced as under:
“7.3.6 In the case of Rushabh Trading Co.,Rushabh Corporation and 7.3.6 In the case of Rushabh Trading Co.,Rushabh Corporation and 7.3.6 In the case of Rushabh Trading Co.,Rushabh Corporation and Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the assessment proceedings, the appellant as well as the purchase assessment proceedings, the appellant as well as the purchase assessment proceedings, the appellant as well as the purchase parties had submitted necessary supporting document parties had submitted necessary supporting documents related to s related to purchases before the AO. Further, during the remand report purchases before the AO. Further, during the remand report purchases before the AO. Further, during the remand report proceedings also, the parties attended before the AO and provided proceedings also, the parties attended before the AO and provided proceedings also, the parties attended before the AO and provided necessary documents with respect to the purchases made by the necessary documents with respect to the purchases made by the necessary documents with respect to the purchases made by the appellant from them. The statement of keypersons were re appellant from them. The statement of keypersons were recorded. In corded. In the remand report, the AO has not made any adverse remark with the remand report, the AO has not made any adverse remark with the remand report, the AO has not made any adverse remark with respect to these 3 parties. Therefore, the disallowance of purchases respect to these 3 parties. Therefore, the disallowance of purchases respect to these 3 parties. Therefore, the disallowance of purchases made by the AO in respect of these 4 parties i.e. Rushabh made by the AO in respect of these 4 parties i.e. Rushabh made by the AO in respect of these 4 parties i.e. Rushabh Corporation, Rushabh Trading Co, Hitesh Kantilal Shah H Corporation, Rushabh Trading Co, Hitesh Kantilal Shah HUF and Corporation, Rushabh Trading Co, Hitesh Kantilal Shah H Jay Kodiyar Enterprise cannot be sustained. Jay Kodiyar Enterprise cannot be sustained.” 9.1 In respect of other parties the Assessing Officer verified In respect of other parties the Assessing Officer verified In respect of other parties the Assessing Officer verified existence of the compan existence of the companies during remand proceeding and observed proceeding and observed that those parties admitted admitted the fact of accommodation entries accommodation entries
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 34 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors issued by them to the assessee. The relevant finding of the CIT(A) is to the assessee. The relevant finding of the CIT(A) is to the assessee. The relevant finding of the CIT(A) is reproduced as under:
“7.3.7 In the case of Vimalnath Associates, Vimanath Corporation, 7.3.7 In the case of Vimalnath Associates, Vimanath Corporation, 7.3.7 In the case of Vimalnath Associates, Vimanath Corporation, Mahavir Enterprises, Bhavya Enterprises, Diyan Enterprises, Mahavir Enterprises, Bhavya Enterprises, Diyan Enterprises, Mahavir Enterprises, Bhavya Enterprises, Diyan Enterprises, Maharashtra Pile Foundation, V. H. Ente Maharashtra Pile Foundation, V. H. Enterprises and Navkar rprises and Navkar Corporation, the Inspector deputed by the AO had visited the Corporation, the Inspector deputed by the AO had visited the Corporation, the Inspector deputed by the AO had visited the premises and the parties were found existing at the given premises and the parties were found existing at the given premises and the parties were found existing at the given addresses. Therefore, the identity of the parties was established by addresses. Therefore, the identity of the parties was established by addresses. Therefore, the identity of the parties was established by the appellant. The statements of Vinod Shah (Prop the appellant. The statements of Vinod Shah (Proprietor of Vimalnath rietor of Vimalnath Corporation), Smt. Khushboo V.Shah (Proprietor of V.H.Enterprises). Corporation), Smt. Khushboo V.Shah (Proprietor of V.H.Enterprises). Corporation), Smt. Khushboo V.Shah (Proprietor of V.H.Enterprises). Kantilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Kantilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Kantilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (kep person of Vimalnath Enterprises) and Shri Nishil M. Madhani (kep person of Vimalnath Enterprises) and Shri Nishil M. Madhani (kep person of Vimalnath Associates & Divya Corporation) were Associates & Divya Corporation) were recorded. In their statements, recorded. In their statements, they had admitted that they had provided accommodation entries of they had admitted that they had provided accommodation entries of they had admitted that they had provided accommodation entries of purchases to the appellant firm. These persons have not retracted purchases to the appellant firm. These persons have not retracted purchases to the appellant firm. These persons have not retracted from their statements. Therefore, the averment made by them in from their statements. Therefore, the averment made by them in from their statements. Therefore, the averment made by them in their statements cannot simply their statements cannot simply be brushed aside.” 9.2 However, the Ld. CIT(A) Ld. CIT(A) is of the view that since the assessee since the assessee has executed work for the government agencies and therefore entire has executed work for the government agencies and therefore entire has executed work for the government agencies and therefore entire amount of bogus purchases cannot be disallowed amount of bogus purchases cannot be disallowed. The relevant . The relevant observation of the Ld. CIT(A) Ld. CIT(A) is reproduced as under:
“However, it is a fact that the appellant company was engaged in However, it is a fact that the appellant company was engaged in However, it is a fact that the appellant company was engaged in the business of execution of project work on behalf of government the business of execution of project work on behalf of government the business of execution of project work on behalf of government agency as well as MCGM and the project has been completed by the agency as well as MCGM and the project has been completed by the agency as well as MCGM and the project has been completed by the appellant firm. The appellant firm has received appellant firm. The appellant firm has received payment from the payment from the government agency on execution of project work assigned to it. The government agency on execution of project work assigned to it. The government agency on execution of project work assigned to it. The sale proceeds have been realised by the appellant firm from the sale proceeds have been realised by the appellant firm from the sale proceeds have been realised by the appellant firm from the government agencies. The AO has not doubted and disturbed the government agencies. The AO has not doubted and disturbed the government agencies. The AO has not doubted and disturbed the sales shown by the appellant as bogus or infl sales shown by the appellant as bogus or inflated. It is a settled ated. It is a settled principle of law that the AO cannot disallow 100% of purchases principle of law that the AO cannot disallow 100% of purchases principle of law that the AO cannot disallow 100% of purchases when the sales are not disturbed by the AO. Even the statements of when the sales are not disturbed by the AO. Even the statements of when the sales are not disturbed by the AO. Even the statements of Vinod Vinod Vinod Shah Shah Shah (Proprietor (Proprietor (Proprietor of of of Vimalnath Vimalnath Vimalnath Corporation), Corporation), Corporation), Smt. Smt. Smt. KhushbooV.Shah (Proprietor of V.H.Enterprises), K KhushbooV.Shah (Proprietor of V.H.Enterprises), Kantilal D. Jain antilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 35 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Corporation) are taken into consideration, wherein they have Corporation) are taken into consideration, wherein they have Corporation) are taken into consideration, wherein they have admitted of having provided bogus accommodatio admitted of having provided bogus accommodation entries, there is n entries, there is no evidence that the cash was received back by these parties from no evidence that the cash was received back by these parties from no evidence that the cash was received back by these parties from the appellant. Thus, the 100% disallowance of purchases made by the appellant. Thus, the 100% disallowance of purchases made by the appellant. Thus, the 100% disallowance of purchases made by the AO in respect of these 13 parties cannot be sustained and only the AO in respect of these 13 parties cannot be sustained and only the AO in respect of these 13 parties cannot be sustained and only profit element embedded in such purchas profit element embedded in such purchase transaction only has to e transaction only has to be disallowed. In this regard, the decisions in the following case are be disallowed. In this regard, the decisions in the following case are be disallowed. In this regard, the decisions in the following case are relevant In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 20131 355 ITR 290 In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 20131 355 ITR 290 In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 20131 355 ITR 290 (Gujarat), the Hon'ble High Court of Gujarat has held that where (Gujarat), the Hon'ble High Court of Gujarat has held that where (Gujarat), the Hon'ble High Court of Gujarat has held that where assessee did purchase cloth and sell finished goods, but purchasers hase cloth and sell finished goods, but purchasers hase cloth and sell finished goods, but purchasers were not traceable, profit element embedded in purchases would be were not traceable, profit element embedded in purchases would be were not traceable, profit element embedded in purchases would be subjected to tax and not entire amount. subjected to tax and not entire amount. In this case, the Hon'ble High Court of Gujarat has held as under: In this case, the Hon'ble High Court of Gujarat has held as under: In this case, the Hon'ble High Court of Gujarat has held as under: ..The Tribunal committed no erro ..The Tribunal committed no error. Whether the purchases r. Whether the purchases themselves were bogus or whether the parties from whom such themselves were bogus or whether the parties from whom such themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question purchases were allegedly made were bogus is essentially a question purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came of fact. The Tribunal having examined the evidence on record came of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee di to the conclusion that the assessee did purchase the cloth and sell d purchase the cloth and sell the finished goods, as natural corollary, not the entire amount the finished goods, as natural corollary, not the entire amount the finished goods, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded covered under such purchase, but the profit element embedded covered under such purchase, but the profit element embedded therein would be subject to tax. In the result, tax appeal is therein would be subject to tax. In the result, tax appeal is therein would be subject to tax. In the result, tax appeal is dismissed. [Para 6].. In the case of Pr. CIT v. RishabhdevTechnocable Ltd. 424 IT 338 . CIT v. RishabhdevTechnocable Ltd. 424 IT 338 . CIT v. RishabhdevTechnocable Ltd. 424 IT 338 (Bom),the Hon'ble High Court of Bombay has held that where (Bom),the Hon'ble High Court of Bombay has held that where (Bom),the Hon'ble High Court of Bombay has held that where assessee had declared certain purchases to be made during year assessee had declared certain purchases to be made during year assessee had declared certain purchases to be made during year and Assessing Officer added entire quantum of purchases to income and Assessing Officer added entire quantum of purchases to income and Assessing Officer added entire quantum of purchases to income of assessee on plea t of assessee on plea that purchases were bogus purchases and hat purchases were bogus purchases and Tribunal held that only reasonable profit at rate of 5 per cent on Tribunal held that only reasonable profit at rate of 5 per cent on Tribunal held that only reasonable profit at rate of 5 per cent on purchases should be added back to income of assessee, Tribunal purchases should be added back to income of assessee, Tribunal purchases should be added back to income of assessee, Tribunal was justified in its view. was justified in its view. The relevant paras of the decision of the Hon'ble High Court The relevant paras of the decision of the Hon'ble High Court of The relevant paras of the decision of the Hon'ble High Court Bombayare reproduced as under: Bombayare reproduced as under: 19. On thorough consideration of the matter, we do not find any 19. On thorough consideration of the matter, we do not find any 19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower error or infirmity in the view taken by the Tribunal. The lower error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much appellate authorities had enhanced the quantum of purchases much appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing beyond that of the Assessing Officer ie., from Rs. 24.18,06,385.00 to Officer ie., from Rs. 24.18,06,385.00 to Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 36 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Rs. 65,65,30,470.00 but having found that the purchases Rs. 65,65,30,470.00 but having found that the purchases Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the retums of the corresponded to sales which were reflected in the retums of the corresponded to sales which were reflected in the retums of the assessee in sales tax proceedings and in addition, were also assessee in sales tax proceedings and in addition, were also assessee in sales tax proceedings and in addition, were also recorded in the books of accounts recorded in the books of accounts with payments made through with payments made through account payee cheques, the purchases were accepted by the two account payee cheques, the purchases were accepted by the two account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add appellate authorities and following judicial dictum decided to add appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the the profit percentage on such purchases to the income of the the profit percentage on such purchases to the income of the assessee. While the CIT (A) hadassesse assessee. While the CIT (A) hadassessed profit at 2% which was d profit at 2% which was added to the income of the assessee, Tribunal made further addition added to the income of the assessee, Tribunal made further addition added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue. We have of 3% profit, thereby protecting the interest of the Revenue. We have of 3% profit, thereby protecting the interest of the Revenue. We have also considered the two decisions relied upon by leamed standing also considered the two decisions relied upon by leamed standing also considered the two decisions relied upon by leamed standing counsel and we find that fac counsel and we find that facts of the present case are clearly ts of the present case are clearly distinguishable from the facts of those two cases to warrant distinguishable from the facts of those two cases to warrant distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited application of the legal principles enunciated in the two cited application of the legal principles enunciated in the two cited decisions.
In BholanathPolyfeb (P.) Ltd. (supra), Gujarat High Court was BholanathPolyfeb (P.) Ltd. (supra), Gujarat High Court was BholanathPolyfeb (P.) Ltd. (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the also confronted with a similar issue. In that case Tribunal was of the also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus opinion that the purchases might have been made from bogus opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus.Considering parties but the purchases themselves were not bogus.Considering parties but the purchases themselves were not bogus.Considering the fact situation, Tribunal was of the opinion that not the entire e fact situation, Tribunal was of the opinion that not the entire e fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount of purchases but the profit margin embedded in such amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the amount would be subjected to tax. Gujarat High Court upheld the amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that whether the purchases wer finding of the Tribunal. It was held that whether the purchases were finding of the Tribunal. It was held that whether the purchases wer bogus or whether the parties from whom such purchases were bogus or whether the parties from whom such purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When allegedly made were bogus was essentially a question of fact. When allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the the Tribunal had concluded that the assessee did make the the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by purchase, as a natural corollary not the entire amount covered by purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be purchase but the profit element embedded therein would be purchase but the profit element embedded therein would be subject to tax.
21. We are in respectful agreement with the view expressed by the 21. We are in respectful agreement with the view expressed by the 21. We are in respectful agreement with the view expressed by the Gujarat High Court.
Thus, we do not find any merit in this appeal. No substantial 22. Thus, we do not find any merit in this appeal. No substantial 22. Thus, we do not find any merit in this appeal. No substantial question of law arises from the order passed by the Tribunal. question of law arises from the order passed by the Tribunal. question of law arises from the order passed by the Tribunal. Consequently, the appeal is dismissed However, there shall be no Consequently, the appeal is dismissed However, there shall be no Consequently, the appeal is dismissed However, there shall be no order as to cost. In the case of Pr. CIT V. Jakharia Fabric (P. In the case of Pr. CIT V. Jakharia Fabric (P.) Ltd. 429 IT 332 ) Ltd. 429 IT 332 (Bom),the Hon'ble High Court of Bombay has also held that where (Bom),the Hon'ble High Court of Bombay has also held that where (Bom),the Hon'ble High Court of Bombay has also held that where information was received by Assessing Officer to effect that eight information was received by Assessing Officer to effect that eight information was received by Assessing Officer to effect that eight parties from whom purchases were made by assessee engaged in parties from whom purchases were made by assessee engaged in parties from whom purchases were made by assessee engaged in Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 37 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
job work of dying of fabrics were hawala deale job work of dying of fabrics were hawala dealers who had issued rs who had issued bogus bills and he treated aforesaid purchases as bogus purchases, bogus bills and he treated aforesaid purchases as bogus purchases, bogus bills and he treated aforesaid purchases as bogus purchases, since without purchase of materials, it was not possible for assessee since without purchase of materials, it was not possible for assessee since without purchase of materials, it was not possible for assessee to complete job work of dying and entire purchases could not be to complete job work of dying and entire purchases could not be to complete job work of dying and entire purchases could not be added as bogus. profit element embedd added as bogus. profit element embedded in such transaction had to ed in such transaction had to be added to total income of assessee. be added to total income of assessee. 9.3 The Ld. CIT(A) referred to the decision of the The Ld. CIT(A) referred to the decision of the CIT v. Bholanath CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Gujarat), Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Gujarat), decision of the decision of the Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Pr. CIT v. Ris Pr. CIT v. Rishabhdev Technocable Ltd. 424 ITR 338 (Bom) Technocable Ltd. 424 ITR 338 (Bom) and decision of in the case and decision of in the case of Pr. CIT v. Jakharia Fabric (P.) Ltd. 429 ITR 332 (Bom), Pr. CIT v. Jakharia Fabric (P.) Ltd. 429 ITR 332 (Bom), Pr. CIT v. Jakharia Fabric (P.) Ltd. 429 ITR 332 (Bom), Following the above decision ollowing the above decisions, the Ld. CIT(A) restricted the , the Ld. CIT(A) restricted the disallowance of purchases to 5% in respect of 9 parties observing disallowance of purchases to 5% in respect of 9 parties observing as disallowance of purchases to 5% in respect of 9 parties observing under:
“In the case of the appellant, the AO has accepted the sales recorded In the case of the appellant, the AO has accepted the sales recorded In the case of the appellant, the AO has accepted the sales recorded in the books of accounts, therefore, only profit element embedded in the books of accounts, therefore, only profit element embedded in the books of accounts, therefore, only profit element embedded into purchases could be disallowed. Accordingly, the disallowance of into purchases could be disallowed. Accordingly, the disallowance of into purchases could be disallowed. Accordingly, the disallowance of purchases is restricted to 5% of purchas purchases is restricted to 5% of purchases made from 09 parties ie es made from 09 parties ie Vimalnath Associates, Vimalnath Corporation Mahavir Enterprises, Vimalnath Associates, Vimalnath Corporation Mahavir Enterprises, Vimalnath Associates, Vimalnath Corporation Mahavir Enterprises, Bhavya Bhavya Bhavya Enterprises, Enterprises, Enterprises, Diyan Diyan Diyan Enterprises, Enterprises, Enterprises, Maharashtra Maharashtra Maharashtra Pile Pile Pile Foundation, V. H. Enterprises and Navkar Corporation & Bharti Foundation, V. H. Enterprises and Navkar Corporation & Bharti Foundation, V. H. Enterprises and Navkar Corporation & Bharti Enterprises. 7.3.8 During the A.Y.2013 7.3.8 During the A.Y.2013-14, the appellant has made purchases appellant has made purchases from Hitesh Kantilal Shah HUF (i) Rushabh Corporation (il) Rushabh from Hitesh Kantilal Shah HUF (i) Rushabh Corporation (il) Rushabh from Hitesh Kantilal Shah HUF (i) Rushabh Corporation (il) Rushabh Trading Co. As discussed in para 7.3.6, purchases made from Trading Co. As discussed in para 7.3.6, purchases made from Trading Co. As discussed in para 7.3.6, purchases made from Rushabh Corporation, Rushabh Trading Co, and HiteshKantilal Rushabh Corporation, Rushabh Trading Co, and HiteshKantilal Rushabh Corporation, Rushabh Trading Co, and HiteshKantilal Shah HUF have been justified by the app Shah HUF have been justified by the appellant during the ellant during the assessment as well as remand proceedings. Therefore, purchases of assessment as well as remand proceedings. Therefore, purchases of assessment as well as remand proceedings. Therefore, purchases of Rs.48,04,750/- made from Rushabh Corporation Rushabh Trading made from Rushabh Corporation Rushabh Trading made from Rushabh Corporation Rushabh Trading Co. and Hitesh Kantilal Shah HUF is deleted. Co. and Hitesh Kantilal Shah HUF is deleted.” 9.4 We have heard rival submission of the parties on the merit of We have heard rival submission of the parties on the merit of We have heard rival submission of the parties on the merit of the addition of bogus purchases. R the addition of bogus purchases. Regarding the addition of bogus egarding the addition of bogus
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 38 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors purchases, deleted by the Ld. CIT(A), we find that the Assessing purchases, deleted by the Ld. CIT(A), we find that the Assessing purchases, deleted by the Ld. CIT(A), we find that the Assessing Officer in the assessment proceedings made addition mainly for the Officer in the assessment proceedings made addition mainly for the Officer in the assessment proceedings made addition mainly for the reason that those parties w reason that those parties were not produced before him ere not produced before him during assessment proceedings assessment proceedings and parties failed to provide proof of and parties failed to provide proof of delivery of goods. The finding of ld CIT(A) are not acceptable due . The finding of ld CIT(A) are not acceptable due . The finding of ld CIT(A) are not acceptable due various reasons. Firstly Firstly, we find that during the remand e find that during the remand proceedings out of those 13 parties, 4 parties were proceedings out of those 13 parties, 4 parties were produced, b produced, but no proof of delivery of goods to the assessee has been produced by no proof of delivery of goods to the assessee has been produced by no proof of delivery of goods to the assessee has been produced by those parties.Secondly Secondly, out of those four parties, three parties three parties were controlled by the same person controlled by the same person i.e. sh Hitesh Kantilal Shah , who Hitesh Kantilal Shah , who had provided annual payment had provided annual payment of Rs. 40,000/- to the other suppliers other suppliers like Vimalanath Corpoation, VH like Vimalanath Corpoation, VH Enterprises for making available making available bank accounts of their firms s of their firms for providing accommodation entry accommodation entry. Relevant part of statement of sh Vinod H shah reproduced by the Relevant part of statement of sh Vinod H shah reproduced by the Relevant part of statement of sh Vinod H shah reproduced by the Assessing Officer is extracted as under: Assessing Officer is extracted as under:
“Q.10. Please explain Please explain in how many entities you are in how many entities you are proprietor, partner or Director. proprietor, partner or Director. Ans. Sir, as stated above, I am basically not working. as stated above, I am basically not working. as stated above, I am basically not working. However, However, However, my my my distant distant distant relative, relative, relative, Hitesh Hitesh Hitesh Shah Shah Shah (Contact (Contact (Contact No.9930195780) is managing and operating a HUF concern ie No.9930195780) is managing and operating a HUF concern ie No.9930195780) is managing and operating a HUF concern ie M/s Vimalnath Corporation, wherein I am karta. Other than Corporation, wherein I am karta. Other than Corporation, wherein I am karta. Other than this, I am not a partner or Director in any business entity. I am this, I am not a partner or Director in any business entity. I am this, I am not a partner or Director in any business entity. I am just a signatory in the HUF concern i.e. M/s Vimalnath just a signatory in the HUF concern i.e. M/s Vimalnath just a signatory in the HUF concern i.e. M/s Vimalnath Corporation, which is managed and operated by my distant Corporation, which is managed and operated by my distant Corporation, which is managed and operated by my distant relative, Hitesh Shah. I am no relative, Hitesh Shah. I am not aware of the business actlivities t aware of the business actlivities carred out by Shri Hitesh Shah in M/s Vimalnath Corporation. carred out by Shri Hitesh Shah in M/s Vimalnath Corporation. carred out by Shri Hitesh Shah in M/s Vimalnath Corporation. You are requested to ask, Shri Hitesh Shah about the business You are requested to ask, Shri Hitesh Shah about the business You are requested to ask, Shri Hitesh Shah about the business activity of M/s Vimalnath Corporation. activity of M/s Vimalnath Corporation.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 39 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Q.11 Please explain how many entities are being operated Please explain how many entities are being operated Please explain how many entities are being operated from this premises at Flat No. 1 from this premises at Flat No. 1st floor, Neminath floor, Neminath Apartment, 60 feet Road, Devchand Nagar, Bhayander West, Apartment, 60 feet Road, Devchand Nagar, Bhayander West, Apartment, 60 feet Road, Devchand Nagar, Bhayander West, Mumbai-401 101? Ans. Sir, the following entities are being operated from this Sir, the following entities are being operated from this Sir, the following entities are being operated from this premises. Sr.No Name Name of of the the Proprietor Nature of Nature of . entity business business 1 M/s M/s V.H. V.H. Proprietor Not aware Not aware Enterprises Enterprises (Khushboo of of the the Vinod nature nature of of Shah) business business 2 M/s M/s Vimalnath Vimalnath HUF Not Not ware ware Corporation Corporation concern of of the the (Karta nature nature of of Vinod business business Himmeth Shah All the above entities are controlled and managed by my distant All the above entities are controlled and managed by my distant All the above entities are controlled and managed by my distant relative, Shri Hitesh Shah. Me and my daughter are just relative, Shri Hitesh Shah. Me and my daughter are just relative, Shri Hitesh Shah. Me and my daughter are just proprietor / karta for documentation purpose and not aware of proprietor / karta for documentation purpose and not aware of proprietor / karta for documentation purpose and not aware of the business activity. the business activity. Q.12 Please give the office and residential address of Shri Please give the office and residential address of Shri Please give the office and residential address of Shri Hitesh Shah. Please also explain how you got convinc Hitesh Shah. Please also explain how you got convinced to act ed to act as a signatory in M/s Vimalnath Corporation? as a signatory in M/s Vimalnath Corporation? Ans. Sir, I am not aware of the exact address of Shri Hitesh Sir, I am not aware of the exact address of Shri Hitesh Sir, I am not aware of the exact address of Shri Hitesh Shah. However, he operates from Haridas Nagar in Borivali Shah. However, he operates from Haridas Nagar in Borivali Shah. However, he operates from Haridas Nagar in Borivali West. Sir, Shri Hitesh Shah is my distint relative and he offered West. Sir, Shri Hitesh Shah is my distint relative and he offered West. Sir, Shri Hitesh Shah is my distint relative and he offered me commission of Rs.40,000/ of Rs.40,000/- annually for using our name for annually for using our name for issue of bogus bills. He would manage the whole affairs of M/s issue of bogus bills. He would manage the whole affairs of M/s issue of bogus bills. He would manage the whole affairs of M/s Vimalnath Corporation and I am not aware about business Vimalnath Corporation and I am not aware about business Vimalnath Corporation and I am not aware about business transactions carried out in the said entity. The commission of transactions carried out in the said entity. The commission of transactions carried out in the said entity. The commission of Rs.40,000/- was paid to m was paid to me in cash for F.Y. 2015-16 to 16 to F.Y. 2017-18. The commission for 18. The commission for F.Y. 2018-19 is still not paid by 19 is still not paid by him. The commission was sent to us through his person and him. The commission was sent to us through his person and him. The commission was sent to us through his person and Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 40 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors we would collect the same from a decided spot in Bhayander or we would collect the same from a decided spot in Bhayander or we would collect the same from a decided spot in Bhayander or outside our Society Building. Same outside our Society Building. Same way, documents were sent way, documents were sent to us for signature through his person. One of his persons is to us for signature through his person. One of his persons is to us for signature through his person. One of his persons is Shri Knatilal (Contact No.9769722713) who would handover the Shri Knatilal (Contact No.9769722713) who would handover the Shri Knatilal (Contact No.9769722713) who would handover the cash to me or bring documents for signature purpose. cash to me or bring documents for signature purpose. Q.13 How much money do you receive for acting as a sig How much money do you receive for acting as a signatory How much money do you receive for acting as a sig in M/s Vimalnath Corporation in M/s Vimalnath Corporation? Ans. As stated above I have received an amount of Rs.40,000 As stated above I have received an amount of Rs.40,000 As stated above I have received an amount of Rs.40,000 annually as commission for acting as a signatory in M/s annually as commission for acting as a signatory in M/s annually as commission for acting as a signatory in M/s Vimalnath Corporation. Vimalnath Corporation. Q.14 Please produce the books of accounts, Cheque books, Please produce the books of accounts, Cheque books, Please produce the books of accounts, Cheque books, bills and Vouchers etc bills and Vouchers etc of M/s Vimalnath Corporation of M/s Vimalnath Corporation. Ans. All the books of account, cheque book, bank book etc. All the books of account, cheque book, bank book etc. All the books of account, cheque book, bank book etc. are in the possession of Shri Hitesh Shah. No documents of are in the possession of Shri Hitesh Shah. No documents of are in the possession of Shri Hitesh Shah. No documents of M/s Vimalnath Corporation are lying with me. M/s Vimalnath Corporation are lying with me. Q.15 Pl explain who operates the Bank account of M/s Pl explain who operates the Bank account of M/s Pl explain who operates the Bank account of M/s Vimalnath Corporation Corporation Ans. The bank account is handled by Shri Hitesh Shah and I The bank account is handled by Shri Hitesh Shah and I The bank account is handled by Shri Hitesh Shah and I use to only sign the cheques, whenever he would send it across use to only sign the cheques, whenever he would send it across use to only sign the cheques, whenever he would send it across through his person. Q.16 Pl.explain since when have you been acting as a Pl.explain since when have you been acting as a Pl.explain since when have you been acting as a signatory in M/s Vimalnath Corporation? M/s Vimalnath Corporation? Ans Sir, I have been acting as a signatory of M/s Vimalnath I have been acting as a signatory of M/s Vimalnath I have been acting as a signatory of M/s Vimalnath Corporation from F.Y. 2015 Corporation from F.Y. 2015-16.” 9.5 Thirdly, The important important issue is that whether the assessee has issue is that whether the assessee has established consumption established consumption of those corresponding purchase with its of those corresponding purchase with its stock or consumption register. It is the assessee who stock or consumption register. It is the assessee who was required was required to establish the factum of consumption of the material with its establish the factum of consumption of the material with its establish the factum of consumption of the material with its documentary evidences documentary evidences but the assessee has neither shown any neither shown any Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 41 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors such evidence before the lower authorities nor before us, he lower authorities nor before us, therefore, he lower authorities nor before us, the deletion of disallowance of purchase corresponding to the deletion of disallowance of purchase corresponding to those the deletion of disallowance of purchase corresponding to parties by the Ld CIT(A) is not justified. by the Ld CIT(A) is not justified.
9.6 Fourthly, regarding, the other parties, egarding, the other parties, who during remand during remand proceedings remained firm on their earl proceedings remained firm on their earlier statements ier statements made that they were engaged in providing accommodation entries, ld CIT(A) they were engaged in providing accommodation entries, ld CIT(A) they were engaged in providing accommodation entries, ld CIT(A) has held them as bogus concerns but according to the ld CIT(A) has held them as bogus concerns but according to the ld CIT(A) has held them as bogus concerns but according to the ld CIT(A) only addition to the extent of profit element ( i.e. 5 % ) on those only addition to the extent of profit element ( i.e. 5 % ) on those only addition to the extent of profit element ( i.e. 5 % ) on those bogus purchases could could be disallowed and not 100 % amount of be disallowed and not 100 % amount of bogus purchase. In our opinion the Ld CIT(A) has not In our opinion the Ld CIT(A) has not analyzed analyzed the issue of bogus purchases in right perspective. The Hon’ble issue of bogus purchases in right perspective. The Hon’ble Bombay issue of bogus purchases in right perspective. The Hon’ble High Court in case of Mohamad haji Adam & Co. case of Mohamad haji Adam & Co.ITA 1004 of 2016 ITA 1004 of 2016 dated 11/02/2019 has he has held that in case of bogus purchases in case of bogus purchases addition should be restricted to the extent of extra addition should be restricted to the extent of extra profit element profit element but that case is of trader where sales are not held doubtful by the trader where sales are not held doubtful by the trader where sales are not held doubtful by the Assessing Officer.
9.7We are of the view that are of the view that when the purchases are admittedly when the purchases are admittedly bogus, then disallowance in such cases will depend on the facts and s, then disallowance in such cases will depend on the facts and s, then disallowance in such cases will depend on the facts and circumstances of the case and no uniform formula can be applied circumstances of the case and no uniform formula can be applied circumstances of the case and no uniform formula can be applied across the cases.
9.7.1 For example, For example, in case of a trader, two situation situations may be possible. Firstly, where , where, the trader is maintaining perfect record trader is maintaining perfect record of stock inventory from which it can be seen that when the from which it can be seen that when the from which it can be seen that when the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 42 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors particular item of purchase has been received by the assessee and particular item of purchase has been received by the assessee and particular item of purchase has been received by the assessee and when the same has been delivered to the buyer on sale. In such when the same has been delivered to the buyer on sale. In such when the same has been delivered to the buyer on sale. In such circumstances, each purchase ca circumstances, each purchase can be linked to respective sales. n be linked to respective sales. Now if (a) the sales are either exports or to the government the sales are either exports or to the government the sales are either exports or to the government organisation, then sales not being doubtful, the only organisation, then sales not being doubtful, the only organisation, then sales not being doubtful, the only presumption presumption would be that the assessee has purchased assessee has purchased those goods from grey market and obtained bills from the those goods from grey market and obtained bills from the those goods from grey market and obtained bills from the bogus accommodation entry provider and money paid ogus accommodation entry provider and money paid ogus accommodation entry provider and money paid though cheques though cheques by the assessee must have been routed must have been routed back to the assessee in cash. back to the assessee in cash. In such circumstances circumstances, the Hon’ble Courts have held that the assessee must have Hon’ble Courts have held that the assessee must have Hon’ble Courts have held that the assessee must have only benefitted by way less purchase only benefitted by way less purchase price p paid in grey market and corresponding profit by market and corresponding profit by which the assessee the assessee benefitted in entire transaction should benefitted in entire transaction should only only be added. Though, the source of the source of investments in purchase of in purchase of goods from grey market need to be examined in such goods from grey market need to be examined in such goods from grey market need to be examined in such cases. The Tribunal Mumbai Bench in The Tribunal Mumbai Bench in the case of the case of DCIT Vs Rajeev G Kalathi (2014) 51 taxmann.com 514 Vs Rajeev G Kalathi (2014) 51 taxmann.com 514 Vs Rajeev G Kalathi (2014) 51 taxmann.com 514 estimated 3 % of profit on bogus purchases. In the case of estimated 3 % of profit on bogus purchases. In the case of estimated 3 % of profit on bogus purchases. In the case of Kiran Navin Doshi Vs Income Kiran Navin Doshi Vs Income-tax officer (ITA No. tax officer (ITA No. 2601/Mum/2017) 2601/Mum/2017) the Tribunal estimated profit at the the Tribunal estimated profit at the rate of 12.5 % of the bogus purchases. rate of 12.5 % of the bogus purchases.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 43 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
(b) When the sales are doubtful When the sales are doubtful or those sales are also those sales are also accommodation accommodation entry bills, in such circumstances, the bills, in such circumstances, the only addition which could be made only addition which could be made in the hands of an in the hands of an assessee is is commiss commission income income for for issuing accommodation entry bills. accommodation entry bills.
9.7.2 Secondly, situation situation where no stock inventory is no stock inventory is maintained by the trader by the trader and the bogus purchases can’t be linked the bogus purchases can’t be linked with corresponding sale, with corresponding sale, then, it is obvious that the bogus purchase it is obvious that the bogus purchase has been booked for reducing the profit and in such for reducing the profit and in such circumstances, circumstances, the entire amount of bogus purchase is liable to be disallowed. the entire amount of bogus purchase is liable to be disallowed. the entire amount of bogus purchase is liable to be disallowed.
9.7.3 Similar, is the situation in case of Contractor or is the situation in case of Contractor or is the situation in case of Contractor or manufactures who consume the bogus purchases in th manufactures who consume the bogus purchases in their eir business. If the contractor is able to establish consumption of those bogus If the contractor is able to establish consumption of those bogus If the contractor is able to establish consumption of those bogus purchased goods in his business by way of evidence, it is presumed goods in his business by way of evidence, it is presumed goods in his business by way of evidence, it is presumed that assessee has procured goods from grey market and therefore that assessee has procured goods from grey market and therefore that assessee has procured goods from grey market and therefore difference of profit on such purchase from grey difference of profit on such purchase from grey market can market can only be added. But where, an assessee is unable to establish consumption added. But where, an assessee is unable to establish consumption added. But where, an assessee is unable to establish consumption of the bogus purchased goods into its of the bogus purchased goods into its business, then entire amount then entire amount of bogus purchases are liable to disallowed. of bogus purchases are liable to disallowed.
9.8 The Hon’ble Gujrat High Court in the case of The Hon’ble Gujrat High Court in the case of NK Protein Proteins Ltd vs DCIT (2017) 84 taxmann.com 195 vs DCIT (2017) 84 taxmann.com 195 has reversed the finding of has reversed the finding of the Tribunal for restricting the disallowance restricting the disallowance at 25% of the 25% of the purchases and held that in such cases where an assessee is and held that in such cases where an assessee is unable and held that in such cases where an assessee is Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 44 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors to establish consumption to establish consumption, 100 % disallowance should be made. should be made. This decision of Hon’ble Gujrat High Court has been upheld by the This decision of Hon’ble Gujrat High Court has been upheld by the This decision of Hon’ble Gujrat High Court has been upheld by the Hon’ble Supreme Court Hon’ble Supreme Court vide SLP© No. 769 of 2017. The Tribunal The Tribunal Pune Bench in the case of Pune Bench in the case of ACIT Vs Pritam S Mahale in ACIT Vs Pritam S Mahale in for Assessment Year : 2009-2010 No.183/PUN/2020 for Assessment Year : 0 hasupheld that in case of contractor where he is unable to establish that in case of contractor where he is unable to establish that in case of contractor where he is unable to establish consumption of such bogus purchases in his business, entire bogus of such bogus purchases in his business, entire bogus of such bogus purchases in his business, entire bogus purchases are liable to be disallowed. The purchases are liable to be disallowed. The relevant finding finding of the Tribunal is reproduced as under: Tribunal is reproduced as under:
“6. We have heard the rival contentions of both the parties; and 6. We have heard the rival contentions of both the parties; and 6. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of “ITAT Rules”, perused the subject to the provisions of rule 18 of “ITAT Rules”, perused the subject to the provisions of rule 18 of “ITAT Rules”, perused the material placed on record, case laws relied upon by the appellant material placed on record, case laws relied upon by the appellant material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the as well the respondent and duly considered the facts of the case in case in the light of settled legal position forewarned to parties present. the light of settled legal position forewarned to parties present. the light of settled legal position forewarned to parties present.
7. On perusal of records, we find that, upon the receipt of 7. On perusal of records, we find that, upon the receipt of 7. On perusal of records, we find that, upon the receipt of information from DGIT(INV), the Ld. AO after identifying the list of information from DGIT(INV), the Ld. AO after identifying the list of information from DGIT(INV), the Ld. AO after identifying the list of entry operators with whom the assessee had alleged entry operators with whom the assessee had alleged hawala hawala transactions and quantification of amount of bogus purchases transactions and quantification of amount of bogus purchases transactions and quantification of amount of bogus purchases involved, has put the respondent assessee to notice calling involved, has put the respondent assessee to notice calling involved, has put the respondent assessee to notice calling evidential documents to prove the existence of parties and evidential documents to prove the existence of parties and evidential documents to prove the existence of parties and genuineness of transactions, and in the event of failure to genuineness of transactions, and in the event of failure to genuineness of transactions, and in the event of failure to showcase physical movement of goods & consumption thereof, physical movement of goods & consumption thereof, physical movement of goods & consumption thereof, disallowed the entire amount of bogus. Whereas, the Ld. FAA disallowed the entire amount of bogus. Whereas, the Ld. FAA disallowed the entire amount of bogus. Whereas, the Ld. FAA reverberating the findings of lower authority, restricted the reverberating the findings of lower authority, restricted the reverberating the findings of lower authority, restricted the disallowance to the GP ratio in the light of Hon’ble Jurisdictional disallowance to the GP ratio in the light of Hon’ble Jurisdictional disallowance to the GP ratio in the light of Hon’ble Jurisdictional High Court of Bombay in “Mohammad Haji Adam & Co.” (Supra) for mbay in “Mohammad Haji Adam & Co.” (Supra) for mbay in “Mohammad Haji Adam & Co.” (Supra) for the reason of acceptance of sales/revenue without dispute. Insofar the reason of acceptance of sales/revenue without dispute. Insofar the reason of acceptance of sales/revenue without dispute. Insofar as the bogus purchases are concerned, the ratio laid in as the bogus purchases are concerned, the ratio laid in as the bogus purchases are concerned, the ratio laid in “Mohammad Haji Adam & Co.” (Supra) cannot squarely be applied “Mohammad Haji Adam & Co.” (Supra) cannot squarely be applied “Mohammad Haji Adam & Co.” (Supra) cannot squarely be applied to the present case for to the present case for three factual variations, firstly the assessee three factual variations, firstly the assessee before us is neither a trader nor a dealer but a Govt Civil Contractor before us is neither a trader nor a dealer but a Govt Civil Contractor before us is neither a trader nor a dealer but a Govt Civil Contractor and secondly there was complete absentia with regards to and secondly there was complete absentia with regards to and secondly there was complete absentia with regards to quantitative details or consumption of material purchased, and quantitative details or consumption of material purchased, and quantitative details or consumption of material purchased, and finally the sales or revenue were not exclusively with reference to or revenue were not exclusively with reference to or revenue were not exclusively with reference to Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 45 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors goods purchases/consumed but inclusive of work contract services. goods purchases/consumed but inclusive of work contract services. goods purchases/consumed but inclusive of work contract services. However, the Hon’ble Lordship had occasioned to considered However, the Hon’ble Lordship had occasioned to considered However, the Hon’ble Lordship had occasioned to considered similar facts and circumstance in the case of “PCIT Vs Pinaki D similar facts and circumstance in the case of “PCIT Vs Pinaki D similar facts and circumstance in the case of “PCIT Vs Pinaki D Pinani” (Bombay ITA/1543 of 2017), wherein the assessee being TA/1543 of 2017), wherein the assessee being TA/1543 of 2017), wherein the assessee being civil contractor, with evidential stock records and sales, was able to civil contractor, with evidential stock records and sales, was able to civil contractor, with evidential stock records and sales, was able to demonstrate the quantity of material consumed in execution of demonstrate the quantity of material consumed in execution of demonstrate the quantity of material consumed in execution of work contract undertaken and thereby established the nexus. work contract undertaken and thereby established the nexus. work contract undertaken and thereby established the nexus.
In the light of aforesaid discussion, we are of the considered 8. In the light of aforesaid discussion, we are of the considered 8. In the light of aforesaid discussion, we are of the considered view that, the ratio laid down by the Hon’ble Supreme Court in the view that, the ratio laid down by the Hon’ble Supreme Court in the view that, the ratio laid down by the Hon’ble Supreme Court in the case of “NK Proteins Ltd vs DCIT” (Supra) is squarely applicable to case of “NK Proteins Ltd vs DCIT” (Supra) is squarely applicable to case of “NK Proteins Ltd vs DCIT” (Supra) is squarely applicable to the facts of assessee case, where the Hon’ble Supreme C the facts of assessee case, where the Hon’ble Supreme Court the facts of assessee case, where the Hon’ble Supreme C dismissed appeal of assessee and confirmed the findings of dismissed appeal of assessee and confirmed the findings of dismissed appeal of assessee and confirmed the findings of Hon’ble Gujarat High Court in respect of bogus or sham purchases, Hon’ble Gujarat High Court in respect of bogus or sham purchases, Hon’ble Gujarat High Court in respect of bogus or sham purchases, wherein the Hon’ble Lordships, after analyzing necessary facts, by wherein the Hon’ble Lordships, after analyzing necessary facts, by wherein the Hon’ble Lordships, after analyzing necessary facts, by para 6 of the order have held that; para 6 of the order have held that; “6. The Tribunal in th “6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has e case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the observed that it would be just and proper to direct the observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the Assessing Officer to restrict the addition in respect of the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the undisclosed income relating to the purchases to 25% of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was total purchases. The said decision was confirmed by this confirmed by this Court as well. On consideration of the matter, we find that Court as well. On consideration of the matter, we find that Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. the facts of the present case are identical to those of M/s. the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorica (supra) In the present case the Tribunal has categorically (supra) In the present case the Tribunal has categorica observed that the assessee had shown bogus purchases observed that the assessee had shown bogus purchases observed that the assessee had shown bogus purchases amounting to Rs.2,92,93,2887 amounting to Rs.2,92,93,2887- and taxing only 25% of these and taxing only 25% of these bogus claim goes against the principles of Sections 68 and bogus claim goes against the principles of Sections 68 and bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on 69C of the Income Tax Act. The entire purchases shown on 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious the basis of fictitious invoices have been debited in the invoices have been debited in the trading account since the transaction has been found to be trading account since the transaction has been found to be trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical bogus. The Tribunal having once come to a categorical bogus. The Tribunal having once come to a categorical finding that the amount of Rs.2,92,93,2887 finding that the amount of Rs.2,92,93,2887- represented represented alleged purchases from bogus suppliers it was not inc alleged purchases from bogus suppliers it was not incumbent umbent on it to restrict the disallowance to only Rs. 73,23,3227 on it to restrict the disallowance to only Rs. 73,23,3227-.” on it to restrict the disallowance to only Rs. 73,23,3227 9. In the present case too, when it has been categorically 9. In the present case too, when it has been categorically 9. In the present case too, when it has been categorically established that, the amount of bogus purchases ₹64,33,495/ established that, the amount of bogus purchases 64,33,495/- is debited to P&L by fictitious tax invoices and the respondent debited to P&L by fictitious tax invoices and the respondent debited to P&L by fictitious tax invoices and the respondent assessee failed to establish the consumption of such goods in the essee failed to establish the consumption of such goods in the essee failed to establish the consumption of such goods in the execution of civil contract by adducing suc execution of civil contract by adducing such stock movement h stock movement records to the satisfaction of Ld. AO., then taxing such bogus satisfaction of Ld. AO., then taxing such bogus satisfaction of Ld. AO., then taxing such bogus
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 46 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors purchases GP rate of goes against the principles of taxation purchases GP rate of goes against the principles of taxation purchases GP rate of goes against the principles of taxation embedded in chapter VI of the Act and against the ratio laid down in chapter VI of the Act and against the ratio laid down in chapter VI of the Act and against the ratio laid down in “N K Proteins Ltd” and “PCIT Vs Pinaki D Pinani” (Supra), for the in “N K Proteins Ltd” and “PCIT Vs Pinaki D Pinani” (Supra), for the in “N K Proteins Ltd” and “PCIT Vs Pinaki D Pinani” (Supra), for the reason, we are of the considered view that, the Ld. AO was right in reason, we are of the considered view that, the Ld. AO was right in reason, we are of the considered view that, the Ld. AO was right in making 100% disallowance towards bogus / hawala purchases, making 100% disallowance towards bogus / hawala purchases, making 100% disallowance towards bogus / hawala purchases, and thus we are inclined to uphold the order of assessment and thus we are inclined to uphold the order of assessment and thus we are inclined to uphold the order of assessment and reverse the order the Ld. FAA. reverse the order the Ld. FAA.” 9.9 In view of above discussion In view of above discussion and following the Tribunal in and following the Tribunal in the case of Prtiam S mahale (supra) Prtiam S mahale (supra) , where the decision in , where the decision in the case of Mohamad Haji Adam and Co. (sup the case of Mohamad Haji Adam and Co. (supra) and N K ra) and N K Proteins Ltd (supra) have been analysed, Proteins Ltd (supra) have been analysed, the findings of ld CIT(A) on the issue of bogus purchases CIT(A) on the issue of bogus purchases are set aside and the aside and the addition made by the Assessing officer is restored. The addition made by the Assessing officer is restored. The addition made by the Assessing officer is restored. The ground No. 1 of the appeal of the Revenue is accordingly ground No. 1 of the appeal of the Revenue is accordingly ground No. 1 of the appeal of the Revenue is accordingly allowed. The ground no. 3 of the cross objection of the he ground no. 3 of the cross objection of the he ground no. 3 of the cross objection of the assessee is dismissed.
10. The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to addition of Rs.2,86,53,687/ addition of Rs.2,86,53,687/- in respect of unsecured loans. The in respect of unsecured loans. The ground No. 3 relates to disallowance of interest expenses of ground No. 3 relates to disallowance of interest expenses of ground No. 3 relates to disallowance of interest expenses of Rs.1,42,15,496/- in respect of those unsecured loan parties which in respect of those unsecured loan parties which in respect of those unsecured loan parties which have been held as unexplained by the Assessing Officer. have been held as unexplained by the Assessing Officer. have been held as unexplained by the Assessing Officer.
10.1 During the course of search proceedings total unsecured loans During the course of search proceedings total unsecured loans During the course of search proceedings total unsecured loans of Rs.1,26,67,16,092/ of Rs.1,26,67,16,092/- were found recorded in the case of the in the case of the assessee for assessment year 2013 assessee for assessment year 2013-14 to assessment year 2019 14 to assessment year 2019- 2020. During the course of 2020. During the course of search and survey proceedings survey proceedings on the premises of the assessee company premises of the assessee company, the key persons of the assessee , the key persons of the assessee
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 47 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors company were asked to furnish asked to furnish details regarding said loan said loans such as complete address of the loan giver of the loan giver, PAN, bank statements and other , PAN, bank statements and other documentary evidences along with confirmations documentary evidences along with confirmations letter letter, ledger account, details of repayment of loan, details of TD of repayment of loan, details of TDS etc. During the etc. During the course of examination of documentary course of examination of documentary evidence certain lapses lapses--were identified by authorised officer by authorised officer and it was noted that in case of and it was noted that in case of following 29 parties, the assessee produced only ledger copies and the assessee produced only ledger copies and the assessee produced only ledger copies and payment proof and no other evidence like PAN, address, payment proof and no other evidence like PAN, address, payment proof and no other evidence like PAN, address, confirmation letter, bank statement a confirmation letter, bank statement and TDS etc. were produced nd TDS etc. were produced:
No. Entity PAN FY 2012 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 1 Aadishwar AAICA1905B 3,03,253 3,03,253 30,00,000 83,22,020 Diamonds 2 Aditi Gems Pvt. AAICA6634L 2,19,000 2,19,000 2,19,000 1,55,400 Ltd. 3 Anshul Gems AAHCA6495 65,00,000 7,21,750 9,46,465 1,72,020 Pvt. Ltd. 4 Antique Pvt. AAJCA9015B 11,53,200 11,53,200 2,28,50,000 23,63,425 24,94,710 Ltd. 5 Arjay Gems Pvt. AAPCA6887A 11,53,200 11,53,200 2,28,50,000 28,63,425 24,94,710 Ltd. 6 Bahubali AADCB9109R 13,35,250 13,35,250 78,19,000 3,18,000 Diamond Pvt. Ltd. 7 Boetal Trading AACCB8137A 9,71,198 9,71,198 3,00,00,000 3,78,000 3,20,160 Pvt. Ltd. 8 Burlington AABCB4362Q 8,21,250 8,21,250 4,80,000 Mercantiles Pvt. Ltd. 9 Chaitanya Gems AADCC9257F 8,32,200 8,32,200 Pvt. Ltd.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 48 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10 Crescent AABCC4886B 5,80,350 5,80,350 45,00,000 9,34,920 Diamond Exim Pvt. Ltd. 11 Divyanshi Gems AADCD8741R 64,26,000 68,14,700 3,14,700 Pvt. Ltd. 12 Dojahan AACCD3340F 75,00,000 6,41,085 2,08,200 Trading Pvt. Ltd 13 Ensure Insure AACCB1526E 13,39,572, 13,39,572, 41,00,000 7,88,400 7,88,400 2,12,627 Brokers Pvt. Ltd. 14 HPL Multi Trade AABCH6652D 12,50,000 40,16,975 5,21,550 Pvt. Ltd. 15 Karnawat Impex AADCK1927A 2,19,000 2,19,000 Pvt. Ltd. 16 Kriya Impex Pvt. AADCK1928B 8,32,200 8,32,200 Ltd. 17 Manohar Impex AAFCM9840G 30,00,000 44,44,564 29,27,960 Pvt. Ltd. 18 Param Gems AAFCP4945C 1,13,00,000 92,37,350 22,19,140 Pvt. Ltd. 19 Piyush Gems AAFCP9545H Pvt. Ltd. 20 Saffron Gems AANCS2828J 3,77,775 3,77,775 39,20,175 5,21,550 Pvt. Ltd. 21 Samkit AADCS9472L 3,04,34,400 3,36,850 15,65,850 Diamond Mfg. Co. Pvt. Ltd. 22 Samkit Gems AAQCS8731D Pvt. Ltd. 23 Snowdrop AAMCS8992E 2,00,00,000 21,96,000 Vincom Pvt. Ltd. 24 Surya Diamond AANCS7279E 11,40,750 11,40,750 2,27,460 Pvt. Ltd. 25 Takshila Exim AADCT9006B 76,50,000 10,00,720
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 49 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 26 Badam Trading AAFCB0891H 10,90,890 10,90,890 3,01,050 Pvt. Ltd. 27 Lalita Gems Pvt. AABCL7179H 3,29,500 3,29,500 2,27,700 Ltd. 28 Moxa Diamond AACCM1959H 1,69,200 1,69,200 15,02,000 51,64,250 1,30,88,000 Pvt. Ltd. 29 Shikha Diamond AAJCS5918B 17,48,818 17,48,818 25,00,000 51,64,250 51,64,250 1,80,88,000 Pvt. Ltd. Total 1,44,38,191 1,44,38,191 10,50,69,000 9,17,46,572 9,03,45,979 1,16,53,010 6,62,810 10.2 Based on the information, profile information, profile of those unsecured loan of those unsecured loan creditors was prepared prepared (using database of income-tax department tax department) about their turnover & net & net profit, taxable business income income and reserve and surplus, whether surplus, whether return of income filed etc. was return of income filed etc. was prepared, which is reproduced by the Assessing Officer on page 37 , which is reproduced by the Assessing Officer on page 37 , which is reproduced by the Assessing Officer on page 37 to 41 of the assessment order. to 41 of the assessment order. It was observed that in respect of 29 It was observed that in respect of 29 parties that firstly, no , no sufficient reserve and surplus in their sufficient reserve and surplus in their balance sheet, secondly secondly parties were every year having high having high turnover butlow net profit butlow net profit ratio, thirdly, some entities didn’t file , some entities didn’t file their return regularly, fourthly fourthly, the parties themselves were having parties themselves were having outstanding creditors in their books of accounts. outstanding creditors in their books of accounts.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 50 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.2.1 The search/survey teams during the course of search search/survey teams during the course of search search/survey teams during the course of search analyzed the income-tax assessment records (i.e. assessment orders tax assessment records (i.e. assessment orders tax assessment records (i.e. assessment orders passed by DCIT Central circle, passed by DCIT Central circle, Surat) of two unsecured loan Surat) of two unsecured loan creditors namelyM/s namelyM/s Kriya Impex Pvt. Ltd. and M/s M/s Karnavati Impex Pvt. Ltd. and found that those and found that those were accommodation entry were accommodation entry provider, which were managed an managed and handled by Shri Rajendra Jain. d handled by Shri Rajendra Jain. 10.2.2 Further, during uring search proceedings, the search team the search team deputed various inspectors for deputed various inspectors for verification of existence of the of existence of the unsecured loan creditors. The reports submitted by the Inspectors unsecured loan creditors. The reports submitted by the Inspectors unsecured loan creditors. The reports submitted by the Inspectors have been reproduced by the Assessing officer on page 48 to 86 of have been reproduced by the Assessing officer on page 48 to 86 of have been reproduced by the Assessing officer on page 48 to 86 of the assessment order. T the assessment order. The Inspector(s) have mainly reported that have mainly reported that parties were not found in existence parties were not found in existence at their addresses. es. The Ld. Assessing Officer has reproduced photos of the places and inquiry Assessing Officer has reproduced photos of the places and inquiry Assessing Officer has reproduced photos of the places and inquiry report of the Inspector of the Department report of the Inspector of the Department in the impugned in the impugned assessment order. All the material All the material gathered during the course of gathered during the course of search was confronted confronted by the search team to the Director of the the Director of the assessee company Shri assessee company Shri Nirmal Madhani. However, he failed to give dhani. However, he failed to give any satisfactory reply in respect of th any satisfactory reply in respect of those 29 parties including their including their current address.
10.2.3 Further, during the course of search proceedings on urther, during the course of search proceedings on urther, during the course of search proceedings on 11.11.2019, statement of Shri Deepak Jain was recorded, , statement of Shri Deepak Jain was recorded, wherein , statement of Shri Deepak Jain was recorded, he stated he was managing few dummy companies he stated he was managing few dummy companies which were used which were used for providing accommodation entry bills/ credits. He admitted that for providing accommodation entry bills/ credits. He admitted that for providing accommodation entry bills/ credits. He admitted that he had provided accommodation loan entry to the assessee though ded accommodation loan entry to the assessee though ded accommodation loan entry to the assessee though
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 51 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors five of his dummy entities. The statement of sh Deepak jain was five of his dummy entities. The statement of sh Deepak jain was five of his dummy entities. The statement of sh Deepak jain was also confronted to the Director of the assessee company. Director of the assessee company. Director of the assessee company.
10.3 Based on inquiries and finding of the Department, the Based on inquiries and finding of the Department, the Based on inquiries and finding of the Department, the Assessing Officer issue Assessing Officer issued show cause notice asking the assessee to d show cause notice asking the assessee to explain the unsecured loan explain the unsecured loan creditors and also produce those 29 also produce those 29 parties before him. It was contended by the assessee that loans . It was contended by the assessee that loans . It was contended by the assessee that loans were received through banking channels and ledger accounts, were received through banking channels and ledger accounts, were received through banking channels and ledger accounts, income-tax returns and rep tax returns and repayment of the loan to said parties had already been submitted before the Assessing Officer. The Assessing already been submitted before the Assessing Officer. The Assessing already been submitted before the Assessing Officer. The Assessing Officer however was not satisfied by the reply given by the assessee. not satisfied by the reply given by the assessee. not satisfied by the reply given by the assessee. According to him the key persons of the assessee company had According to him the key persons of the assessee company had According to him the key persons of the assessee company had admitted in statement admitted in statement on oath that they have taken oath that they have taken bogus accommodation entries unsecured loans accommodation entries unsecured loans. The Assessing Officer he Assessing Officer was of the opinion that cas cash generated while bogus purchases while bogus purchases was handed over to unsecured loan secured loan creditors. The Assessing Officer was The Assessing Officer was of the view that the assessee failed that the assessee failed to produce material evidences in material evidences in support of genuineness of the loan transaction and accordingly, of genuineness of the loan transaction and accordingly, the of genuineness of the loan transaction and accordingly, assessee failed to discharge its onus u/s 68 of the Act to establish ed to discharge its onus u/s 68 of the Act to establish ed to discharge its onus u/s 68 of the Act to establish identity, genuineness of the transaction and creditworthiness of the identity, genuineness of the transaction and creditworthiness of the identity, genuineness of the transaction and creditworthiness of the parties. The Ld. Assessing Officer relying on the decision parties. The Ld. Assessing Officer relying on the decision in the case parties. The Ld. Assessing Officer relying on the decision of Roshan Di Hatti v. CIT [1977] 107 ITR 937 (SC) Roshan Di Hatti v. CIT [1977] 107 ITR 937 (SC) and Kale Roshan Di Hatti v. CIT [1977] 107 ITR 937 (SC) Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) han Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) etc. held all han Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) the 29 parties as unexplained cash credit the 29 parties as unexplained cash credit making addition of Rs. making addition of Rs. 31,47,15,562/- for AY 2013 for AY 2013-14 to AY 2018-19. The Assessing The Assessing
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 52 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Officer also made addition u/s 68 in respect of the interest Officer also made addition u/s 68 in respect of the interest paid to Officer also made addition u/s 68 in respect of the interest those unsecured loan creditors during the period from AY 2013 ose unsecured loan creditors during the period from AY 2013-14 ose unsecured loan creditors during the period from AY 2013 to 2018-19. The addition for loan and interest made for various 19. The addition for loan and interest made for various 19. The addition for loan and interest made for various years has been summarized summarized by the Assessing officer as under: by the Assessing officer as under:
A.Y. Bogus unsecured loan Bogus unsecured loan Bogus interests paid Total amount (Rs.) Total amount (Rs.) receipts (Rs.) receipts (Rs.) thereon (Rs.) 2013-14 1,44,38,191 1,44,38,191 1,42,15,496 2,86,53,687 2,86,53,687 2014-15 10,58,69,000 10,58,69,000 1,12,40,415 11,71,09,415 11,71,09,415 2015-16 9,17,46,572 9,17,46,572 1,66,58,522 10,84,05,094 10,84,05,094 2016-17 9,03,45,979 9,03,45,979 2,62,59,244 11,66,05,223 11,66,05,223 2017-18 1,16,53,010 1,16,53,010 68,61,233 1,85,14,243 1,85,14,243 2018-19 6,62,810 6,62,810 7,36,547 13,99,267 13,99,267 Total 31,47,15,562 31,47,15,562 7,59,71,367 39,06,86,929 39,06,86,929 10.4 In respect of year under consideration n respect of year under consideration, the addition for , the addition for unsecured loan creditor is of unsecured loan creditor is of Rs.1,44,38,191/- and for interest for interest is of Rs.1,42,15,496/-. The relevant finding of the Assessing Officer The relevant finding of the Assessing Officer The relevant finding of the Assessing Officer while making addition are reproduced as under: while making addition are reproduced as under:
8.4 in response to the show cause notice assessee has submitted 8.4 in response to the show cause notice assessee has submitted 8.4 in response to the show cause notice assessee has submitted the documents which include ledger confirmation and ITR of the the documents which include ledger confirmation and ITR of the the documents which include ledger confirmation and ITR of the above parties. it was also submitte above parties. it was also submitted that the assessee has d that the assessee has returned back loans in various parties in full. Thus, mere returned back loans in various parties in full. Thus, mere returned back loans in various parties in full. Thus, mere submission of bank statement and ledger confirmation of the submission of bank statement and ledger confirmation of the submission of bank statement and ledger confirmation of the parties parties parties is is is not not not sufficient sufficient sufficient to to to prove prove prove the the the genuineness genuineness genuineness and and and creditworthiness of the loan parties. Also, the director a creditworthiness of the loan parties. Also, the director and the key nd the key persons of company has clearly stated in their statements recorded persons of company has clearly stated in their statements recorded persons of company has clearly stated in their statements recorded
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 53 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors during the course of Search & Seizure proceedings that they have during the course of Search & Seizure proceedings that they have during the course of Search & Seizure proceedings that they have taken accommodation entries of unsecured loans. The modus taken accommodation entries of unsecured loans. The modus taken accommodation entries of unsecured loans. The modus operandt are that for these transactions the beneficiar operandt are that for these transactions the beneficiary will give y will give them cash and the same will be returned to the beneficiary by them cash and the same will be returned to the beneficiary by them cash and the same will be returned to the beneficiary by issue of cheques after charging their commission on such issue of cheques after charging their commission on such issue of cheques after charging their commission on such transactions. 8.5 The assessee further relied on the fact that, the parties are 5 The assessee further relied on the fact that, the parties are 5 The assessee further relied on the fact that, the parties are identifiable and amounts were received throug identifiable and amounts were received through banking channels. h banking channels. These parties are credit worthy to make such investments in the These parties are credit worthy to make such investments in the These parties are credit worthy to make such investments in the assessee company and submitted that the transactions are assessee company and submitted that the transactions are assessee company and submitted that the transactions are genuine. The assessee failed to prove genuineness of these genuine. The assessee failed to prove genuineness of these genuine. The assessee failed to prove genuineness of these transactions. 8.6 The assessee in response to specific s 6 The assessee in response to specific show cause notice has not how cause notice has not made any submissions to disprove the departments above made any submissions to disprove the departments above made any submissions to disprove the departments above findings. The assessee except for pointing out that its name is not findings. The assessee except for pointing out that its name is not findings. The assessee except for pointing out that its name is not mentioned in the statements given, has not commented on the mentioned in the statements given, has not commented on the mentioned in the statements given, has not commented on the entire modus operandi admitted by the parties co entire modus operandi admitted by the parties concerned. The ncerned. The controlling persons of unsecured loan parties have categorically controlling persons of unsecured loan parties have categorically controlling persons of unsecured loan parties have categorically admitted that they are involved in providing only bogas and admitted that they are involved in providing only bogas and admitted that they are involved in providing only bogas and accommodation entries for commission. The statements were given accommodation entries for commission. The statements were given accommodation entries for commission. The statements were given under oath in the Income Tax Act. The evidences gather under oath in the Income Tax Act. The evidences gathered clearly ed clearly proved that these parties have only provided accommodation proved that these parties have only provided accommodation proved that these parties have only provided accommodation entries for consideration entries for consideration /commission to the willing parties. These /commission to the willing parties. These parties receive cash from the clients than through layering transfer parties receive cash from the clients than through layering transfer parties receive cash from the clients than through layering transfer the funds in the form loans. The assessee mainly the funds in the form loans. The assessee mainly generate cash generate cash through bogus expenses and this cash hand over to the entry through bogus expenses and this cash hand over to the entry through bogus expenses and this cash hand over to the entry operators. In present case also, assessee has generated cash operators. In present case also, assessee has generated cash operators. In present case also, assessee has generated cash through bogus purchase and taken unsecured loan entry by through bogus purchase and taken unsecured loan entry by through bogus purchase and taken unsecured loan entry by handing over cash to the entry operators. Hence the assessee's handing over cash to the entry operators. Hence the assessee's handing over cash to the entry operators. Hence the assessee's arguments on this lack any meri rguments on this lack any merit and deserve to be rejected. t and deserve to be rejected. 8.7 Further, the entry providers in their statements have 8.7 Further, the entry providers in their statements have 8.7 Further, the entry providers in their statements have categorically stated that, the cheques and bills/documents were categorically stated that, the cheques and bills/documents were categorically stated that, the cheques and bills/documents were issued. There are no book entries to the real transactions either in issued. There are no book entries to the real transactions either in issued. There are no book entries to the real transactions either in the books of the assessee or in the books of these entry providers. books of the assessee or in the books of these entry providers. books of the assessee or in the books of these entry providers. Therefore, the statements on oath, solemn affirmation and the Therefore, the statements on oath, solemn affirmation and the Therefore, the statements on oath, solemn affirmation and the admission of the parties when confronted with the evidences found admission of the parties when confronted with the evidences found admission of the parties when confronted with the evidences found in the course of search are sufficient evidences under taxation in the course of search are sufficient evidences under taxation in the course of search are sufficient evidences under taxation provisions to conclude that, both the parties entered into such provisions to conclude that, both the parties entered into such provisions to conclude that, both the parties entered into such arrangements with connivance with each other. arrangements with connivance with each other.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 54 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
8.8 As per the provisions of section 68 of the IT. Act, the assessee 8.8 As per the provisions of section 68 of the IT. Act, the assessee 8.8 As per the provisions of section 68 of the IT. Act, the assessee is is is required required required to to to explain explain explain the the the identity, identity, identity, genuineness genuineness genuineness and and and creditworthiness of the creditworthiness of the party. In present case assessee has proved party. In present case assessee has proved identity of unsecured loan parties, but failed to provide the nature identity of unsecured loan parties, but failed to provide the nature identity of unsecured loan parties, but failed to provide the nature and source of the credit appearing in its books. The explanation and source of the credit appearing in its books. The explanation and source of the credit appearing in its books. The explanation offered by assessee found to be unsatisfactory. The Hon'ble offered by assessee found to be unsatisfactory. The Hon'ble offered by assessee found to be unsatisfactory. The Hon'ble Supreme Court has h Supreme Court has held in the case of Shreelekha Banerjee Vs CIT eld in the case of Shreelekha Banerjee Vs CIT [49 ITR 112(SC)) that addition for unexplained cash credit is [49 ITR 112(SC)) that addition for unexplained cash credit is [49 ITR 112(SC)) that addition for unexplained cash credit is justified simply if the assessee fails to offer an explanation or the justified simply if the assessee fails to offer an explanation or the justified simply if the assessee fails to offer an explanation or the explanation offered by the assessee is found to be not satisfactory explanation offered by the assessee is found to be not satisfactory explanation offered by the assessee is found to be not satisfactory by the Assessing Officer. essing Officer. 10.5 In respect of addition by the Assessing Officer u/s 68 of the addition by the Assessing Officer u/s 68 of the addition by the Assessing Officer u/s 68 of the Act, before the Ld. CIT(A) the assessee provided evidence before the Ld. CIT(A) the assessee provided evidences related to before the Ld. CIT(A) the assessee provided evidence those 29 parties including ledger copy se 29 parties including ledger copy, confirmation, bank bank account details, ITR copy etc. which were fo ITR copy etc. which were forwarded by the Ld. CIT(A) to the rwarded by the Ld. CIT(A) to the Assessing Officer calling for calling for the remand report. The Ld. Assessing the remand report. The Ld. Assessing Officer submitted that assessee did not produce those Officer submitted that assessee did not produce those creditors Officer submitted that assessee did not produce those before him for recording their statement for recording their statement on oath, hence hence it was not possible to verify their their credentials. In rejoinder, the assessee n rejoinder, the assessee submitted that those loans were taken long back and were repaid in se loans were taken long back and were repaid in se loans were taken long back and were repaid in financial year 2017-18 18, therefore, those parties were not in contact those parties were not in contact thus, cannot be produce be produced before the Assessing Officer. However, before the Assessing Officer. However, whereas the evidence such as loan confirmation ence such as loan confirmation, ITR ITR ,copy of balance sheet, bank statement in respect of those parties bank statement in respect of those parties were bank statement in respect of those parties already submitted during the remand proceedings. During appellate during the remand proceedings. During appellate during the remand proceedings. During appellate proceedings, the Ld. CIT(A) reconciled the ledger balances of 29 proceedings, the Ld. CIT(A) reconciled the ledger balances of 29 proceedings, the Ld. CIT(A) reconciled the ledger balances of 29 parties at the end of each each year from assessment year 2013 year from assessment year 2013-14 to assessment year 2020 assessment year 2020-21 and found that out of 29 parties, in Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 55 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors respect of 9 parties no credit transactions were appear respect of 9 parties no credit transactions were appearing during respect of 9 parties no credit transactions were appear the period from AY 2013 the period from AY 2013-14 to 2020-21. The Ld. CIT(A) accordingly 21. The Ld. CIT(A) accordingly deleted the addition u/s 68 of the Act in respect of th tion u/s 68 of the Act in respect of tho ose 9 parties observing as under:
“8.3.6 The AO has made reference to statement of Shri Rajendra 8.3.6 The AO has made reference to statement of Shri Rajendra 8.3.6 The AO has made reference to statement of Shri Rajendra Jain regarding providing accommodation entries of unsecured loans Jain regarding providing accommodation entries of unsecured loans Jain regarding providing accommodation entries of unsecured loans to various parties. The list of 29 parties include to various parties. The list of 29 parties include name of two parties name of two parties i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, the appellant has not received any unsecured loan during F.Y. 2012 the appellant has not received any unsecured loan during F.Y. 2012- the appellant has not received any unsecured loan during F.Y. 2012 13 to F.Y. 2017-18 from Karnawat Impex Pvt. Ltd and Kriya Impex. 18 from Karnawat Impex Pvt. Ltd and Kriya Impex. 18 from Karnawat Impex Pvt. Ltd and Kriya Impex. Therefore, reliance of AO on the state Therefore, reliance of AO on the statement of Shri Rajendra Jain for ment of Shri Rajendra Jain for making addition u/s.68 inrespect of unsecured loan from Karnawat making addition u/s.68 inrespect of unsecured loan from Karnawat making addition u/s.68 inrespect of unsecured loan from Karnawat Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the case of the appellant. case of the appellant. The AO has also referred to Five companies managed & controlled The AO has also referred to Five companies managed & controlled The AO has also referred to Five companies managed & controlled by Shri Dipak Jain which had provided accommodation entries. AO ri Dipak Jain which had provided accommodation entries. AO ri Dipak Jain which had provided accommodation entries. AO has not mentioned names of Five companies controlled by Dipak has not mentioned names of Five companies controlled by Dipak has not mentioned names of Five companies controlled by Dipak Jain, however, it is gathered that only two companies i.e Sanmati Jain, however, it is gathered that only two companies i.e Sanmati Jain, however, it is gathered that only two companies i.e Sanmati Gems Pvt. Ltd. and Surya Diamond Pvt. Ltd. are mentioned in list of Gems Pvt. Ltd. and Surya Diamond Pvt. Ltd. are mentioned in list of Gems Pvt. Ltd. and Surya Diamond Pvt. Ltd. are mentioned in list of 29 parties. In the case of Sanmati Gems Pvt. Ltd, the AO has also 9 parties. In the case of Sanmati Gems Pvt. Ltd, the AO has also 9 parties. In the case of Sanmati Gems Pvt. Ltd, the AO has also accepted that no unsecured loan was received fr accepted that no unsecured loan was received from it by the om it by the appellant company.” 10.5.1 Further in para 8.3.6, the Ld. CIT(A) has mentioned that Further in para 8.3.6, the Ld. CIT(A) has mentioned that Further in para 8.3.6, the Ld. CIT(A) has mentioned that the parties ‘Karnawat Impex Pvt. Ltd’ ‘Karnawat Impex Pvt. Ltd’ and ‘Kriya Impex’ ’ addition in respect of which made relying on the statement of Shri Rajendra respect of which made relying on the statement of Shri Rajendra respect of which made relying on the statement of Shri Rajendra Jain and since there was was no loan or credit in respect of th no loan or credit in respect of those two parties during the period from AY 2013 parties during the period from AY 2013-14 to 2020-21, therefore therefore, no addition could have been made. addition could have been made.
10.5.2 The Ld. CIT(A) has further mentioned that two parties The Ld. CIT(A) has further mentioned that two parties The Ld. CIT(A) has further mentioned that two parties namely ‘M/s Surya Diamond Pvt. Ltd Surya Diamond Pvt. Ltd’ and ‘M/s Sanmati Gems Pvt. Sanmati Gems Pvt.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 56 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Ltd’ were stated by the lower authorities as were stated by the lower authorities as controlled by controlled by Sh Deepak Jain, but, those two part parties were also having no credit transactio transactions with the assessee during the period form AY 2013 with the assessee during the period form AY 2013-14 to 2020 14 to 2020-21, hence no addition could have been made in respect of those two could have been made in respect of those two could have been made in respect of those two parties also. This exclusion left 18 parties for examining on the test This exclusion left 18 parties for examining on the test This exclusion left 18 parties for examining on the test laid down u/s 68 of the Act. laid down u/s 68 of the Act.
10.5.3 In respect of In respect of those remaining 18 parties, the Ld. CIT(A) 18 parties, the Ld. CIT(A) held that those parties held that those parties had filed the available evidence filed the available evidences and the assessee discharged its assessee discharged its onus provided u/s 68 of the Act provided u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under: relevant finding of the Ld. CIT(A) is reproduced as under: relevant finding of the Ld. CIT(A) is reproduced as under:
“8.3.10The AO has ignored a 8.3.10The AO has ignored all these evidences which were provided ll these evidences which were provided by theappellant company to the A during the course of assessment by theappellant company to the A during the course of assessment by theappellant company to the A during the course of assessment proceedings. The onus cast upon the assessee regarding proving proceedings. The onus cast upon the assessee regarding proving proceedings. The onus cast upon the assessee regarding proving identity and creditworthiness of the lender companies and the identity and creditworthiness of the lender companies and the identity and creditworthiness of the lender companies and the genuineness of the loan tra genuineness of the loan transactions, as provided in Section 68, was nsactions, as provided in Section 68, was discharged by the appellant company. The AO has simply relied discharged by the appellant company. The AO has simply relied discharged by the appellant company. The AO has simply relied upon profiling done by the Department based on the details upon profiling done by the Department based on the details upon profiling done by the Department based on the details available in the ITBA System. The AO has not made any further available in the ITBA System. The AO has not made any further available in the ITBA System. The AO has not made any further enquiries to disprove the evide enquiries to disprove the evidences submitted by the appellant nces submitted by the appellant during the assessment proceedings. during the assessment proceedings. In this regard, the decision in the case of Additional CIT v. Hanuman In this regard, the decision in the case of Additional CIT v. Hanuman In this regard, the decision in the case of Additional CIT v. Hanuman Agarwal [1984] 151 IT 150 (Pat.), wherein it is held that Agarwal [1984] 151 IT 150 (Pat.), wherein it is held that ... As the confirmatory letter was issued by the creditor sub ... As the confirmatory letter was issued by the creditor subsequent ... As the confirmatory letter was issued by the creditor sub to the so-called confession, called confession, it was much more incumbent upon it was much more incumbent upon the department to summon the creditor in order to verify the the department to summon the creditor in order to verify the the department to summon the creditor in order to verify the statements made in the confirmatory letter. statements made in the confirmatory letter. This was never This was never done. The so-called confession was not made available and was not called confession was not made available and was not called confession was not made available and was not quoted in any of the orders. The so uoted in any of the orders. The so-called confession was made in a called confession was made in a third party"s case and, hence, it was no pointer to the fact that it third party"s case and, hence, it was no pointer to the fact that it third party"s case and, hence, it was no pointer to the fact that it also related to the amount in question. The assessee having been also related to the amount in question. The assessee having been also related to the amount in question. The assessee having been called upon to explain the nature and source of the dep called upon to explain the nature and source of the deposit, called upon to explain the nature and source of the dep
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 57 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors immediately filed the confirmatory letter from the creditor. The immediately filed the confirmatory letter from the creditor. The immediately filed the confirmatory letter from the creditor. The confirmatory letter contained the address of the party. It also confirmatory letter contained the address of the party. It also confirmatory letter contained the address of the party. It also contained the GIR number. The assessee having fumished all this, contained the GIR number. The assessee having fumished all this, contained the GIR number. The assessee having fumished all this, did all that it could do and these materials showed prim did all that it could do and these materials showed prima facie not a facie not only the identity of the creditor but also the genuineness of the only the identity of the creditor but also the genuineness of the only the identity of the creditor but also the genuineness of the transaction and also the capacity of the creditor and, as such, the transaction and also the capacity of the creditor and, as such, the transaction and also the capacity of the creditor and, as such, the assessee completely discharged its initial onus under section 68. assessee completely discharged its initial onus under section 68. assessee completely discharged its initial onus under section 68. The revenue did not summon the creditor unde The revenue did not summon the creditor under section 131. It took r section 131. It took no steps to verify the statement of the assessee. no steps to verify the statement of the assessee. Thus, after the Thus, after the assessee filed the confirmatory letter with the correct name assessee filed the confirmatory letter with the correct name assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, the and address of the creditor and the GIR number as well, the and address of the creditor and the GIR number as well, the onus immediately shifted on the department whi onus immediately shifted on the department which was not ch was not discharged by the department. discharged by the department. Therefore, the impugned addition Therefore, the impugned addition of the deposit to the assessee's income and the consequential of the deposit to the assessee's income and the consequential of the deposit to the assessee's income and the consequential disallowance of interest could not be sustained. disallowance of interest could not be sustained. The assessee is not supposed to know the capacity of the money The assessee is not supposed to know the capacity of the money- The assessee is not supposed to know the capacity of the money lender or the cash creditor. It is within the exclusive domain or the r the cash creditor. It is within the exclusive domain or the r the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and dark trusses of the minds of the creditors to know as to whether and dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. how their sources of income are arrived. It is for that specific It is for that specific purpose that section 131 has been introduced so that in case purpose that section 131 has been introduced so that in case purpose that section 131 has been introduced so that in case of any suspicion, the ITO or the authorities concerned may of any suspicion, the ITO or the authorities concerned may of any suspicion, the ITO or the authorities concerned may exercise the powers of a civil court under section 131 and exercise the powers of a civil court under section 131 and exercise the powers of a civil court under section 131 and call upon the creditor concerned to prove his capacity to pay call upon the creditor concerned to prove his capacity to pay call upon the creditor concerned to prove his capacity to pay and the genuineness of his transaction. and the genuineness of his transaction.Once the ITO or the Once the ITO or the authority concerned is satisfied that the creditor is not telling the ned is satisfied that the creditor is not telling the ned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his truth, it has been left open to the assessee to discharge his truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and subsequent onus of proving the genuineness of the transaction and subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay by cross the capacity of the creditor to pay by cross-examining him. Where, examining him. Where, therefore, as in the instantcase, an assessee gives the correct name, re, as in the instantcase, an assessee gives the correct name, re, as in the instantcase, an assessee gives the correct name, address and GIR number of the creditor, he has discharged his onus address and GIR number of the creditor, he has discharged his onus address and GIR number of the creditor, he has discharged his onus and unless a notice in due form under section 131 is issued by the and unless a notice in due form under section 131 is issued by the and unless a notice in due form under section 131 is issued by the revenue to test the veracity of the genuineness of the tran revenue to test the veracity of the genuineness of the transaction or saction or the capacity of the creditor to pay, the assessee has to succeed. the capacity of the creditor to pay, the assessee has to succeed. the capacity of the creditor to pay, the assessee has to succeed. Therefore, the impugned addition was not justified. ned addition was not justified. 8.3.11 During the remand proceedings, the AO has asked the During the remand proceedings, the AO has asked the During the remand proceedings, the AO has asked the assessee to produce those parties to verify the identity, assessee to produce those parties to verify the identity, assessee to produce those parties to verify the identity, creditworthiness hiness hiness and and and genuineness genuineness genuineness of of of transactions transactions transactions of of of unsecured loans. The parties were not produced before the unsecured loans. The parties were not produced before the unsecured loans. The parties were not produced before the AO. AO. AO. However, However, However, the the the appellant appellant appellant had had had submitted submitted submitted necessary necessary necessary documentary documentary documentary evidence evidence evidence in in in support support support of of of identity identity identity and and and Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 58 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors creditworthiness creditworthiness creditworthiness of of of lenders lenders lenders and and and genuineness genuineness genuineness of of of the the the transactions. Instead of issuing summons us. 131 or notice ctions. Instead of issuing summons us. 131 or notice ctions. Instead of issuing summons us. 131 or notice us. 133(6). the AO asked the assessee to produce those us. 133(6). the AO asked the assessee to produce those us. 133(6). the AO asked the assessee to produce those parties. The assessee has no power to force the parties to parties. The assessee has no power to force the parties to parties. The assessee has no power to force the parties to appear before the AO. Further, mere non appear before the AO. Further, mere non-attendance of lender attendance of lender parties before the AO could parties before the AO could not be a ground to make addition not be a ground to make addition us. 68 of the Act. In number of the judgments the courts have held that merely In number of the judgments the courts have held that merely In number of the judgments the courts have held that merely because summons issued to some of creditors could not be served or because summons issued to some of creditors could not be served or because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground they failed to appear before Assessing Officer, could not be ground they failed to appear before Assessing Officer, could not be ground to treat those credits as non those credits as non-genuine. In the case of Commissioner of Income Commissioner of Income-taxv.Orissa Corpn, (P.) taxv.Orissa Corpn, (P.) Ltd.[1986] 159 ITR 78 Ltd.[1986] 159 ITR 78 (SC), the Hon'ble Supreme Court of India has held as under: (SC), the Hon'ble Supreme Court of India has held as under: In this case the assessee had given the names and addresses of the In this case the assessee had given the names and addresses of the In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the creditors. It was in the knowledge of the revenue that the creditors. It was in the knowledge of the revenue that the said creditors were the income said creditors were the income-lax assessees. Their index number lax assessees. Their index number was in the file of the revenue. was in the file of the revenue.The revenue, apart from issuing The revenue, apart from issuing notices under section 131 at the instance of the assessee, did notices under section 131 at the instance of the assessee, did notices under section 131 at the instance of the assessee, did not pursue the matter further.The revenue did not examine rsue the matter further.The revenue did not examine rsue the matter further.The revenue did not examine the source of income of the said alleged creditors to find out the source of income of the said alleged creditors to find out the source of income of the said alleged creditors to find out whether they were credit whether they were credit-worthy or were such who could worthy or were such who could advance the alleged loans. There was no effort made to advance the alleged loans. There was no effort made to advance the alleged loans. There was no effort made to pursue the so- -called alleged creditors. editors. In In those those circumstances, the assessee could not do any further circumstances, the assessee could not do any further. In the circumstances, the assessee could not do any further premises, if the Tribunal came to the conclusion that the assessee premises, if the Tribunal came to the conclusion that the assessee premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said had discharged the burden that lay on him, then it could not be said had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable o that such a conclusion was unreasonable or perverse or based on no r perverse or based on no evidence. If the conclusion was based on some evidence on which a evidence. If the conclusion was based on some evidence on which a evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could conclusion could be arrived at, no question of law as such could conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions The High Court was, therefore, right in refusing to refer the questions The High Court was, therefore, right in refusing to refer the questions sought for. The head-note of the judgment of the Hon'ble High Court of Gujaratin note of the judgment of the Hon'ble High Court of Gujaratin note of the judgment of the Hon'ble High Court of Gujaratin the case of Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 59 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Deputy Commissioner of Income Deputy Commissioner of Income-taxv.Rohini Builders [2003] 127 taxv.Rohini Builders [2003] 127 Taxman 523 (Gujarat). Taxman 523 (Gujarat). Section 68 of the Income Section 68 of the Income-tax Act, 1961 - Cash Credits - Assessing Assessing Officer made addition of Rs. 12,8 Officer made addition of Rs. 12,85,000 as unexplained cash credits 5,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties in respect of loans taken by assessee from 21 parties - Assessee Assessee had discharged initial onus by providing identity of all creditors by had discharged initial onus by providing identity of all creditors by had discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers/permanent account giving their complete addresses, GIR numbers/permanent account giving their complete addresses, GIR numbers/permanent account numbers and copies of as numbers and copies of assessment orders wherever readily sessment orders wherever readily available - Assessee had also proved capacity of creditors by Assessee had also proved capacity of creditors by Assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques showing that amounts were received by account payee cheques showing that amounts were received by account payee cheques drawn from bank accounts of creditors drawn from bank accounts of creditors - Repayment of loans and Repayment of loans and interest thereon was also made by acco interest thereon was also made by account payee cheques by unt payee cheques by assessee and tax also had been deducted at source on interest assessee and tax also had been deducted at source on interest assessee and tax also had been deducted at source on interest payments and remitted payments and remitted - Whether assessee was not expected to Whether assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors, prove genuineness of cash deposited in bank accounts of creditors, prove genuineness of cash deposited in bank accounts of creditors, because under law, assessee can be asked to p because under law, assessee can be asked to prove source of rove source of credits in its books of account but not source of source credits in its books of account but not source of source - Held, yes Held, yes - Whether merely because summons issued to some of creditors Whether merely because summons issued to some of creditors Whether merely because summons issued to some of creditors could not be served or they failed to appear before Assessing could not be served or they failed to appear before Assessing could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credi Officer, could not be ground to treat those credits as non ts as non- genuine • Held, yes genuine • Held, yes - Whether considering totality of facts and Whether considering totality of facts and circumstances of case, especially circumstances of case, especially fact that Assessing Officer had fact that Assessing Officer had not disallowed interest claimed/paid in relation to those not disallowed interest claimed/paid in relation to those not disallowed interest claimed/paid in relation to those credits in assessment year under consideration or even in credits in assessment year under consideration or even in credits in assessment year under consideration or even in subsequent assessment years, and tax at source had been subsequent assessment years, and tax at source had been subsequent assessment years, and tax at source had been deducted out of interest paid/credited to creditors, Tribunal deducted out of interest paid/credited to creditors, Tribunal deducted out of interest paid/credited to creditors, Tribunal was justified in deleting addition made was justified in deleting addition made - Held, yes - Whether as Whether as there was no substance in appeal and no substantial question of there was no substance in appeal and no substantial question of there was no substance in appeal and no substantial question of law arose, appeal was liable to be dismissed , appeal was liable to be dismissed - Held, yes" In the case of Deputy Commissioner of Income In the case of Deputy Commissioner of Income-tax, Mumbaiv.Acro tax, Mumbaiv.Acro Exports Trade (P.)Ltd. 20191 111 taxmann.com 51 (Mumbai Exports Trade (P.)Ltd. 20191 111 taxmann.com 51 (Mumbai - Trib.), Exports Trade (P.)Ltd. 20191 111 taxmann.com 51 (Mumbai the ITAT Mumbai has held that where assessee company issued the ITAT Mumbai has held that where assessee company issued the ITAT Mumbai has held that where assessee company issued shares on premium and had filed complete details to prove identity and had filed complete details to prove identity and had filed complete details to prove identity and creditworthiness of parties, and genuineness of transactions, and creditworthiness of parties, and genuineness of transactions, and creditworthiness of parties, and genuineness of transactions, Assessing Officer was unjustified in making additions in respect of Assessing Officer was unjustified in making additions in respect of Assessing Officer was unjustified in making additions in respect of such share capital/premium received by assessee under section 68. such share capital/premium received by assessee under section 68. such share capital/premium received by assessee under section 68. In this case, the ITAT has held as under: case, the ITAT has held as under: The provision of section 68 deals with a cases, where any sum The provision of section 68 deals with a cases, where any sum The provision of section 68 deals with a cases, where any sum found credited in the books of accounts of an assessee, in any found credited in the books of accounts of an assessee, in any found credited in the books of accounts of an assessee, in any Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 60 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors previous year, for which the assessee offered no explanation about previous year, for which the assessee offered no explanation about previous year, for which the assessee offered no explanation about the nature and source, thereo the nature and source, thereof or the explanations offered by the f or the explanations offered by the assessee, in the opinion of the Assessing Officer is not satisfactory, assessee, in the opinion of the Assessing Officer is not satisfactory, assessee, in the opinion of the Assessing Officer is not satisfactory, then sum so found credited may be charged to income tax, as then sum so found credited may be charged to income tax, as then sum so found credited may be charged to income tax, as income of the assessee of that previous year. In order to fix any income of the assessee of that previous year. In order to fix any income of the assessee of that previous year. In order to fix any credit within the ambi credit within the ambit of section68, the Assessing Officer has to t of section68, the Assessing Officer has to examine three ingredients i.e., identity, genuineness of transactions examine three ingredients i.e., identity, genuineness of transactions examine three ingredients i.e., identity, genuineness of transactions and creditworthiness of the parties. In this factual and legal and creditworthiness of the parties. In this factual and legal and creditworthiness of the parties. In this factual and legal background, if you examine, the present case in the light of various background, if you examine, the present case in the light of various background, if you examine, the present case in the light of various evidences filed by the assessee, in order to prove credit found in the filed by the assessee, in order to prove credit found in the filed by the assessee, in order to prove credit found in the form of share capital and share premium, one has to see. whether form of share capital and share premium, one has to see. whether form of share capital and share premium, one has to see. whether the assessee has discharged its initial onus cast upon under section the assessee has discharged its initial onus cast upon under section the assessee has discharged its initial onus cast upon under section 68 or not. In this case, the assessee has filed various deta 68 or not. In this case, the assessee has filed various details. 68 or not. In this case, the assessee has filed various deta including share application form, copy of declaration, board including share application form, copy of declaration, board including share application form, copy of declaration, board resolution, bank statement of investor company, PAN card, resolution, bank statement of investor company, PAN card, resolution, bank statement of investor company, PAN card, acknowledgment of return of income, financial statement of investor acknowledgment of return of income, financial statement of investor acknowledgment of return of income, financial statement of investor company, form no. 2 for allotment of equity shares and bank company, form no. 2 for allotment of equity shares and bank company, form no. 2 for allotment of equity shares and bank statement reflecting, the amount received through banking channels. ement reflecting, the amount received through banking channels. ement reflecting, the amount received through banking channels. Once, the assessee has discharged its initial onus by filing various Once, the assessee has discharged its initial onus by filing various Once, the assessee has discharged its initial onus by filing various details, then the onus shift to the Assessing Officer to carry out details, then the onus shift to the Assessing Officer to carry out details, then the onus shift to the Assessing Officer to carry out further verification, in the light of evidences filed by further verification, in the light of evidences filed by the assessee to the assessee to ascertain true nature of transactions between the parties before, he ascertain true nature of transactions between the parties before, he ascertain true nature of transactions between the parties before, he come to the conclusion that the transactions between the parties are come to the conclusion that the transactions between the parties are come to the conclusion that the transactions between the parties are genuine or not. In this case although, the Assessing Officer has genuine or not. In this case although, the Assessing Officer has genuine or not. In this case although, the Assessing Officer has issued section 133(6) notices to the issued section 133(6) notices to the parties, no further enquiry has parties, no further enquiry has been conducted, including issue of summons under section 131. No been conducted, including issue of summons under section 131. No been conducted, including issue of summons under section 131. No doubt, none of the investors companies have responded to section doubt, none of the investors companies have responded to section doubt, none of the investors companies have responded to section 133(6) notices issued by the Assessing Officer, but fact of the matter 133(6) notices issued by the Assessing Officer, but fact of the matter 133(6) notices issued by the Assessing Officer, but fact of the matter is when, the assessee is when, the assessee has filed complete set of documents, including has filed complete set of documents, including name and address of the parties, it is for the Assessing Officer to name and address of the parties, it is for the Assessing Officer to name and address of the parties, it is for the Assessing Officer to carry out further investigation by exercising all possible options carry out further investigation by exercising all possible options carry out further investigation by exercising all possible options available to him, but non available to him, but non-attendance of parties in response to section attendance of parties in response to section 133(6) cannot be attributed to the assessee, because due to time lag (6) cannot be attributed to the assessee, because due to time lag (6) cannot be attributed to the assessee, because due to time lag certain persons might have left the place and for this no certain persons might have left the place and for this no certain persons might have left the place and for this no responsibility can be fastened upon the assessee. responsibility can be fastened upon the assessee. In this case, the assessee done what best it could do and filed, In this case, the assessee done what best it could do and filed, In this case, the assessee done what best it could do and filed, whatever information available with it, in order to satisfy the ion available with it, in order to satisfy the ion available with it, in order to satisfy the Assessing Officer. In case, the Assessing Officer is not satisfied with Assessing Officer. In case, the Assessing Officer is not satisfied with Assessing Officer. In case, the Assessing Officer is not satisfied with documents furnished by the assessee, then he is free to carry out documents furnished by the assessee, then he is free to carry out documents furnished by the assessee, then he is free to carry out his own investigations by exercising powers conferred under section his own investigations by exercising powers conferred under section his own investigations by exercising powers conferred under section 131 or under section 133(6). or under section 133(6).
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 61 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
The Assessing Officer, except issue of section 133(6) notices nothing The Assessing Officer, except issue of section 133(6) notices nothing The Assessing Officer, except issue of section 133(6) notices nothing has been done to find out, the nature of transactions between the has been done to find out, the nature of transactions between the has been done to find out, the nature of transactions between the parties. Therefore, when, the assessee has filed complete details to parties. Therefore, when, the assessee has filed complete details to parties. Therefore, when, the assessee has filed complete details to prove identity, genuinene prove identity, genuineness of transactions and creditworthiness of ss of transactions and creditworthiness of the parties, then there is no reason for the Assessing Officer to came the parties, then there is no reason for the Assessing Officer to came the parties, then there is no reason for the Assessing Officer to came to the conclusion that share capital and share premium is to the conclusion that share capital and share premium is to the conclusion that share capital and share premium is unexplained only forthe reason that during the survey proceedings, unexplained only forthe reason that during the survey proceedings, unexplained only forthe reason that during the survey proceedings, the director of the company had admitted that those five companies he company had admitted that those five companies he company had admitted that those five companies are shell companies ignoring the fact that such admission has been are shell companies ignoring the fact that such admission has been are shell companies ignoring the fact that such admission has been retracted by filing affidavit along with letter explaining reasons for retracted by filing affidavit along with letter explaining reasons for retracted by filing affidavit along with letter explaining reasons for such admission during survey proceedings. Further, additions made such admission during survey proceedings. Further, additions made such admission during survey proceedings. Further, additions made by the Assessing Officer cannot be sustained even on basis of the Assessing Officer cannot be sustained even on basis of the Assessing Officer cannot be sustained even on basis of statement of VS because the Assessing Officer has relied upon statement of VS because the Assessing Officer has relied upon statement of VS because the Assessing Officer has relied upon statement of VS, the erstwhile director of those five companies to statement of VS, the erstwhile director of those five companies to statement of VS, the erstwhile director of those five companies to make additions towards share capital, but when KK, the present make additions towards share capital, but when KK, the present make additions towards share capital, but when KK, the present director of the assessee ctor of the assessee-company asked for copies of statement of company asked for copies of statement of VS and also opportunity for cross examination of VS, the Assessing VS and also opportunity for cross examination of VS, the Assessing VS and also opportunity for cross examination of VS, the Assessing Officer has denied, the opportunity of cross examination and also Officer has denied, the opportunity of cross examination and also Officer has denied, the opportunity of cross examination and also not furnished copies of statement recorded from VS. It is a s not furnished copies of statement recorded from VS. It is a settled not furnished copies of statement recorded from VS. It is a s position of law that once, any third party information/statements is position of law that once, any third party information/statements is position of law that once, any third party information/statements is relied upon to make additions, it is the obligation of the Assessing relied upon to make additions, it is the obligation of the Assessing relied upon to make additions, it is the obligation of the Assessing Officer to provide copies of such statements/information and also to Officer to provide copies of such statements/information and also to Officer to provide copies of such statements/information and also to provide an opportunity of cross examinatio provide an opportunity of cross examination of the person, who gave n of the person, who gave the statement, when such opportunity has been availed by the the statement, when such opportunity has been availed by the the statement, when such opportunity has been availed by the person against whom, such statements are used. When, third party person against whom, such statements are used. When, third party person against whom, such statements are used. When, third party information is relied upon to draw an adverse inference against the information is relied upon to draw an adverse inference against the information is relied upon to draw an adverse inference against the assessee, the same needs to be provi assessee, the same needs to be provided and also opportunity of ded and also opportunity of cross examination shall be given, if such opportunity is av cross examination shall be given, if such opportunity is availed by ailed by the assessee. (Para 15] the assessee. (Para 15]” (emphasis supplied externally) 10.4 The Ld. CIT(A) further relied on other decisions to substantiate The Ld. CIT(A) further relied on other decisions to substantiate The Ld. CIT(A) further relied on other decisions to substantiate that the assessee discharged that the assessee discharged its onus by bringing all documentary by bringing all documentary evidences on record, hence addition is not justified. In the justified. In the concluding para the Ld. CIT(A) deleted the addition observing as para the Ld. CIT(A) deleted the addition observing as para the Ld. CIT(A) deleted the addition observing as under:
“8.3.14In view of the above facts and discussion made as above 8.3.14In view of the above facts and discussion made as above 8.3.14In view of the above facts and discussion made as above and alsorespectively fo and alsorespectively following decisions of jurisdictional ITAT, llowing decisions of jurisdictional ITAT, Mumbai in the case ofACIT Vs. Dhanpal B. Shah, ITO Vs Bala Mumbai in the case ofACIT Vs. Dhanpal B. Shah, ITO Vs Bala Mumbai in the case ofACIT Vs. Dhanpal B. Shah, ITO Vs Bala
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 62 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Suresh Agarwal and ACIT Vs. Abani Sarbeshwar Das, the addition Suresh Agarwal and ACIT Vs. Abani Sarbeshwar Das, the addition Suresh Agarwal and ACIT Vs. Abani Sarbeshwar Das, the addition us. 68 in respect of unsecured loans taken from 18 parties i.e us. 68 in respect of unsecured loans taken from 18 parties i.e us. 68 in respect of unsecured loans taken from 18 parties i.e Aadishwar Diamonds, Ansh Aadishwar Diamonds, Anshul Gems Pvt Ltd, Antique Exim Pv ms Pvt Ltd, Antique Exim Pvt.Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Divyanshi Gems Pvt. Ltd, Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Divyanshi Gems Pvt. Ltd, Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Divyanshi Gems Pvt. Ltd, Dojahan Trading Pvt. Ltd, Ensure Insure Brokers Pvt. Ltd, HPL Multi Dojahan Trading Pvt. Ltd, Ensure Insure Brokers Pvt. Ltd, HPL Multi Dojahan Trading Pvt. Ltd, Ensure Insure Brokers Pvt. Ltd, HPL Multi Trade Pvt. Ltd, Manhar Trade Pvt. Ltd, Manhar Impex Pvt. Ltd, Param Gems Pvt. Ltd, Saffron Impex Pvt. Ltd, Param Gems Pvt. Ltd, Saffron Gems Pvt. Ltd, Samkit Diamond Mfg Co. Pvt Ltd, Takshla Exim Pvt. Gems Pvt. Ltd, Samkit Diamond Mfg Co. Pvt Ltd, Takshla Exim Pvt. Gems Pvt. Ltd, Samkit Diamond Mfg Co. Pvt Ltd, Takshla Exim Pvt. Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd, cannot be Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd, cannot be Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd, cannot be sustained. 8.3.15During theA.Y. 2013 8.3.15During theA.Y. 2013-14, the AO has made addition of 14, the AO has made addition of unsecuredloan of Rs.1.44.38.191/ oan of Rs.1.44.38.191/- from Aadishwar Diamonds, Aditi from Aadishwar Diamonds, Aditi Gems Pvt. Ltd. Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Gems Pvt. Ltd. Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Gems Pvt. Ltd. Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt.Ltd, Burlington Mercantiles Diamonds Pvt. Ltd, Beetal Trading Pvt.Ltd, Burlington Mercantiles Diamonds Pvt. Ltd, Beetal Trading Pvt.Ltd, Burlington Mercantiles Pvt. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Pvt. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Pvt. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Ensure Insure Brokers Pvt. Ltd, Karnavat Impex Pvt. Ltd, Kriya , Ensure Insure Brokers Pvt. Ltd, Karnavat Impex Pvt. Ltd, Kriya , Ensure Insure Brokers Pvt. Ltd, Karnavat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Saffron Gems Pvt. Ltd, Surya Diamond Pvt. Ltd, Impex Pvt. Ltd, Saffron Gems Pvt. Ltd, Surya Diamond Pvt. Ltd, Impex Pvt. Ltd, Saffron Gems Pvt. Ltd, Surya Diamond Pvt. Ltd, Badam Trading, Lalita Gems Pvt. Ltd, Moxa Diamond Pvt. Ltd and Badam Trading, Lalita Gems Pvt. Ltd, Moxa Diamond Pvt. Ltd and Badam Trading, Lalita Gems Pvt. Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd. Shikha Diamond Pvt. Ltd. However, from verification of records, i However, from verification of records, it is noticed that during A.Y. t is noticed that during A.Y. 2013-14, theappellant has not received fresh loans from Aadishwar 14, theappellant has not received fresh loans from Aadishwar 14, theappellant has not received fresh loans from Aadishwar Diamonds, Aditi Gems Pvt.Ltd, Antique Exim Pvt. Ltd, Arjay Gems Diamonds, Aditi Gems Pvt.Ltd, Antique Exim Pvt. Ltd, Arjay Gems Diamonds, Aditi Gems Pvt.Ltd, Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Burlington Mercantiles Put. Ltd., Burlington Mercantiles Put. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Karnavat Impex Pvt Ltd, Kriya Impex Pt Diamonds Exim Pvt. Ltd, Karnavat Impex Pvt Ltd, Kriya Impex Pt Diamonds Exim Pvt. Ltd, Karnavat Impex Pvt Ltd, Kriya Impex Pt Ltd, Saffron Gems Put. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Ltd, Saffron Gems Put. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Ltd, Saffron Gems Put. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita Gems Put. Ltd, Moxa Diamond Pvt. Ltd, Shikha Pvt. Ltd, Lalita Gems Put. Ltd, Moxa Diamond Pvt. Ltd, Shikha Pvt. Ltd, Lalita Gems Put. Ltd, Moxa Diamond Pvt. Ltd, Shikha Diamond Pvt. Ltd. Therefore, a Diamond Pvt. Ltd. Therefore, addition of unsecured loan from these ddition of unsecured loan from these party is not justified and it is deleted. party is not justified and it is deleted. The appellant has received unsecured loan of Rs.8,00,000/ The appellant has received unsecured loan of Rs.8,00,000/- from The appellant has received unsecured loan of Rs.8,00,000/ EnsureInsure Brokers Pvt. Ltd. As discussed in para 8.3.3 to 8.3.12 EnsureInsure Brokers Pvt. Ltd. As discussed in para 8.3.3 to 8.3.12 EnsureInsure Brokers Pvt. Ltd. As discussed in para 8.3.3 to 8.3.12 of this appellate order, the addition made by of this appellate order, the addition made by A u/s.68 in respect of A u/s.68 in respect of unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also not sustainable. Therefore, addition of Rs.1,44,38,191/ Therefore, addition of Rs.1,44,38,191/- made by AO u/s.68 in made by AO u/s.68 in respect of unsecured loans is deleted. respect of unsecured loans is deleted.”
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 63 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.5 Regarding the issue of no addition could have been made Regarding the issue of no addition could have been made Regarding the issue of no addition could have been made without aid of the incriminating material in completed without aid of the incriminating material in completed assessments, assessments, the Ld. CIT(A) held in favor favor of the assessee observing as under: of the assessee observing as under:
“8.3.9From the assessment order, it is seen that there is no 8.3.9From the assessment order, it is seen that there is no 8.3.9From the assessment order, it is seen that there is no reference in the assessment order about any incriminating document nce in the assessment order about any incriminating document nce in the assessment order about any incriminating document found/seized during the course of search proceedings relevant to the found/seized during the course of search proceedings relevant to the found/seized during the course of search proceedings relevant to the and unsecured loans. The appellant has also provided a copy of and unsecured loans. The appellant has also provided a copy of and unsecured loans. The appellant has also provided a copy of statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement was recorded us 132(4) on 08.11.2019 during the search atement was recorded us 132(4) on 08.11.2019 during the search atement was recorded us 132(4) on 08.11.2019 during the search proceedings.Even in their statement recorded us. 132(4), there is no proceedings.Even in their statement recorded us. 132(4), there is no proceedings.Even in their statement recorded us. 132(4), there is no mention about any incriminating evidences/material found or seized mention about any incriminating evidences/material found or seized mention about any incriminating evidences/material found or seized related to unsecured loans. Thus, it can be safely inferr related to unsecured loans. Thus, it can be safely inferred that related to unsecured loans. Thus, it can be safely inferr during during during the the the course course course of of of search search search proceedings, proceedings, proceedings, no no no incriminating incriminating incriminating material/evidences in relation to the unsecured loans were material/evidences in relation to the unsecured loans were material/evidences in relation to the unsecured loans were found/seized. It is a well settled law that in the unabated assessment order, no It is a well settled law that in the unabated assessment order, no It is a well settled law that in the unabated assessment order, no addition u/s 153A can be made unless there is some addition u/s 153A can be made unless there is some incriminating incriminating material with respect to the The Hon'ble ITAT, Special Bench, material with respect to the The Hon'ble ITAT, Special Bench, material with respect to the The Hon'ble ITAT, Special Bench, Mumbai has in the case of All Cargo Global Logistics Ltd. v. DCIT Mumbai has in the case of All Cargo Global Logistics Ltd. v. DCIT Mumbai has in the case of All Cargo Global Logistics Ltd. v. DCIT 137 ITD 287 (Mum) (SB) held that in respect of non 137 ITD 287 (Mum) (SB) held that in respect of non-abated 137 ITD 287 (Mum) (SB) held that in respect of non assessments, the assessment will be made on the basis o assessments, the assessment will be made on the basis of books of f books of account or other documents not produced in the course of original account or other documents not produced in the course of original account or other documents not produced in the course of original assessment but found in the course of search and undisclosed assessment but found in the course of search and undisclosed assessment but found in the course of search and undisclosed income or undisclosed property discovered in the course of search. It income or undisclosed property discovered in the course of search. It income or undisclosed property discovered in the course of search. It has thus been held that in case of completed ass has thus been held that in case of completed assessments, the essments, the assessment u/s.153A has to be made on the basis of incriminating assessment u/s.153A has to be made on the basis of incriminating assessment u/s.153A has to be made on the basis of incriminating material material material only, only, only, i.e., i.e., i.e., undisclosed undisclosed undisclosed income/property/books income/property/books income/property/books of of of accounts/documents. In other words, where nothing incriminating is accounts/documents. In other words, where nothing incriminating is accounts/documents. In other words, where nothing incriminating is found in the course of search relating to any of the found in the course of search relating to any of the assessment assessment years covered u/s.153A of the Act, the assessment for such A.Ys. years covered u/s.153A of the Act, the assessment for such A.Ys. years covered u/s.153A of the Act, the assessment for such A.Ys. cannot be disturbed. It has also been held that in the absence of any cannot be disturbed. It has also been held that in the absence of any cannot be disturbed. It has also been held that in the absence of any incriminating materials, the completed assessment has only to be incriminating materials, the completed assessment has only to be incriminating materials, the completed assessment has only to be reiterated. Similar view has been taken in t Similar view has been taken in the case of Murli Agro Products Ltd. he case of Murli Agro Products Ltd. [2014] 49taxmann.com 172 (Bom). [2014] 49taxmann.com 172 (Bom). The Hon'ble jurisdictional High Court in the case of Commissioner of The Hon'ble jurisdictional High Court in the case of Commissioner of The Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax-ll, Thane v.Continental Warehousing Corporation (Nhava ll, Thane v.Continental Warehousing Corporation (Nhava ll, Thane v.Continental Warehousing Corporation (Nhava
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 64 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Sheva) Ltd.[2015] 58 taxmann.com 78 (Bombay) has held Sheva) Ltd.[2015] 58 taxmann.com 78 (Bombay) has held that no addition can be made in respect of assessments which have become addition can be made in respect of assessments which have become addition can be made in respect of assessments which have become final, if no incriminating material is found during the search. It has final, if no incriminating material is found during the search. It has final, if no incriminating material is found during the search. It has been held that once the original assessment has attained finality, been held that once the original assessment has attained finality, been held that once the original assessment has attained finality, then the Assessing Officer then the Assessing Officer while passing the while passing the independent independent assessment order us.153A r.w.s. 143(3) cannot disturb the assessment order us.153A r.w.s. 143(3) cannot disturb the assessment order us.153A r.w.s. 143(3) cannot disturb the assessment/reassessment order which has attained finality, unless assessment/reassessment order which has attained finality, unless assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s.153A the materials gathered in the course of the proceedings u/s.153A the materials gathered in the course of the proceedings u/s.153A establish establish establish that that that the the the reliefs reliefs reliefs granted granted granted under under under the the the finalized finalized finalized assessment/reassessment were contrary to the facts unearthed assessment/reassessment were contrary to the facts unearthed assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. during the course of 153A proceedings.” 10.6 Before us, the Ld. Ld. Counsel of the assessee has relied on the Counsel of the assessee has relied on the order of Ld. CIT(A), whereas whereas the ld. DR has relied on the order of the the ld. DR has relied on the order of the Assessing Officer. The DR The DR submitted that the Ld CIT(A) is wrong in submitted that the Ld CIT(A) is wrong in concluding that assessing officer in remand proceeding has concluding that assessing officer in remand proceeding has concluding that assessing officer in remand proceeding has conceded the addition in respect of unsecured loan. He also conceded the addition in respect of unsecured loan. He also conceded the addition in respect of unsecured loan. He also submitted that unsecured loan creditors were found in existence submitted that unsecured loan creditors were found in existence submitted that unsecured loan creditors were found in existence during the course of se search action and the director of the assessee action and the director of the assessee company was duly confronted all the facts of company was duly confronted all the facts of non-existence existence of those parties,despite, the assessee failed to produce those before the the assessee failed to produce those before the the assessee failed to produce those before the assessing officer. The confirmation letters, ITR etc had been filed on assessing officer. The confirmation letters, ITR etc had been filed on assessing officer. The confirmation letters, ITR etc had been filed on behalf of the unsecured of the unsecured loan parties before the Assessing Officer before the Assessing Officer mostly between 21/09/2021 to 23/09/2021, which mostly between 21/09/2021 to 23/09/2021, which can’t be a coincidence but can be possible only if filed by one person on their coincidence but can be possible only if filed by one person on their coincidence but can be possible only if filed by one person on their behalf and which could be behalf and which could be none other than the assessee, so than the assessee, so credential of of of those documents those documents those documents was was was required required required to to to confirmed confirmed confirmed independently by way of producing them and then confirming their independently by way of producing them and then confirming their independently by way of producing them and then confirming their creditworthiness. The Ld CIT(A) wrongly admitted the plea of the creditworthiness. The Ld CIT(A) wrongly admitted the plea of the creditworthiness. The Ld CIT(A) wrongly admitted the plea of the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 65 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors assessee that it had been a longtime since the loans taken and assessee that it had been a longtime since the loans taken and assessee that it had been a longtime since the loans taken and same were returned subsequently, but the Ld CIT(A) has subsequently, but the Ld CIT(A) has conveniently ignored that the assessee had shown to have paid conveniently ignored that the assessee had shown to have paid conveniently ignored that the assessee had shown to have paid interest to them regularly, and thus interest to them regularly, and thus can’t say that those parties say that those parties could not be produced before the Assessing Officer. be produced before the Assessing Officer.
10.7We have heard rival submission of the parties on the issue in 10.7We have heard rival submission of the parties on the issue in 10.7We have heard rival submission of the parties on the issue in dispute. As far as the addition of unsecured loan creditor As far as the addition of unsecured loan creditors is As far as the addition of unsecured loan creditor concerned, it has been assailed on legality of addition as well as on it has been assailed on legality of addition as well as on it has been assailed on legality of addition as well as on merit. Firstly, we examine whether the addition could hav merit. Firstly, we examine whether the addition could have been merit. Firstly, we examine whether the addition could hav possible to make addition legally. to make addition legally. Secondly, we have to examine the , we have to examine the addition on merit.
10.8 We have already held that AY 2020 We have already held that AY 2020-21 and AY 2019 21 and AY 2019-20, which were pending as on the date of were pending as on the date of search, got abated as on the date of abated as on the date of search. It has been held by t search. It has been held by the Hon’ble Bomaby High Court he Hon’ble Bomaby High Court (jurisdictional High Court) Court) in the case of Continental corporation in the case of Continental corporation (supra) that in assessments other than abated assessments, no (supra) that in assessments other than abated assessments, no (supra) that in assessments other than abated assessments, no addition could be made without the aid of incriminating material. addition could be made without the aid of incriminating material. addition could be made without the aid of incriminating material. Thus, except AY 2020 Thus, except AY 2020-21 and 2019-20, we have to examine the we have to examine the existence of incriminating material qua the addition of unsecured existence of incriminating material qua the addition of unsecured existence of incriminating material qua the addition of unsecured loan creditors u/s 68 of the Act. u/s 68 of the Act.
10.9 We find that as regards to the issue of unsecured loan We find that as regards to the issue of unsecured loan We find that as regards to the issue of unsecured loan creditors, during the course of search, the inspectors of the creditors, during the course of search, the inspectors of the creditors, during the course of search, the inspectors of the department visited the parties but hardly any of the concerned tment visited the parties but hardly any of the concerned tment visited the parties but hardly any of the concerned
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 66 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors unsecured loan creditor was found in existence. The Inspectors unsecured loan creditor was found in existence. The Inspectors unsecured loan creditor was found in existence. The Inspectors collected photographs of their premises, made collected photographs of their premises, made enquiries enquiries from neighborhood etc and all those evidences were duly confronted to neighborhood etc and all those evidences were duly confronted to neighborhood etc and all those evidences were duly confronted to the director of the assessee company. These photographs and other tor of the assessee company. These photographs and other tor of the assessee company. These photographs and other material suggesting non material suggesting non-existence of the parties and consequent and consequent falsity of books of account, when account, when seen in totality of the facts, seen in totality of the facts, definitely constitute the incriminating material qua the addition of definitely constitute the incriminating material qua the addition of definitely constitute the incriminating material qua the addition of unsecured loan creditor. Accordingly, we set aside the finding of the nsecured loan creditor. Accordingly, we set aside the finding of the nsecured loan creditor. Accordingly, we set aside the finding of the Ld CIT(A) on the issue in dispute. Ld CIT(A) on the issue in dispute.
10.10 As far as issue on the merit is As far as issue on the merit is concerned, we find we find that addition has been made by the Assessing Officer invoking has been made by the Assessing Officer invoking section has been made by the Assessing Officer invoking 68 of the Act. For discha 68 of the Act. For discharging onus of section 68 of the rging onus of section 68 of the Act, the assessee is required to establish required to establish ‘identity’ and ‘creditworthiness creditworthiness’ of the unsecured loan creditor and the unsecured loan creditor and ‘genuineness of the transaction genuineness of the transaction’ of loan. In the case the Ld CIT(A) has loan. In the case the Ld CIT(A) has firstly, deleted the addition in deleted the addition in respect of 9 parties, holding that loan transactions alleged by the respect of 9 parties, holding that loan transactions alleged by the respect of 9 parties, holding that loan transactions alleged by the assessing officer were not appearing in the books of accounts of the assessing officer were not appearing in the books of accounts of the assessing officer were not appearing in the books of accounts of the assessee. Secondly, addition in respect of 18 parties has been , addition in respect of 18 parties has been , addition in respect of 18 parties has been deleted on the reasoning reasoning that the assessee has discharged its onus he assessee has discharged its onus u/s 68 of the Act.
10.11 Firstly, we take up the issue of we take up the issue of addition in respect of 11 addition in respect of 11 parties, which the Ld. CIT(A) Ld. CIT(A) has deleted. The Ld CIT(A) noted that has deleted. The Ld CIT(A) noted that in entries of ‘Piyush Gems P Ltd Piyush Gems P Ltd’ and ‘Sanmati Gems Pvt Ltd Sanmati Gems Pvt Ltd’ , the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 67 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Assessing Officer himself has recorded that no loan was received fficer himself has recorded that no loan was received fficer himself has recorded that no loan was received from those parties during the period from AY 2013 from those parties during the period from AY 2013-14 to AY 2020 14 to AY 2020- 21. On verification of table of addition of unsecured loan creditor by 21. On verification of table of addition of unsecured loan creditor by 21. On verification of table of addition of unsecured loan creditor by the Assessing Officer, we concur with the Assessing Officer, we concur with ld. CIT(A). but re regarding the remaining 9 parties, we find that remaining 9 parties, we find that the Assessing officer has made the Assessing officer has made addition on the basis of the unsecured loan entries found in the addition on the basis of the unsecured loan entries found in the addition on the basis of the unsecured loan entries found in the books of the assessee during the course of search action, and books of the assessee during the course of search action, and books of the assessee during the course of search action, and credits in respect of those those parties were duly appearing in the ing in the ledger accounts of unsecured of unsecured loan creditor confronted to the director of confronted to the director of the assessee. During assessment proceeding also no such facts was the assessee. During assessment proceeding also no such facts was the assessee. During assessment proceeding also no such facts was brought to the knowledge of the Assessing Officer brought to the knowledge of the Assessing Officer that no credit that no credit transaction was with those 9 parties duri transaction was with those 9 parties during the period from AY ng the period from AY 2013-14 to AY 2020-21. The CIT(A) accepted the contention of the 21. The CIT(A) accepted the contention of the 21. The CIT(A) accepted the contention of the assessee without providing opportunity assessee without providing opportunity to the assessing Officer to the assessing Officer on the evidences which were produced for the first time before him, the evidences which were produced for the first time before him, the evidences which were produced for the first time before him, which is evident from the following f which is evident from the following finding of the ld. CIT(A) : CIT(A) :
“From the above table, it is noticed that in case of Piyush Gems Pvt. From the above table, it is noticed that in case of Piyush Gems Pvt. From the above table, it is noticed that in case of Piyush Gems Pvt. Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the appellant and it is also evident from the details provided in the appellant and it is also evident from the details provided in the appellant and it is also evident from the details provided in the assessment order. From the above table, it is observed that in the case of Aditi Gems Pvt. From the above table, it is observed that in the case of Aditi Gems Pvt. From the above table, it is observed that in the case of Aditi Gems Pvt. Ltd, Badam Trading Pvt. Ltd, Burlington Mercantiles Pvt. Ltd, Ltd, Badam Trading Pvt. Ltd, Burlington Mercantiles Pvt. Ltd, Ltd, Badam Trading Pvt. Ltd, Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt, Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex, Chaitanya Gems Pvt, Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex, Chaitanya Gems Pvt, Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex, Lalita Gems Pvt. Ltd, Snowdrop Vincom Pvt. Ltd, Surya Diam Lalita Gems Pvt. Ltd, Snowdrop Vincom Pvt. Ltd, Surya Diamond Pvt. Lalita Gems Pvt. Ltd, Snowdrop Vincom Pvt. Ltd, Surya Diam Ltd, no unsecured loans were received during F.Y. 2012 Ltd, no unsecured loans were received during F.Y. 2012-13 to F.Y. 13 to F.Y. 2017-18 by the appellant. However, the AO has made addition in 18 by the appellant. However, the AO has made addition in 18 by the appellant. However, the AO has made addition in respect of these parties as bogus unsecured loans u/s.68 of the Act. respect of these parties as bogus unsecured loans u/s.68 of the Act. respect of these parties as bogus unsecured loans u/s.68 of the Act.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 68 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
The addition made by AO in respect of those 09 pa The addition made by AO in respect of those 09 parties are The addition made by AO in respect of those 09 pa summarized as under: summarized as under:
N Name of FY 2012-13 FY FY 2014-15 FY 2015- FY FY FY o the party 2013- 16 2016- 2016 2017 . 14 17 17 -18 1 Aditi Gems 2,19,000 2,19,00 1,55,400 Pvt. Ltd. 0 2 Burlingtone 8,21,250 4,80,000 Mercantiles Pvt. Ltd 3 Chaitanya 8,32,200 Gems Pvt. Ltd. 4 Karnawat 2,19,000 Impex Pvt. Ltd. 5 Kriya 8,32,200 Impex Pvt. Ltd. 6 Surya 11,40,750 2,27,460 Diamond Pvt. Ltd. 7 Badam 10,90,890 3,01,050 Trading Pvt. Ltd. 8 Lalita 3,28,500 2,27,700 Gems Pvt. Ltd. 9 Snowdrop 200,00,00 21,96,0 Gems 0 00
It is not a case of the AO that the appellant had received unsecured It is not a case of the AO that the appellant had received unsecured It is not a case of the AO that the appellant had received unsecured loans from such parties and such loans were not recorded in the loans from such parties and such loans were not recorded in the loans from such parties and such loans were not recorded in the books of accounts of the appellant. In fact, the AO has made addition books of accounts of the appellant. In fact, the AO has made addition books of accounts of the appellant. In fact, the AO has made addition of unsecured loans as these loans were received and reflected in the loans as these loans were received and reflected in the loans as these loans were received and reflected in the book of account of the appellant but such unsecured loans were not book of account of the appellant but such unsecured loans were not book of account of the appellant but such unsecured loans were not genuine and bogus. Also there is no mention in the assessment order genuine and bogus. Also there is no mention in the assessment order genuine and bogus. Also there is no mention in the assessment order that there was incriminating material found during the search and that there was incriminating material found during the search and it that there was incriminating material found during the search and reflected certain unsecured loans received by the appellant and they reflected certain unsecured loans received by the appellant and they reflected certain unsecured loans received by the appellant and they were not reflected in the books of accounts. were not reflected in the books of accounts.
Thus, the addition u/s 68 made by AO in respect of unsecured loans Thus, the addition u/s 68 made by AO in respect of unsecured loans Thus, the addition u/s 68 made by AO in respect of unsecured loans received from above mentioned 09 parties is without any basis and received from above mentioned 09 parties is without any basis and received from above mentioned 09 parties is without any basis and factually wrong addition. Therefore, addition of unsecured made ally wrong addition. Therefore, addition of unsecured made ally wrong addition. Therefore, addition of unsecured made u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Di Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Diamond Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Di
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 69 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Gems is deleted.” 10.12 This action of Ld CIT(A) This action of Ld CIT(A) is in violation of principles of is in violation of principles of natural justice and rule 46A of income and rule 46A of income-tax rules, 1962. Thus, we tax rules, 1962. Thus, we feel appropriate to restore this issue to the file of the Ld Assessing feel appropriate to restore this issue to the file of the Ld Assessing feel appropriate to restore this issue to the file of the Ld Assessing Officer for verification of the claim of the assessee Officer for verification of the claim of the assessee with, with, balance sheet of the assessee and respective parties for the period from AY sheet of the assessee and respective parties for the period from AY sheet of the assessee and respective parties for the period from AY 2013-14 to AY 2020-21 and 21 and bank statements of the assessee and bank statements of the assessee and respective parties to substantiate that no such loan transaction respective parties to substantiate that no such loan transaction respective parties to substantiate that no such loan transaction were recorded on the books of account of the assessee. were recorded on the books of account of the assessee. The addition The addition u/s 68 for interest amount amount in respect those 11 parties is al se 11 parties is also restored for deciding afresh after due verification of loan transaction restored for deciding afresh after due verification of loan transaction restored for deciding afresh after due verification of loan transaction during the period from AY 2013 during the period from AY 2013-14 to AY 2020-21.
10.13 Now, we take up the addition in respect of 18 unsecured Now, we take up the addition in respect of 18 unsecured Now, we take up the addition in respect of 18 unsecured loan creditors, which has been deleted by the Ld CIT(A). , which has been deleted by the Ld CIT(A). The Ld , which has been deleted by the Ld CIT(A). CIT(A) has relied,firstly firstly, that no cross examination of sh Rajendra , that no cross examination of sh Rajendra Jain and Deepak Jain, whose statement were relied upon by the Jain and Deepak Jain, whose statement were relied upon by the Jain and Deepak Jain, whose statement were relied upon by the Assessing Officer , was not provided. The relevant finding of the Ld Officer , was not provided. The relevant finding of the Ld Officer , was not provided. The relevant finding of the Ld CIT(A) is reproduced as under: CIT(A) is reproduced as under:
“8.3.8 During the appellate pro 8.3.8 During the appellate proceedings, the appellant has ceedings, the appellant has submitted the copies of notices u/s 142(1) and showcause notice submitted the copies of notices u/s 142(1) and showcause notice submitted the copies of notices u/s 142(1) and showcause notice dated 15.09.2021 issued by the AO. From the perusal of notices dated 15.09.2021 issued by the AO. From the perusal of notices dated 15.09.2021 issued by the AO. From the perusal of notices u/s 142(1), it is seen that the AO had raised query about the u/s 142(1), it is seen that the AO had raised query about the u/s 142(1), it is seen that the AO had raised query about the unsecured loans. In response to that, t unsecured loans. In response to that, the appellant had provided he appellant had provided necessary details with respect to unsecured loans on 21.07 2021 necessary details with respect to unsecured loans on 21.07 2021 necessary details with respect to unsecured loans on 21.07 2021 and subsequently on perusal of showcause notice dated and subsequently on perusal of showcause notice dated and subsequently on perusal of showcause notice dated 15.09.2021, it is seen that the AO has mentioned about the name 15.09.2021, it is seen that the AO has mentioned about the name 15.09.2021, it is seen that the AO has mentioned about the name
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 70 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors and amount of 29 parties from whom the appellant and amount of 29 parties from whom the appellant had taken had taken unsecured loans. The AO had asked the appellant to produce those unsecured loans. The AO had asked the appellant to produce those unsecured loans. The AO had asked the appellant to produce those parties before him for verification. From the notices u/s 142(1) and parties before him for verification. From the notices u/s 142(1) and parties before him for verification. From the notices u/s 142(1) and the show cause notice issued by the AO, it is seen that the AO has the show cause notice issued by the AO, it is seen that the AO has the show cause notice issued by the AO, it is seen that the AO has not provided to the appellant the copies of not provided to the appellant the copies of statements of Shri statements of Shri Rajendra Jain and Shri Deepak Jain recorded during the search Rajendra Jain and Shri Deepak Jain recorded during the search Rajendra Jain and Shri Deepak Jain recorded during the search proceedings. Further, the AO has relied upon the profiling of 29 proceedings. Further, the AO has relied upon the profiling of 29 proceedings. Further, the AO has relied upon the profiling of 29 parties and the details gathered by the investigation wing and the parties and the details gathered by the investigation wing and the parties and the details gathered by the investigation wing and the outcome of the enquiry done by the investig outcome of the enquiry done by the investigation wing. However, ation wing. However, the same was not provided by the AO to the appellant to rebut the the same was not provided by the AO to the appellant to rebut the the same was not provided by the AO to the appellant to rebut the finding of the investigation wing and submit the necessary finding of the investigation wing and submit the necessary finding of the investigation wing and submit the necessary evidences necessary to support the case of the appellant. evidences necessary to support the case of the appellant. During the appellate proceedings, the appellant has During the appellate proceedings, the appellant has submitted that submitted that the appellant was not provided the copies of the statements of Shri the appellant was not provided the copies of the statements of Shri the appellant was not provided the copies of the statements of Shri Rajendra Jain andShn Deepak Jain which have been relied upon Rajendra Jain andShn Deepak Jain which have been relied upon Rajendra Jain andShn Deepak Jain which have been relied upon by the AO to make the addition in respect of unsecured loans. It is by the AO to make the addition in respect of unsecured loans. It is by the AO to make the addition in respect of unsecured loans. It is a fact that the appellant was not made aware a fact that the appellant was not made aware of the material which of the material which was being used against the appellant by the AO in the assessment was being used against the appellant by the AO in the assessment was being used against the appellant by the AO in the assessment order and the same material was gathered by the AO behind the order and the same material was gathered by the AO behind the order and the same material was gathered by the AO behind the back of the appellant It is a settled principle of law that no addition back of the appellant It is a settled principle of law that no addition back of the appellant It is a settled principle of law that no addition can be made by the AO without prov can be made by the AO without providing and confronting the iding and confronting the material gathered by the AO behind the back of the assessee In the material gathered by the AO behind the back of the assessee In the material gathered by the AO behind the back of the assessee In the case of the appellant also, the AO has relied upon the statements of case of the appellant also, the AO has relied upon the statements of case of the appellant also, the AO has relied upon the statements of Shri Rajendra Jain and Shri Deepak Jain and also the report of the Shri Rajendra Jain and Shri Deepak Jain and also the report of the Shri Rajendra Jain and Shri Deepak Jain and also the report of the investigation wing The appe investigation wing The appellant was not provided with the llant was not provided with the relevant material which has been used by the AO in the relevant material which has been used by the AO in the relevant material which has been used by the AO in the assessment order for making addition in respect of unsecured assessment order for making addition in respect of unsecured assessment order for making addition in respect of unsecured loans. Thus, there has been clear violation of principal of natural loans. Thus, there has been clear violation of principal of natural loans. Thus, there has been clear violation of principal of natural justice Had the AO provided the copies o justice Had the AO provided the copies of statements of Rajendra f statements of Rajendra Jain and Deepak Jain and also the evidences gathered by the Jain and Deepak Jain and also the evidences gathered by the Jain and Deepak Jain and also the evidences gathered by the investigation wing to the appellant, the appellant would had investigation wing to the appellant, the appellant would had investigation wing to the appellant, the appellant would had certainly certainly certainly provided provided provided to to to the the the AO AO AO all all all the the the necessary necessary necessary documents/evidences to rebut the statements or the evidences documents/evidences to rebut the statements or the evidences documents/evidences to rebut the statements or the evidences used against it. The AO has failed to provide the material gathered ed against it. The AO has failed to provide the material gathered ed against it. The AO has failed to provide the material gathered by him to the appellant and also has not provided the opportunity by him to the appellant and also has not provided the opportunity by him to the appellant and also has not provided the opportunity to rebut and cross examine the persons whose statements have to rebut and cross examine the persons whose statements have to rebut and cross examine the persons whose statements have been heavily relied upon by the AO while making addition in been heavily relied upon by the AO while making addition in been heavily relied upon by the AO while making addition in respect of unsecured loans In this regard, the following case laws pect of unsecured loans In this regard, the following case laws pect of unsecured loans In this regard, the following case laws are relevant
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 71 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
In the case of Dhakeswari Cotton Mills Ltd v CIT [1954] 26 ITR Dhakeswari Cotton Mills Ltd v CIT [1954] 26 ITR Dhakeswari Cotton Mills Ltd v CIT [1954] 26 ITR 775(SC), theHon'ble Supreme Court of India has held as under , theHon'ble Supreme Court of India has held as under: , theHon'ble Supreme Court of India has held as under “….As regards the second contention although ITO is no As regards the second contention although ITO is not As regards the second contention although ITO is no fettered by technical rules of evidence and pleadings, and fettered by technical rules of evidence and pleadings, and fettered by technical rules of evidence and pleadings, and that he is entitled to act on matenal which may not be that he is entitled to act on matenal which may not be that he is entitled to act on matenal which may not be accepted as evidence in a court of law but there the accepted as evidence in a court of law but there the accepted as evidence in a court of law but there the agreement ends, because it is equally clear that in making agreement ends, because it is equally clear that in making agreement ends, because it is equally clear that in making the assessment under section the assessment under section 23(3) he is not entitled to make 23(3) he is not entitled to make a pure guess and make an assessment without reference to a pure guess and make an assessment without reference to a pure guess and make an assessment without reference to any evidence or any material at all and there must be any evidence or any material at all and there must be any evidence or any material at all and there must be something more than bare suspicion to support the something more than bare suspicion to support the something more than bare suspicion to support the assessment under section 23(3) The rule of law on this assessment under section 23(3) The rule of law on this assessment under section 23(3) The rule of law on this subject has been fairly and rightly stated by the Lahore High t has been fairly and rightly stated by the Lahore High t has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v CIT [1944] 12 Court in the case of Seth Gurmukh Singh v CIT [1944] 12 Court in the case of Seth Gurmukh Singh v CIT [1944] 12 393. In the instant case the Tribunal violated certain 393. In the instant case the Tribunal violated certain 393. In the instant case the Tribunal violated certain fundamental rules of justice in reaching its conclusions fundamental rules of justice in reaching its conclusions fundamental rules of justice in reaching its conclusions Firstly, it did not disclose to Firstly, it did not disclose to the assessee what information the assessee what information had been supplied to it by the departmental representative. had been supplied to it by the departmental representative. had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assessee to rebut Next, it did not give any opportunity to the assessee to rebut Next, it did not give any opportunity to the assessee to rebut the material furnished to it by him and lastly, it declined to the material furnished to it by him and lastly, it declined to the material furnished to it by him and lastly, it declined to take all the material that the assessee take all the material that the assessee wanted to produce in wanted to produce in support of its case. The result was that the assessee had not support of its case. The result was that the assessee had not support of its case. The result was that the assessee had not had a fair hearing The estimate of the gross rate of profit on had a fair hearing The estimate of the gross rate of profit on had a fair hearing The estimate of the gross rate of profit on sales both by the ITO and the Tribunal was based on sales both by the ITO and the Tribunal was based on sales both by the ITO and the Tribunal was based on surmises, suspicions and conjectures. The Tribunal took fr surmises, suspicions and conjectures. The Tribunal took from surmises, suspicions and conjectures. The Tribunal took fr the representative of the department a statement of gross the representative of the department a statement of gross the representative of the department a statement of gross profit rates of other cotton mills but did not show that profit rates of other cotton mills but did not show that profit rates of other cotton mills but did not show that statement to the assessee did not givehim a opportunity to statement to the assessee did not givehim a opportunity to statement to the assessee did not givehim a opportunity to show that statement had no relevancy whatsoever to the show that statement had no relevancy whatsoever to the show that statement had no relevancy whatsoever to the case of the mill in ques case of the mill in question. It was not known whether the tion. It was not known whether the mills which had disclosed these rates were similarly situated mills which had disclosed these rates were similarly situated mills which had disclosed these rates were similarly situated and circumstanced. Not only did the Tribunal not show the and circumstanced. Not only did the Tribunal not show the and circumstanced. Not only did the Tribunal not show the information given by the representative of the department to information given by the representative of the department to information given by the representative of the department to the assessee, but it refused even to loo the assessee, but it refused even to look at books and papers k at books and papers which which which assessee's assessee's assessee's representative representative representative produced produced produced before before before the the the Accountant Member in his chamber The assessment in this Accountant Member in his chamber The assessment in this Accountant Member in his chamber The assessment in this case and in the connected appeal was above the figure of Rs. case and in the connected appeal was above the figure of Rs. case and in the connected appeal was above the figure of Rs. 55 lakhs and it was just and proper when dealing with a 55 lakhs and it was just and proper when dealing with a 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste this magnitude not to employ unnecessary haste this magnitude not to employ unnecessary haste and show impatience particularly when it was known to the and show impatience particularly when it was known to the and show impatience particularly when it was known to the department that the books of the assessee were in the department that the books of the assessee were in the department that the books of the assessee were in the Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 72 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors custody of the Sub custody of the Sub-Divisional Officer Thus both the ITO and Divisional Officer Thus both the ITO and the Tribunal in estimating the gross the Tribunal in estimating the gross profit rate on sales did profit rate on sales did not act on any material but acted on pure guess and not act on any material but acted on pure guess and not act on any material but acted on pure guess and suspicion It was thus a fit case for the exercise of power suspicion It was thus a fit case for the exercise of power suspicion It was thus a fit case for the exercise of power under Article 136 under Article 136. In the result, the appeal was to be allowed and the order of In the result, the appeal was to be allowed and the order of In the result, the appeal was to be allowed and the order of the Tribunal was to be set aside and th the Tribunal was to be set aside and the case was to be e case was to be remanded to it with direction that in arriving at its estimate remanded to it with direction that in arriving at its estimate remanded to it with direction that in arriving at its estimate of gross profits and sales it should give full opportunity to the of gross profits and sales it should give full opportunity to the of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it assessee to place any relevant material on the point that it assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in t has before the Tribunal, whether it is found in the books of he books of account or elsewhere and it should also disclose to the account or elsewhere and it should also disclose to the account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to assessee the material on which the Tribunal is going to assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to found its estimate and then afford him full opportunity to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO meet the substance of any private inquiries made by the ITO meet the substance of any private inquiries made by the ITO if it is intended to make the esti nded to make the estimate on the foot of those mate on the foot of those enquiries…” In the case of KishinchandChellaramv CIT [1980] 125 ITR 713 KishinchandChellaramv CIT [1980] 125 ITR 713 KishinchandChellaramv CIT [1980] 125 ITR 713 (SC), the Hon'ble Supreme Court of India has held as under the Hon'ble Supreme Court of India has held as under: “….The letters, dated 14 The letters, dated 14-2-1955 and 9-3-1959 ENT ITR 713 1959 ENT ITR 713, did not constitute did not constitute any material evidence which the Tribunal any material evidence which the Tribunal could legitimately take into account for the purpose of could legitimately take into account for the purpose of could legitimately take into account for the purpose of arriving at the finding that the amount of Rs 1,07,350 was arriving at the finding that the amount of Rs 1,07,350 was arriving at the finding that the amount of Rs 1,07,350 was remitted by the assessee from its Madras Office, and if these remitted by the assessee from its Madras Office, and if these remitted by the assessee from its Madras Office, and if these two letters were eliminated from consi two letters were eliminated from consideration, there was no deration, there was no material evidence at all before the Tribunal which could material evidence at all before the Tribunal which could material evidence at all before the Tribunal which could support its finding What the manager of the bank wrote in support its finding What the manager of the bank wrote in support its finding What the manager of the bank wrote in his letters could not possibly be based on his personal his letters could not possibly be based on his personal his letters could not possibly be based on his personal knowledge but was based on here say The revenue knowledge but was based on here say The revenue knowledge but was based on here say The revenue authorities ought to have called upon the manager to produce ght to have called upon the manager to produce ght to have called upon the manager to produce the documents and papers on the basis of which he made the documents and papers on the basis of which he made the documents and papers on the basis of which he made the statement and confronted the assessee with those the statement and confronted the assessee with those the statement and confronted the assessee with those documents and papers. No explanation has been furnished documents and papers. No explanation has been furnished documents and papers. No explanation has been furnished by the revenue as to what happened when the m by the revenue as to what happened when the manager anager appeared in obedience to the summons and what statement appeared in obedience to the summons and what statement appeared in obedience to the summons and what statement he made. It was not possible to hold in the face of the application for It was not possible to hold in the face of the application for It was not possible to hold in the face of the application for remittance signed in the name of T, that amount was remittance signed in the name of T, that amount was remittance signed in the name of T, that amount was remitted by the assessee and the finding to that effect remitted by the assessee and the finding to that effect remitted by the assessee and the finding to that effect
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 73 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors reached by the Tribunal must be held to be unreasonable reached by the Tribunal must be held to be unreasonable e Tribunal must be held to be unreasonable and perverse. Even assuming that these letters were to be taken into Even assuming that these letters were to be taken into Even assuming that these letters were to be taken into account those letters would at the highest establish that T an account those letters would at the highest establish that T an account those letters would at the highest establish that T an employee remitted the amount from Madras and N, another employee remitted the amount from Madras and N, another employee remitted the amount from Madras and N, another employee, received it at employee, received it at Bombay From this it did not follow Bombay From this it did not follow that the remittance was made at Madras and received at that the remittance was made at Madras and received at that the remittance was made at Madras and received at Bombay on behalf of the assessee The burden was on the Bombay on behalf of the assessee The burden was on the Bombay on behalf of the assessee The burden was on the department to show that the money belonged to the assessee department to show that the money belonged to the assessee department to show that the money belonged to the assessee by bringing proper evidence on record and the assess by bringing proper evidence on record and the assessee by bringing proper evidence on record and the assess could not be expected to call T and N who left the service at could not be expected to call T and N who left the service at could not be expected to call T and N who left the service at the time when the assessment was reopened in evidence to the time when the assessment was reopened in evidence to the time when the assessment was reopened in evidence to help the department to discharge the burden that lay upon it help the department to discharge the burden that lay upon it. help the department to discharge the burden that lay upon it Therefore, there was no evidence on the basis of which the Therefore, there was no evidence on the basis of which the Therefore, there was no evidence on the basis of which the Tribunal could come to the finding that the impugned amount d come to the finding that the impugned amount d come to the finding that the impugned amount was remitted by the assessee and that it represented its was remitted by the assessee and that it represented its was remitted by the assessee and that it represented its undisclosed income undisclosed income…”
In the case of H.R. Mehta v ACIT [2016] 72 taxmann.com 110 H.R. Mehta v ACIT [2016] 72 taxmann.com 110 H.R. Mehta v ACIT [2016] 72 taxmann.com 110 (Bombay), the Hon'ble Supreme Court of India has held as under the Hon'ble Supreme Court of India has held as under the Hon'ble Supreme Court of India has held as under “….In the light of the fact that the money was advanced e light of the fact that the money was advanced e light of the fact that the money was advanced apparently by the account payee cheque and was repaid apparently by the account payee cheque and was repaid apparently by the account payee cheque and was repaid vide account payee cheque the least that the Assessing vide account payee cheque the least that the Assessing vide account payee cheque the least that the Assessing Officer should have done was to grant an opportunity to the Officer should have done was to grant an opportunity to the Officer should have done was to grant an opportunity to the assessee to meet the case against him b assessee to meet the case against him by providing the y providing the matenal sought to be used against him in arriving before matenal sought to be used against him in arriving before matenal sought to be used against him in arriving before passing the order of assessment. This not having been done, passing the order of assessment. This not having been done, passing the order of assessment. This not having been done, the denial of such opportunity goes to root of the matter and the denial of such opportunity goes to root of the matter and the denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment and strikes at the very foundation of the assessment and strikes at the very foundation of the assessment and therefore, renders the orders passed by the Commissioner e, renders the orders passed by the Commissioner e, renders the orders passed by the Commissioner (Appeals) and the Tribunal vulnerable. The assessee was (Appeals) and the Tribunal vulnerable. The assessee was (Appeals) and the Tribunal vulnerable. The assessee was bound to be provided with the material used against him bound to be provided with the material used against him bound to be provided with the material used against him apart from being permitting him to cross examine the apart from being permitting him to cross examine the apart from being permitting him to cross examine the deponents whose statements were relied upo deponents whose statements were relied upon by him. n by him. Despite the request seeking an opportunity to cross examine Despite the request seeking an opportunity to cross examine Despite the request seeking an opportunity to cross examine the deponents and furnish the assessee with copies of the deponents and furnish the assessee with copies of the deponents and furnish the assessee with copies of statements and disclose material these were denied to him. statements and disclose material these were denied to him. statements and disclose material these were denied to him.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 74 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Therefore, the addition made to the income of the assessee Therefore, the addition made to the income of the assessee Therefore, the addition made to the income of the assessee was not justified and liable to be deleted [Para 17) ied and liable to be deleted [Para 17)…” In the case of CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) the CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) Hon'ble High Court of Delhi has held that since material collected Hon'ble High Court of Delhi has held that since material collected Hon'ble High Court of Delhi has held that since material collected by revenue behind back of assessee was used against him without by revenue behind back of assessee was used against him without by revenue behind back of assessee was used against him without disclosing that material to him or giving any opportunity to him to disclosing that material to him or giving any opportunity to him to disclosing that material to him or giving any opportunity to him to cross-examine person whose statement had been used b examine person whose statement had been used by revenue y revenue against his interests, principles of natural justice had been violated against his interests, principles of natural justice had been violated against his interests, principles of natural justice had been violated and therefore, addition and therefore, addition was rightly deleted by Tribunal In this casethe Hon'ble High Court of has held as under In this casethe Hon'ble High Court of has held as under: There was no dispute that all the information asked for in the There was no dispute that all the information asked for in the There was no dispute that all the information asked for in the office letter dated 5 office letter dated 5-3-2003 was supplied by the assessee. 2003 was supplied by the assessee. That letter did not advert to anystatement of Mor H or P That letter did not advert to anystatement of Mor H or P That letter did not advert to anystatement of Mor H or P Clearty there was no way that the assessee could have Clearty there was no way that the assessee could have Clearty there was no way that the assessee could have known about any statements recorded of those persons. The known about any statements recorded of those persons. The known about any statements recorded of those persons. The version given by the assess version given by the assessee, therefore, was correct or at ee, therefore, was correct or at least a plausible one [Para 10] least a plausible one [Para 10] The Tribunal had on those facts rightly come to the The Tribunal had on those facts rightly come to the The Tribunal had on those facts rightly come to the conclusion that since the revenue had relied upon the conclusion that since the revenue had relied upon the conclusion that since the revenue had relied upon the statement of M it should have been made available to the statement of M it should have been made available to the statement of M it should have been made available to the assessee with an opportunity assessee with an opportunity of cross-examining him. That examining him. That was not done by the Assessing Officer It clearly showed that was not done by the Assessing Officer It clearly showed that was not done by the Assessing Officer It clearly showed that the principles of natural Justice had been violated [Para 11] the principles of natural Justice had been violated [Para 11] the principles of natural Justice had been violated [Para 11] There was no infirmity in the view taken by the Tribunal on There was no infirmity in the view taken by the Tribunal on There was no infirmity in the view taken by the Tribunal on the facts of the case. It was quite clear the facts of the case. It was quite clear that matenal collected that matenal collected by the revenue behind the back of theassessee was used by the revenue behind the back of theassessee was used by the revenue behind the back of theassessee was used against him without disclosing that material to him or giving against him without disclosing that material to him or giving against him without disclosing that material to him or giving any opportunity to him to cross any opportunity to him to cross-examine the person whose examine the person whose statement had been used by the revenue against the statement had been used by the revenue against the statement had been used by the revenue against the interests of the assessee [Para 12] s of the assessee [Para 12] Hence, no substantial question of law arose for consideration Hence, no substantial question of law arose for consideration Hence, no substantial question of law arose for consideration of the High Court[Para 13]. of the High Court[Para 13]. In the case of CIT v Kamal Trading Company[2013] 346 ITR CIT v Kamal Trading Company[2013] 346 ITR CIT v Kamal Trading Company[2013] 346 ITR 60(Rajasthan) the Hon'ble High Court of Rajasthan has held that the Hon'ble High Court of Rajasthan has held that the Hon'ble High Court of Rajasthan has held that Assessing Officer had not brought any evidence on record to r had not brought any evidence on record to r had not brought any evidence on record to disprove transaction of purchase of crops by assessee from disprove transaction of purchase of crops by assessee from disprove transaction of purchase of crops by assessee from Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 75 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors farmers, amount shown as payable to said farmers could not be farmers, amount shown as payable to said farmers could not be farmers, amount shown as payable to said farmers could not be treated as unexplained credits on basis of statement of farmers treated as unexplained credits on basis of statement of farmers treated as unexplained credits on basis of statement of farmers recorded behind back of ass recorded behind back of assessee In this casethe Hon’ble High Court of has held as under ble High Court of has held as under:
“….3. Deletion of addition of Rs 22 41 482 has been ordered 3. Deletion of addition of Rs 22 41 482 has been ordered 3. Deletion of addition of Rs 22 41 482 has been ordered by the Commissioner of Income by the Commissioner of Income-tax (Appeals), which addition tax (Appeals), which addition was made by the Assessing Officer on account of was made by the Assessing Officer on account of was made by the Assessing Officer on account of unexplained sundry credi unexplained sundry creditors Disallowance was also made tors Disallowance was also made on account of claim of loss of Rs 200 200 in the paddy on account of claim of loss of Rs 200 200 in the paddy on account of claim of loss of Rs 200 200 in the paddy account The Commissioner of Income account The Commissioner of Income-tax (Appeals) has found tax (Appeals) has found that certain statements of certain farmers were recorded by that certain statements of certain farmers were recorded by that certain statements of certain farmers were recorded by the Inspector of Income the Inspector of Income-tax, but it were recorded behind the behind the back of the assessee The assessee was not given back of the assessee The assessee was not given back of the assessee The assessee was not given opportunity to cross opportunity to cross-examine the witnesses Statements were examine the witnesses Statements were written in Hindi whereas the farmers were illiterate or semi written in Hindi whereas the farmers were illiterate or semi- written in Hindi whereas the farmers were illiterate or semi literate Affidavits were filed by the assessee of each and literate Affidavits were filed by the assessee of each and literate Affidavits were filed by the assessee of each and every farmer, whic every farmer, which have been relied upon by the h have been relied upon by the Commissioner of Income Commissioner of Income-tax (Appeals) and the said finding tax (Appeals) and the said finding has been affirmed by the Income has been affirmed by the Income-tax Appellate Tribunal tax Appellate Tribunal.
The Commissioner of Income 4. The Commissioner of Income-tax (Appeals) with respect to tax (Appeals) with respect to sundry creditors has given the findings that on con sundry creditors has given the findings that on consideration sideration of statements of 20 farmers and the affidavits, mert has of statements of 20 farmers and the affidavits, mert has of statements of 20 farmers and the affidavits, mert has been found in the contention of the assessee that the been found in the contention of the assessee that the been found in the contention of the assessee that the Inspector of Income Inspector of Income-tax was not authorized to record or tax was not authorized to record or collect statements and the said statements were recorded collect statements and the said statements were recorded collect statements and the said statements were recorded behind the back of th behind the back of the assessee. It wasfurther held that to It wasfurther held that to expect iterate and semi expect iterate and semi-literate farmers to recount from literate farmers to recount from memory details of accounts with the assessee was asking memory details of accounts with the assessee was asking memory details of accounts with the assessee was asking too much. They are not expected to be familiar with concepts too much. They are not expected to be familiar with concepts too much. They are not expected to be familiar with concepts such as financial year and 31st March They such as financial year and 31st March They do not do not understand the timing difference. Merely by the fact that the understand the timing difference. Merely by the fact that the understand the timing difference. Merely by the fact that the stamp papers were purchased from one stamp vendor it does stamp papers were purchased from one stamp vendor it does stamp papers were purchased from one stamp vendor it does not lead to the inference that the contents of the affidavits not lead to the inference that the contents of the affidavits not lead to the inference that the contents of the affidavits were dictated by the assessee. The Assessing Officer did not were dictated by the assessee. The Assessing Officer did not were dictated by the assessee. The Assessing Officer did not bring on record any other evidence to support such inference on record any other evidence to support such inference on record any other evidence to support such inference Each of these farmers appeared before the Assessing Officer Each of these farmers appeared before the Assessing Officer Each of these farmers appeared before the Assessing Officer to confirm that he sold his crops. Thus, there is no reason to confirm that he sold his crops. Thus, there is no reason to confirm that he sold his crops. Thus, there is no reason with the Assessing Officer to ignore their statements. with the Assessing Officer to ignore their statements. with the Assessing Officer to ignore their statements.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 76 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
Affidavits were enough and Affidavits were enough and sufficient piece of evidence so as sufficient piece of evidence so as to accept the case of the assessee Reasons in detail have to accept the case of the assessee Reasons in detail have to accept the case of the assessee Reasons in detail have been given by the Commissioner of Income been given by the Commissioner of Income-tax (Appeals) in 4 tax (Appeals) in 4- 5 pages The order of the Commissioner of Income 5 pages The order of the Commissioner of Income-tax 5 pages The order of the Commissioner of Income (Appeals) has been affirmed by the Income (Appeals) has been affirmed by the Income-tax Appe tax Appellate Tribunal in paragraph No. 13 the Income Tribunal in paragraph No. 13 the Income-tax Appellate tax Appellate Tribunal has observed thus Tribunal has observed thus:
"After hearing the rival contentions and on a perusal of the "After hearing the rival contentions and on a perusal of the After hearing the rival contentions and on a perusal of the materials available on record, we noted that the Assessing materials available on record, we noted that the Assessing materials available on record, we noted that the Assessing Officer has examined the books of account durin Officer has examined the books of account during the course g the course of the assessment proceedings but he did not find any of the assessment proceedings but he did not find any of the assessment proceedings but he did not find any mistake in the books of account Even the Assessing Officer mistake in the books of account Even the Assessing Officer mistake in the books of account Even the Assessing Officer failed to prove any transaction as non failed to prove any transaction as non-genuine The Inspector genuine The Inspector made enquires behind the back of the assessee firm and made enquires behind the back of the assessee firm and made enquires behind the back of the assessee firm and without affording any opportunity the Inspector furnished his ing any opportunity the Inspector furnished his ing any opportunity the Inspector furnished his report to the Assessing Officer When the Assessing Officer report to the Assessing Officer When the Assessing Officer report to the Assessing Officer When the Assessing Officer confronted the assessee confronted the assessee-firm with the report of the Inspector, firm with the report of the Inspector, the assessee-firm contacted all the farmers and requested firm contacted all the farmers and requested firm contacted all the farmers and requested the Assessing Officer to iss the Assessing Officer to issue summons under section 131 of ue summons under section 131 of the Act All the farmers appeared before the Assessing Officer the Act All the farmers appeared before the Assessing Officer the Act All the farmers appeared before the Assessing Officer who examined them individually and all of them confirmed who examined them individually and all of them confirmed who examined them individually and all of them confirmed that they sold their crops to the assessee that they sold their crops to the assessee-firm They have firm They have faith in the assessee firm as it is their perma faith in the assessee firm as it is their permanent aratia and nent aratia and the full amounts are paid after certain penod The amount as the full amounts are paid after certain penod The amount as the full amounts are paid after certain penod The amount as stated in the accounts as on March 31 2006 was stated in the accounts as on March 31 2006 was stated in the accounts as on March 31 2006 was outstanding which was paid subsequently within 2/3 outstanding which was paid subsequently within 2/3 outstanding which was paid subsequently within 2/3 months. From the above facts and also keeping in view the months. From the above facts and also keeping in view the months. From the above facts and also keeping in view the materials available on r materials available on record, the Assessing Officer has not ecord, the Assessing Officer has not brought any evidence on record to disprove any transactions. brought any evidence on record to disprove any transactions. brought any evidence on record to disprove any transactions. Therefore, in such circumstances, the disallowance has been Therefore, in such circumstances, the disallowance has been Therefore, in such circumstances, the disallowance has been made on surmises and conjectures Hence, the learned made on surmises and conjectures Hence, the learned made on surmises and conjectures Hence, the learned Commissioner of Income Commissioner of Income-tax (Appeals) has rightly deleted the ly deleted the said addition. Thus ground No. 2 of the Revenue is said addition. Thus ground No. 2 of the Revenue is said addition. Thus ground No. 2 of the Revenue is dismissed.
For the reasons stated by the Commissioner of Income 5. For the reasons stated by the Commissioner of Income-tax 5. For the reasons stated by the Commissioner of Income (Appeals) and the Income (Appeals) and the Income-tax Appellate Tribunal, we are tax Appellate Tribunal, we are satisfied that a finding of fact has been recorded by the satisfied that a finding of fact has been recorded by the satisfied that a finding of fact has been recorded by the Commissioner of Income issioner of Income-tax (Appeals) which has been tax (Appeals) which has been affirmed by the Income affirmed by the Income-tax Appellate Tribunal, thus, no case tax Appellate Tribunal, thus, no case
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 77 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors for interference in the appeal is made out No substantial for interference in the appeal is made out No substantial for interference in the appeal is made out No substantial question of law is involved with respect to the deletion of Rs. question of law is involved with respect to the deletion of Rs. question of law is involved with respect to the deletion of Rs. 22,41,482. In the case of CIT v.Raja Ginning Udyog[2005] 268 ITR CIT v.Raja Ginning Udyog[2005] 268 ITR CIT v.Raja Ginning Udyog[2005] 268 ITR 383(MP), the Hon'ble High Court of Madhya Pradesh has held that the Hon'ble High Court of Madhya Pradesh has held that: the Hon'ble High Court of Madhya Pradesh has held that “…5. With regard to ground No (1) the Tribunal has recorded 5. With regard to ground No (1) the Tribunal has recorded 5. With regard to ground No (1) the Tribunal has recorded a finding that some enquiry was conducted by the Assessing a finding that some enquiry was conducted by the Assessing a finding that some enquiry was conducted by the Assessing Officer on his own and he had Officer on his own and he had not asked the assessee to not asked the assessee to produce the farmers so as to ascertain from them the produce the farmers so as to ascertain from them the produce the farmers so as to ascertain from them the payments made to them with regard to cotton purchased by payments made to them with regard to cotton purchased by payments made to them with regard to cotton purchased by the assessee Assessee was asked to produce farmers for the the assessee Assessee was asked to produce farmers for the the assessee Assessee was asked to produce farmers for the first time on 4th January 1993, Le about 3 months before first time on 4th January 1993, Le about 3 months before first time on 4th January 1993, Le about 3 months before passing of the final order. Since the farmers were busy ing of the final order. Since the farmers were busy ing of the final order. Since the farmers were busy during this period they could not be produced and no further during this period they could not be produced and no further during this period they could not be produced and no further opportunity in this regard was given Thus, finding has been opportunity in this regard was given Thus, finding has been opportunity in this regard was given Thus, finding has been recorded in the enquiry that was conducted by the Assessing recorded in the enquiry that was conducted by the Assessing recorded in the enquiry that was conducted by the Assessing Officerbehind the back Officerbehind the back of the assessee This violated the of the assessee This violated the principles of natural justice in the light of this finding, CIT(A) principles of natural justice in the light of this finding, CIT(A) principles of natural justice in the light of this finding, CIT(A) and Tnbunal both found the procedure adopted by Assessing and Tnbunal both found the procedure adopted by Assessing and Tnbunal both found the procedure adopted by Assessing Officer as erroneous and against law This has also now Officer as erroneous and against law This has also now Officer as erroneous and against law This has also now become a finding of fact which cannot be c become a finding of fact which cannot be challenged in this hallenged in this appeal, as the appeal is required to be heard only on appeal, as the appeal is required to be heard only on appeal, as the appeal is required to be heard only on substantial question of law substantial question of law. In the case of the appellant, the AO has made addition on the basis In the case of the appellant, the AO has made addition on the basis In the case of the appellant, the AO has made addition on the basis of statements of Shri Rajendra Jain & Shri Dipak Jain, both entry of statements of Shri Rajendra Jain & Shri Dipak Jain, both entry of statements of Shri Rajendra Jain & Shri Dipak Jain, both entry providers. However, t providers. However, the appellant was not made aware of these he appellant was not made aware of these statement being used against it. The appellant was also not statement being used against it. The appellant was also not statement being used against it. The appellant was also not provided with the information gathered by investigation wing, provided with the information gathered by investigation wing, provided with the information gathered by investigation wing, which has been also relied upon by the AO. Thus, there has been which has been also relied upon by the AO. Thus, there has been which has been also relied upon by the AO. Thus, there has been clear violence of principle o clear violence of principle of natural justice by the AO while making f natural justice by the AO while making addition of unsecured loans addition of unsecured loans. 10.14 In our opinion , the addition of unsecured loan creditor , In our opinion , the addition of unsecured loan creditor , In our opinion , the addition of unsecured loan creditor , where the Assessing Officer relied on statement of Sh Rajendra Jain where the Assessing Officer relied on statement of Sh Rajendra Jain where the Assessing Officer relied on statement of Sh Rajendra Jain and Deepak Jain have already been deleted by the Ld C and Deepak Jain have already been deleted by the Ld CIT(A) holding IT(A) holding
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 78 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors that no credit entries are appearing in respect of those unsecured that no credit entries are appearing in respect of those unsecured that no credit entries are appearing in respect of those unsecured loan creditor during the period from AY 2013 loan creditor during the period from AY 2013-14 to 2020 14 to 2020-21 and so to reference of no cross examination for the purpose of deleting the no cross examination for the purpose of deleting the no cross examination for the purpose of deleting the unsecure loans , particularly, particularly, where the Assessing officer has not Assessing officer has not relied on statements of Rajendra jain and Deepak Jain, is relied on statements of Rajendra jain and Deepak Jain, is relied on statements of Rajendra jain and Deepak Jain, is unjustified. Further, during the search proceeding, the director of unjustified. Further, during the search proceeding, the director of unjustified. Further, during the search proceeding, the director of the assessee company sh Ni the assessee company sh Nirmal Madani was duly informed about Madani was duly informed about the the statement statement of of sh sh Rajendra Rajendra Jain Jain and and Dee Deepak pak jain jain of of accommodation entries provided through entities controlled by accommodation entries provided through entities controlled by accommodation entries provided through entities controlled by them, but no cross examination was sought by the Director of the , but no cross examination was sought by the Director of the , but no cross examination was sought by the Director of the assessee company. Moreover, the Assessing made the addition due assessee company. Moreover, the Assessing made the addition due assessee company. Moreover, the Assessing made the addition due to failure on part of the assessee in producing those to failure on part of the assessee in producing those parties to to failure on part of the assessee in producing those substantiate their identity and creditworthiness substantiate their identity and creditworthiness. The reliance . The reliance placed by the Ld CIT(A) on the decision of Dhakeshwari Cotton Mills placed by the Ld CIT(A) on the decision of Dhakeshwari Cotton Mills placed by the Ld CIT(A) on the decision of Dhakeshwari Cotton Mills Ltd (supra), Kishinchand Chellaram (supra), H R Mehta (supra), Cit Ltd (supra), Kishinchand Chellaram (supra), H R Mehta (supra), Cit Ltd (supra), Kishinchand Chellaram (supra), H R Mehta (supra), Cit Vs Rajesh Kumar (supra) , CIT vs Kamal Trading Vs Rajesh Kumar (supra) , CIT vs Kamal Trading Company (supra) Company (supra) and CIT vs Raja Ginning U and CIT vs Raja Ginning Udhyog (supra) are distinguishable on dhyog (supra) are distinguishable on facts and ratio of those decisions are not applicable over the facts of facts and ratio of those decisions are not applicable over the facts of facts and ratio of those decisions are not applicable over the facts of the assessee.
10.15 The second reasoning has been given by the ld CIT(A) is The second reasoning has been given by the ld CIT(A) is The second reasoning has been given by the ld CIT(A) is of no incriminating material material qua the addition, which we have qua the addition, which we have already dealt above while already dealt above while adjudicating the cross objection of the the cross objection of the assessee.
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 79 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.16 The next reasoning reasoning given by the Ld CIT(A) in para 8.3.10 in para 8.3.10 of the impugned order is that the of the impugned order is that the Assessing Officer has ignored the Officer has ignored the evidences filed by the assessee regarding identity and credit evidences filed by the assessee regarding identity and credit evidences filed by the assessee regarding identity and credit worthiness of the lender parties and worthiness of the lender parties and genuineness of the transaction of the transaction and he relied merely on profiling of the lender made based on profiling of the lender made based on details available in Income details available in Income-tax Department database (ITBA ent database (ITBA), without carrying out further enquiries. without carrying out further enquiries. The Ld CIT(A) has relied on The Ld CIT(A) has relied on the decision Hon’ble Patna High Court in the case of the decision Hon’ble Patna High Court in the case of Additional the decision Hon’ble Patna High Court in the case of CIT Vs Hanuman Agrwal (supra) CIT Vs Hanuman Agrwal (supra) where the creditors confessed the where the creditors confessed the loan as unexplained cash loan as unexplained cash credit, but later on filed confirmatory ter on filed confirmatory letter, but the ITO rejected the claim of the assessee and made letter, but the ITO rejected the claim of the assessee and made letter, but the ITO rejected the claim of the assessee and made addition u/s 68 of the Act. The Hon’ble High Court held the ITO addition u/s 68 of the Act. The Hon’ble High Court held the ITO addition u/s 68 of the Act. The Hon’ble High Court held the ITO should have issued summon u/s 131 of the for taking statement of should have issued summon u/s 131 of the for taking statement of should have issued summon u/s 131 of the for taking statement of the creditor when his correct addres the creditor when his correct address was provided by the assessee s was provided by the assessee and the onus of the assessee is discharged when correct address is and the onus of the assessee is discharged when correct address is and the onus of the assessee is discharged when correct address is provided. Further, the Ld CIT(A) held that the Assessing Officer in provided. Further, the Ld CIT(A) held that the Assessing Officer in provided. Further, the Ld CIT(A) held that the Assessing Officer in remand proceeding also insisted upon production of the unsecured remand proceeding also insisted upon production of the unsecured remand proceeding also insisted upon production of the unsecured loan creditor and did not loan creditor and did not issue summon u/s 131 or notice u/s issue summon u/s 131 or notice u/s 133(6) of the Act. The Ld CIT(A) relied on the decision of Hon’ble . The Ld CIT(A) relied on the decision of Hon’ble . The Ld CIT(A) relied on the decision of Hon’ble Supreme Court in the case of Supreme Court in the case of CIT vs Orissa Corporation P Ltd CIT vs Orissa Corporation P Ltd (supra). In the said case, the assessee supplied correct name In the said case, the assessee supplied correct name and In the said case, the assessee supplied correct name address of the alleged cre address of the alleged creditors and Revenue issued summon u/s ditors and Revenue issued summon u/s 131 of the Act but the alleged creditors did not but the alleged creditors did not attend, attend, thus ITO made the addition. The Hon’ble made the addition. The Hon’ble Supreme Court held that held that revenue
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 80 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors apart form issue notice u/s 131 did not pursue the matter and did apart form issue notice u/s 131 did not pursue the matter and did apart form issue notice u/s 131 did not pursue the matter and did not examine the creditwo not examine the creditworthiness of the crditors and thus Hon’ble and thus Hon’ble Supreme Court approved the action of the Tribunal that the approved the action of the Tribunal that the approved the action of the Tribunal that the assessee discharged its onus. In the case of assessee discharged its onus. In the case of DCIT Vs Rohini DCIT Vs Rohini Builders (supra ) cited by the Ld CIT(A) the Hon’ble Court held that cited by the Ld CIT(A) the Hon’ble Court held that cited by the Ld CIT(A) the Hon’ble Court held that merely because the summon merely because the summon issued to the creditors could not be issued to the creditors could not be served and the interest paid to them was not disallowed , the served and the interest paid to them was not disallowed , the served and the interest paid to them was not disallowed , the creditors can’t be held as unexplained. ld as unexplained. Further, the Ld CIT(A( relied Ld CIT(A( relied on the decision of the Tribunal in the case of on the decision of the Tribunal in the case of DCIT vs Acro Exports DCIT vs Acro Exports Trade P ltd (supra ) where in it is held that non-attendance attendance of parties in response to section 133(6) of the Act cannot be attributed to to section 133(6) of the Act cannot be attributed to to section 133(6) of the Act cannot be attributed to the assessee. The Ld CIT(A) has cited number of decisio The Ld CIT(A) has cited number of decisions but the The Ld CIT(A) has cited number of decisio facts of those cases are distinguishable. In the case of the facts of those cases are distinguishable. In the case of the assessee, facts of those cases are distinguishable. In the case of the during the course of search itself the Department attempted to the course of search itself the Department attempted to the course of search itself the Department attempted to verify but those parties were not found at the address provided by those parties were not found at the address provided by those parties were not found at the address provided by the assessee. The Assessing Officer has reproduced report of the the assessee. The Assessing Officer has reproduced report of the the assessee. The Assessing Officer has reproduced report of the Inspector, wherein he had made inquiry in neighborhood. The Inspector, wherein he had made inquiry in neighborhood. The Inspector, wherein he had made inquiry in neighborhood. The Assessing Officer has also reproduced the photo of the closed ssessing Officer has also reproduced the photo of the closed ssessing Officer has also reproduced the photo of the closed premises of those unsecured loan creditors. premises of those unsecured loan creditors. For ready For ready reference , one such enquiry report is reproduced as under: one such enquiry report is reproduced as under:
“Prateek Gehlot, Inspector Prateek Gehlot, Inspector O/o DDIT( Inv.) Unit-I(1), Mumbai Inv.) Unit Date : 08.11.2019 Date : 08.11.2019
Skyway Infra Projects Pvt. Ltd. Skyway Infra Projects Pvt. Ltd. 81 2669, 2676, 2670, 2677, 2681, ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors To, The Assistant Director of Income Tax (Investigation), The Assistant Director of Income Tax (Investigation), Unit-4(2), Mumbai
Sub : Inspector Report in the case of M/s Divyanshi Gems Private Limited Sub : Inspector Report in the case of M/s Divyanshi Gems Private Limited – reg. Sub : Inspector Report in the case of M/s Divyanshi Gems Private Limited Respected Sir,
As directed, we, the undersigned Inspectors, went for discreet inquiry As directed, we, the undersigned Inspectors, went for discreet inquiry to the address of to the address of M/s Divyanshi Gems Private Limited at Cabin No.A, Office No. 404, Pramukh Darshan M/s Divyanshi Gems Private Limited at Cabin No.A, Office No. 404, Pramukh Darshan M/s Divyanshi Gems Private Limited at Cabin No.A, Office No. 404, Pramukh Darshan Apartment, Near CFhaarKhanaChakla, Rampura, Surat on 08.11.2019. After reaching the Apartment, Near CFhaarKhanaChakla, Rampura, Surat on 08.11.2019. After reaching the Apartment, Near CFhaarKhanaChakla, Rampura, Surat on 08.11.2019. After reaching the premise, it was revealed that the security guard of the building premise, it was revealed that the security guard of the building Shri Gopalbhai AgarwaL was Gopalbhai AgarwaL was staying at the said premise for the last 6 months and he did not knew anything about the said staying at the said premise for the last 6 months and he did not knew anything about the said staying at the said premise for the last 6 months and he did not knew anything about the said entity. Further, enquiries were made in the nearby area about the entity but nobody knew entity. Further, enquiries were made in the nearby area about the entity but nobody knew entity. Further, enquiries were made in the nearby area about the entity but nobody knew anything about it. The image of the said premise w anything about it. The image of the said premise which was closed is also enclosed herewith. hich was closed is also enclosed herewith. Submitted.