DCIT 7(3), MUMBAI vs. SHRI. KHIMJI KARAMSHI PATEL, MUMBAI
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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
PER PRASHANT MAHARISHI, AM:
This is the bunch of three appeals filed by the learned assessing officer and 2 cross objections filed by the assessee with respect to same assessee arising out of the same search, involving Assessment year 2008-09, 2011-12 and 2014- 15, involves common issues, both the parties argued them together, therefore, these appeals and cross objections are disposed of bm2qiy this common order.
ITA no. 3039/Mum/2019
Assessment year 2008 – 09
The learned Deputy Commissioner of income Tax Central Circle 7 (3), Mumbai (the learned AO) is in appeal in ITA no. 3039/Mum/2019 before us against the order of Commissioner of Income Tax (Appeals)-49, Mumbai [for short, “CIT(A)”] dated 28.02.2019 for A.Y. 2008-09 raising following grounds of appeal :-
ITA No.3039/MUM/2019 (Assessment Year 2008-09) “1. On the facts and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of ₹ 3,00,00,000/- made by the AO on account of unsecured loan u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the assessee failed to prove the genuineness of the transaction and creditworthiness of the M/s. Divine Tradecom Pvt Ltd and M/s. Rowland Trexim Pvt Ltd.
On the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 3,17,213/- made by the AO on account of interest expenditure on unsecured loan without appreciating the fact that the assessee failed to prove the genuineness of transactions during assessment proceedings.
On the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of business loss of ₹
Brief facts of the case are that
i. Assessee is an individual , filed his original return of income on 26.09.2008 declaring total income of Rs. Nil and the return was processed u/s. 143(1) of the Income Tax Act, 1961 [for short, “the Act”].
ii. Later on, information was received from the DDIT(Inv.) Unit-3(1) and 3(2), Mumbai vide letter dated 04.03.2015 that during search/survey action conducted on 09.10.2014 in the case of Kamdhenu/Green Valley Group, it was noticed that the assessee has received unsecured loans of Rs. 50,00,000/- from M/s. Divine Tradecom Pvt. Ltd., a Kolkata based company in the year under consideration.
iii. Further, it is informed that statement of Shri Pradeep Poddar, Director of M/s. Divine Tradecom Pvt. Ltd., M/s. Bhawna Computers Pvt. Ltd., M/s. Rowland Trexim Pvt. Ltd. and „many other Kolkata based companies‟ was recorded u/s. 131 of the Act on 02.12.2014 wherein he stated that he has used above companies to provide accommodation entries to the Kamdhenu Group and assessee is one of the directors in Patel/Patni group of concerns, an associate group of Kamdhenu Group.
iv. Accordingly, case of the assessee was reopened by issuing notice u/s. 148 of the Act dated 16.03.2015. Subsequently, notice u/s. 143(2) and 142(1) of the Act were issued and served.
v. In the reassessment order passed u/s. 143(3) r.w.s. 147 of the Act dated 29.03.2016, ld Assessing Officer made addition of Rs. 3,00,00,000/- u/s. 68 of the Act being Rs. 2,50,00,000/- received from M/s. Divine Tradecom Pvt. Ltd. and Rs. 50,00,000/- received from
vi. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A) who granted partial relief to the assessee vide order dated 28.02.2019 and a subsequent Corrigendum Order dated 17.06.2019.
vii. Aggrieved by the relief granted by the ld. CIT(A) to the assessee, revenue is in appeal before us.
The ground no. 1 and 2 relates to the deletion of addition of Rs. 3,00,00,000/- made u/s. 68 of the Act and consequential interest of Rs. 3,17,213/-. During the year under consideration, the assessee obtained unsecured loan of Rs. 2,50,00,000/- from M/s. Divine Tradecom Pvt. Ltd. and Rs. 50,00,000/- from M/s. Rowland Trexim Pvt. Ltd.
The ld. Departmental Representative submitted that
i. These lender companies are operated by one Shri Pradeep Poddar who is an accommodation entry provider and that in his statement- recorded u/s. 131 of the Act on 02.12.2014, he himself had stated that he was just acting as a Dummy Director in these two companies. In this regard, primary analysis of money received by these companies was made and it was found that these companies have in turn received share capital from various other Kolkata based companies, which belonged to identified entry operators. In fact, in past, these entry operators have accepted before the department that they are in the business of providing accommodation entries and for that purpose, they have created shell companies. These entry providers provided accommodation entries in lieu of cash and rotated these cash in numerous self-controlled shell entities.
ii. Merely because the assessee furnished the confirmation, ITR acknowledgement, financial statements and bank statement of these
iii. companies do not have their own fund and accumulated profits are negative or just meager and that in these entities, the funds are influxed through web of other entities by way of share premium or unsecured loans and then the same are transferred to other entities.
iv. M/s. Divine Tradecom Pvt. Ltd. and M/s. Rowland Trexim Pvt. Ltd. were purchased by Kamdhenu Group at a very low price than the net worth of these companies, which also proves that the loan transaction with the assessee is not a genuine transaction and merely an accommodation entry.
The LD AR submitted that the observations made by the Assessing Officer and that addressed by the ld. DR are misplaced and not properly appreciated. The ld. Counsel submitted that
i. All the three ingredients of section 68 of the Act viz. identity of the lender, genuineness of the transaction and creditworthiness of the lender have been duly established by furnishing relevant documentary evidences in the form of confirmations, ITR acknowledgement, financial statements, bank statements of the lender, PAN card copies, details of interest paid and TDS deducted thereon, Affidavit of Shri Pradeep Poddar retracting the statement earlier made on 02.12.2014.
ii. Statement of Shri Pradeep Poddar on whom the revenue has placed reliance upon was taken on 02.12.2014 and on very next day i.e. on 03.12.2014, Shri Padeep Poddar had filed a Police Complaint that his said statement was taken under duress and coercion and he was forcefully made to sign the statement and declaration. In this regard, the ld. Counsel drew our attention to the copy of Police Complaint placed at page nos. 39 to 43 of Paper Book. The said statement was further retracted by Shri Pradeep Poddar in his Affidavit dated 09.12.2014 which is placed at page nos. 36 to 38 of Paper Book.
iii. No defects/ infirmities have been found by the department in any of the documentary evidences placed on record. It is also not the case where any cash was deposited in any of the bank accounts of the lenders and that the lenders had sufficient bank balance out of which loans were advanced to the assessee.
iv. Placed reliance on the decision of Hon‟ble Jurisdictional High Court in the case of PCIT v. Ami Industries (India) P. Ltd. (ITA no. 1231 of 2017) and CIT v. Oasis Hospitalities (P.) Ltd. (2011)198 taxman 247 (Delhi) wherein it is held that adequate bank balance establishes the creditworthiness of the parties.
v. Nothing adverse is also found in the course of inquiry by the Assessing Officer. In fact, both these lenders viz. M/s. Divine Tradecom Pvt. Ltd. and M/s. Rowland Trexim Pvt. Ltd. are reassessed u/s. 143(3) r.w.s. 147 of the Act post search conducted in Kamdhenu Group on 09.10.2014 and the concerned Assessing Officer has accepted the share capital along with premium raised by these lenders and no adverse view has been formed in the said reassessment orders of both these lenders which are placed on page nos. 13 to 15 and 28 to 30 of Paper Book.
vi. Even source of source of loan stands established.
vii. Merely because Kamdhenu Group acquired the shares of these lender companies at a very low rate does not have any relevance in regard to the transaction of interest bearing loan taken by the assessee.
Accordingly, ld. Counsel submitted that the ld. CIT(A) has rightly deleted the addition of Rs. 3,00,00,000/- made u/s. 68 of the Act and also the consequential addition of interest of Rs. 3,17,213/- thereon.
We have considered the rival submissions of the parties and have gone through the orders of lower authorities and the material placed on record.
"7.5. I have perused the aforesaid documents and found that the assessee has furnished all the relevant documents in support of the transactions entered with M/s. Divine Tradecom Pvt. Ltd. & M/s. Rowland Trexim Pvt. Ltd. to establish the identity,
7.8 Element of credit worthiness and satisfaction of AO thereafter is subjective and requires more efforts/inquiry on the part of the AO to give a finding in the order that lender is not credit worthy. The AO must make proper enquiry before making any addition. In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.), it has been held that section 68 empowers the Assessing officer to make enquiry. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee’s explanation, A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained.
7.9 Further, in the case of Nemichand Kothari vs. CIT – [264 ITR 254] [Gau], the Hon’ble High Court had held that:
7.10 The assessee must satisfy three important conditions, namely, (i) the identity of the creditor; (ii) the genuineness of the transaction; and (iii) the financial capacity of the person, i.e. the credit worthiness of the creditor. However, the onus of the
7.11 It is clear from the submission of appellant that the transactions were through account payee cheques and appellant has submitted sufficient details before the AO during the re- assessment proceedings. The source of receipt through banking channel clearly establishes the genuineness of the credit which is reflected in the books of accounts. The present case is on a much better footing in view of the fact that source of source of loan is explained by the assessee on one side whereas the AO has not brought on record any cogent evidence to disbelieve the evidences submitted by the assessee.
7.12 In the light of the above, it is now important to examine the validity of addition based on the statement of Shri Pradeep Poddar and Shri Anand Sharma. Statement of Shri Pradeep Poddar
The Ld DR did not point out any infirmity in the order of the LD CIT (A).The Ld CIT (A) has gave detailed reasoning for deleting the addition and further more clinching issue is reassessment of the lender companies where the monies received by them are accepted as genuine. When the source of money is accepted as compliant with provision of section 68 of the Act, in absence of any further inquiry and findings , the amount received by assessee form those companies cannot be held to be taxable in the hands of the assessee u/s 68 of the Act. Thus, reassessment orders in lender companies accepting the money if at all received from companies operated by some unscrupulous persons, then money received by assessee cannot be held to non-genuine. In fact, that is the only allegation of LD AO, which is demolished by the reassessment orders of the lender companies. We therefore do not incline to interfere with the findings and reasoning of the ld. CIT(A) and uphold the order of ld. CIT(A).
Accordingly, ground no.1 and 2 of the revenue is dismissed.
The ground no. 3 relates to disallowance of business loss of Rs. 30,93,410/-.
Briefly, facts of this issue are that during the year under consideration, the assessee incurred interest expenditure of Rs. 37,66,487/- and also received interest income of Rs. 6,73,077/- resulting into a loss of Rs. 30,93,410/-. Ld AO held that assessee had not brought on record any evidence to show
In this regard, the ld. DR of the assessee relied on the order of the Assessing Officer and requested to confirm the disallowance of Rs. 30,93,410/- as interest bearing funds were not wholly and exclusively utilized for the purpose of business.
ld. AR requested that the ld. CIT (A) has only granted the relief to the extent the funds were utilized by the assessee for the business requirements of his proprietorship concern and hence, the relief granted by the ld. CIT (A) is only to the extent of proportionate interest of Rs. 3,86,176/- based on the utilization of funds for the very business purpose itself.
We have heard the rival submission of the parties and have gone through the assessment order, CIT(A)‟s order and the material placed on record. The issue here is that of utilization of interest bearing funds for the purpose of business in order to claim the interest expenditure. In the present facts, it is seen that the assessee has not wholly and exclusively utilized the interest bearing funds towards his business and the Assessing Officer has accordingly, disallowed the interest thereon. However, on perusal of the Balance Sheet of the assessee, the ld. CIT(A) has given a categorical finding at para 9.4 in her order, the relevant extract of which is reproduced as under:-
Since out of the overall interest bearing funds, certain funds were utilized for the purpose of business of the proprietorship concern of the assessee, to that extent, interest ought to be allowed u/s. 36(1)(iii) of the Act. We therefore do incline to interfere with the order of the ld. CIT(A) and the Corrigendum Order passed thereafter in granting relief to the assessee to the extent of Rs. 3,86,176/- on this issue u/s. 36(1)(iii) of the Act. Hence, the ground no. 3 of the revenue is dismissed.
In the result, the appeal of the revenue in ITA no. 3039/Mum/2019 for A.Y. 2008-09 is dismissed.
ITA no. 4038/Mum/2019
&
CO no. 46/Mum/2021
AY 2014-15
ITA No.4038/MUM/2019 (Assessment Year 2014-15) “1. In the circumstances and facts of the case and in law, the CIT(A) has erred in deleting the addition of ₹2,63,00,000/- made by the AO as unexplained cash credit in the form of bogus loans u/s. 68 of the Act without considering the fact that the statements of Shri Anand Sharma and Shri Praveen Agarwal and other related concerns were recorded u/s. 131 of the Act wherein they had stated that the above mentioned companies were engaged in the business of providing accommodation entries.
Whether on facts and in law the Ld. CIT(A) was correct in allowing the appeal of the assessee, ignoring the facts of the case and placing reliance on the superficial documentation supporting the claim of the assessee.
On the fact and circumstances of the case and in law, the ld CIT(A) was not justified in allowing the appeal of the assessee was superficial and the assessee could not prove the creditworthiness of the parties and hence failed to discharge his onus.
Whether on facts and in law the Ld. CIT(A) was correct in allowing the interest payment of ₹ 11,78,742/- on the loan as the said loan is nothing but bogus accommodation entry.
Whether on the facts and in law the Ld. CIT(A) was correct in allowing the disallowance of interest expenses of ₹ 30,80,593/- despite the fact that the assessee has failed to provide party
For the A.Y. 2014-15, the assessee has also filed Cross Objections in CO no. 46/Mum/2021, grounds of which are as under:
(a) On the facts and circumstances of the case, the assessment order passed u/s. 153C r.w.s 143(3) of the Act is invalid and bad in law. (b) The ld. CIT(A) erred in facts and law in not quashing the order passed by the ld. Assessing Officer u/s.153C r.w.s.143(3) of the Act despite the undisputed fact that no incriminating /material was found in the course of searched person which belonged to the assessee and thereby failing to appreciate that the very existence of incriminating material is a sine-qua-non to assume jurisdiction u/s.153C of the Act. (c) The ld. CIT(A) erred in facts and law in not appreciating that the ld. Assessing Officer recorded his general satisfaction note for A.Y.2009-10 to A.Y.2014-15 and therefore the assessment u/s.153C for the year under consideration is not based on any year specific incriminating material. (d) The ld. CIT(A) erred in facts and law in not appreciating that mere loan books disclosing duly recorded loan transactions in books of account cannot be construed as incriminating material. (e) Without prejudice to (d), the ld. CIT(A) erred in facts and law in not appreciating that the ld. Assessing Officer made the addition of Rs.2,63,00,000/- in respect of loans taken from M/s.Everlink Investment Advisory Pvt. Ltd. and M/s.Konark Commerce Pvt. Ltd. wherein no reference about the said alleged parties was made in the satisfaction note recorded thereby there being no existence of any incriminating material in relation to the said loans.
Brief facts of the case are that the assessee filed his original return of income for A.Y. 2014-15 on 19.11.2014 declaring total income at Rs. 1,87,20,000/- and same was processed u/s. 143(1) of the Act. Later, a search action u/s.
Since the Cross Objections deal with the issue of jurisdiction u/s. 153C for making the additions / disallowances, we take them first before adjudicating the appeal of the revenue for the A.Y. 2014-15.
The ld. Counsel of the assessee vehemently argued that the Assessing Officer has wrongly acquired the jurisdiction u/s. 153C of the Act and additions are made devoid of any incriminating material found in the course of search of third party. He drew our attention to the first proviso to section 153C which reads as under:-
“Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person”
He, accordingly, emphasized on the first proviso to section 153C of the Act to submit that A.Y. 2014-15 is an unabated year as the date of initiation of search begins from the date of handing over of the seized incriminating
The ld. DR for the revenue relied on the order of the lower authorities.
We have heard the rival submissions of the parties and have gone through the assessment order and appellate order along with the material placed on record. The core issue involved here is the validity of additions in light of the satisfaction note recorded before issuing the notice u/s. 153C of the Act for A.Y. 2014-15 and the additions made in the assessment order having any basis to incriminating material, if any. It would be relevant to reproduce here the satisfaction note recorded on 18.03.2016 by the Assessing Officer prior to issue of notice u/s. 153C of the Act for A.Y. 2014-15 dated 22.03.2016:
“A Search action was carried out u/s 132 of the Income Tax Act, 1961 on 09.10.2014 at the offices of Lotus/Kamdhenu / Green Valley group & their Associates and at the residences of their Directors As a part of the search a Survey was conducted at the office premises of M/s Nishrin Trading and Investment Pvt. Ltd. Situated at Sir Navroji Bldg, Shankar Sneth Lane, Grant Road West, Mumbai 400 007 on 09.10.2014 which was later converted into search and seizure action u/s 132(1) on 10.10.2014. During the course of search action certain loan books were also found and seized which were marked as Sr no 1 to 13 of Annexure A to Panchanama at 11.10.2014 Page 8 and 9 of the loan book Sr no 8 seized reflects loan transactions of by M/s Trishul Developers (prop Khimji Karamshi Patel) of Rs 2,52,28,964 /-and Rs 1.21,42,032/- with M/s Divine Tradecom Pvt Ltd and M/s Rowland Trexim Pvt Ltd. During the course of search in the said group it was found that the entities with whom the loans transactions are entered, namely M/s Divine Tradecom Pvt Ltd and M/s Rowland Trexim Pvt Ltd are Paper companies giving accommodation entries. The operator of the said companies, namely Shri Pradeep Poddar has given a statement u/s 131 that both the companies are
On perusal of the satisfaction note placed at page no. 1 of Common Paper Book filed before us, it is noted that it refers to certain loan books of the proprietorship concern of the assessee namely M/s. Trishul Developers were found and seized which reflects loan transactions of Rs. 2,52,28,964/- and Rs. 1,21,42,032/- with M/s. Divine Tradecom Pvt. Ltd. and M/s. Rowland Trexim Pvt. Ltd. respectively. It is clarified that these transactions with the parties are duly recorded in the books of accounts of the assessee. The satisfaction note nowhere points out as to what incriminating material was found or discovered in the course of search carried out in the case of Kamdhenu group. Even the additions and disallowances, which are made by the Assessing Officer, are not in connection to the issue referred to in satisfaction note. Moreover, satisfaction note is prepared for all the years together from A.Ys. 2009-10 to 2014-15 without pointing out any assessment year specific incriminating material for the year under consideration. It is observed that as per first proviso to section 153C of the Act, A.Y. 2014-15 is an unabated year and have attained finality as the due date of issuing notice u/s. 143(2) for the said year was 30.09.2015 whereas the satisfaction note is recorded on 18.03.2016 and notice u/s. 153C of the Act is issued on 22.03.2016. Further, it is noted that the addition of Rs. 2,00,00,000/- being unsecured loans from
In this regard, we find that the said issue is squarely covered by the decision of the Hon‟ble Apex Court in the case of Sinhgad Technical Education Society Ltd. (2017) 84 Taxman.com 290 (SC), wherein it is held that there has to be incriminating material pertaining to the assessment year in question in order to make any addition or disallowance in an assessment made u/s. 153C of the Act. In light of the above background of facts and settled judicial precedent, we are of the considered view that no additions or disallowances can be made devoid of any incriminating material found during the search on a third person. Accordingly, the Cross objection filed by the assessee is allowed.
Since the Cross Objection filed by the assessee in CO 46/Mum/2021 is allowed on the jurisdiction issue itself, appeal of the revenue in ITA no. 4038/Mum/2019 on merits of the case need not require any adjudication and is accordingly dismissed.
ITA No.3117/MUM/2019 (Assessment Year 2011-12) CO No. 72/MUM/2020 Arising Out of ITA No. 3117/MUM/2019 (Assessment Year 2011-12)
The Ld AO is in appeal in ITA no. 3117/Mum/2019 before us against the order of Commissioner of Income Tax (Appeals)-49, Mumbai [for short, “CIT(A)”] dated 28.02.2019 for A.Y. 2011-12.
LD AO has raised following grounds of appeal:-
“On the facts and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of ₹ 3,00,00,000/- made by the AO on account of unsecured loan u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the assessee failed to prove the genuineness of the transactions and creditworthiness of the M/s. Jeenmata Suppliers Pvt Ltd and M/s. Chandra Ghanta Commodities Pvt Ltd.”
On the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 18,60,244/- made by the AO on account of interest expenditure on unsecured loan without appreciating the fact that the assessee failed to prove the genuineness of transactions during assessment proceedings.
On the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 4,07,492/- made by the AO on account of interest expenditure u/s. 36(1)(iii) of the Act on unsecured loan without appreciating the fact that the assessee failed to explain the interest expenditure.”
Assessee has filed cross objection in CO No. 72/MUM/2020rasiing following ground of appeal :-
“(a) On the facts and circumstances of the case, the assessment order passed u/s. 153C r.w.s. 143(3) of the Act is invalid and bad in law.
(c) The ld. CIT(A) erred in facts and law in note quashing the order passed by the ld. Assessing Officer u/s. 153C r.w.s. 143(3) of the Act despite the undisputed fact that no incriminating material was found in the course of searched person which belonged to the assessee and thereby failing to appreciate that the very existence of incriminating material is a sine-qua-non to assume jurisdiction u/s. 153C of the Act.”
Brief facts of the case are that the assessee had filed his original return of income for A.Y. 2011-12 on 29.09.2011 declaring total income at Rs. 2,43,73,110/- and same was processed u/s. 143(1) of the Act. Later, a search action u/s. 132 of the Act was carried out in the appellant‟s group concerns on 09.10.2014. Consequently, Assessing Officer issued notice u/s. 153C dated 22.03.2016 to the assessee requiring him to furnish the return of income for A.Y. 2011-12. Satisfaction note was also recorded by the Assessing Officer before issuing the notice u/s. 153C of the Act. In the assessment completed, the Assessing Officer made various additions u/s. 68 and interest disallowance aggregating to Rs. 3,22,67,736/-. Aggrieved by the additions so made, the assessee preferred appeal before the ld. CIT(A) who deleted all the additions / disallowances and allowed the appeal in favour of the assessee. Hence, the revenue is in appeal before us.
The ground no. 1 and 2 of the appeal relates to the deletion of addition of Rs. 3,00,00,000/- made u/s. 68 of the Act and consequential interest of Rs. 18,60,244/- respectively. The ground no. 3 relates to deletion of disallowance of interest of Rs. 4,07,492/- u/s. 36(1)(iii) of the Act.
We have heard the rival submissions of the parties and have gone through the assessment record and CIT(A)‟s order along with the material placed on record. The core issue involved here is the validity of additions in light of the satisfaction note recorded before issuing the notice u/s. 153C of the Act for A.Y. 2011-12 and the additions made in the assessment order having any basis to incriminating material, if any. It would be relevant to reproduce here the satisfaction note recorded on 18.03.2016 by the Assessing Officer prior to issue of notice u/s. 153C of the Act for A.Y. 2011-12 dated 22.03.2016:
“A Search action was carried out u/s 132 of the Income Tax Act, 1961 on 09.10.2014 at the offices of Lotus/Kamdhenu / Green Valley group & their Associates and at the residences of their Directors As a part of the search a Survey was conducted at the office premises of M/s Nishrin Trading and Investment Pvt. Ltd. Situated at Sir Navroji Bldg, Shankar Sneth Lane, Grant Road West, Mumbai 400 007 on 09.10.2014 which was later converted into search and seizure action u/s 132(1) on 10.10.2014. During the course of search action certain loan books were also found and seized which were marked as Sr no 1 to 13 of Annexure A to Panchanama at 11.10.2014 Page 8 and 9 of the loan book Sr no 8 seized reflects loan transactions of by M/s Trishul Developers (prop Khimji Karamshi Patel) of Rs 2,52,28,964 /-and Rs 1.21,42,032/- with M/s Divine Tradecom Pvt Ltd and M/s Rowland Trexim Pvt Ltd. During the acourse of search in the said group it was found that the entities with whom the loans transactions are entered, namely M/s Divine Tradecom Pvt Ltd and M/s Rowland Trexim Pvt Ltd are Paper companies giving
On perusal of the satisfaction note placed at page no. 1 of Common Paper Book filed before us, it is noted that it refers to certain loan books of the proprietorship concern of the assessee namely M/s. Trishul Developers were found and seized which reflects loan transactions of Rs. 2,52,28,964/- and Rs. 1,21,42,032/- with M/s. Divine Tradecom Pvt. Ltd. and M/s. Rowland Trexim Pvt. Ltd. respectively. It is clarified that these transactions with the parties are duly recorded in the books of accounts of the assessee. The satisfaction note nowhere points out as to what incriminating material was found or discovered in the course of search carried out in the case of Lotus group. Even the additions and disallowances that are made by the Assessing Officer are not in connection to the issue referred to in satisfaction note. Moreover, satisfaction note is prepared for all the years together from A.Ys. 2009-10 to
In this regard, we find that the said issue is squarely covered by the decision of the Hon‟ble Apex Court in the case of Sinhgad Technical Education Society Ltd. (2017) 84 Taxman.com 290 (SC), wherein it is held that there has to be incriminating material pertaining to the assessment year in question in order to make any addition or disallowance in an assessment made u/s. 153C of the Act. In light of the above background of facts and settled judicial precedent, we are of the considered view that no additions or disallowances can be made devoid of any incriminating material found during the search on a third person. Accordingly, the ground nos. 1 to 3 of the revenue are dismissed.
Since the appeal of the revenue in ITA no. 3117/Mum/2019 is dismissed, CO of the assessee bearing CO 72/Mum/2019 stands infructuous and need not require any jurisdiction. Hence, dismissed.
Order pronounced in the open court on 15.02.2023.
Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 15.02.2023 Dragon and Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
