DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA vs. M/S HADOTI PUNJI VIKAS LTD., KOTA

ORDER PER: VIJAP PAL RAO, J.M. This appeal by the revenue and cross objection by the assessee are directed against the order of the ld. CIT(A)-2, Udaipur dated 16/07/2018 & CO 44/JP/2018 2 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

for the A.Y. 2010-11. The Revenue in its appeal has taken following grounds:

2. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of Share application money by observing that the alleged investor companies M/s Prithvi Vinimay Pvt. Ltd. and M/s Birla Arts Pvt. Ltd., M/s Macro Soft Technology Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sangam Distributors Pvt. Ltd.,, are not shell companies without considering the financial statements of these companies.

3. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Prithvi Vinimay Pvt. Ltd. and M/'s Birla Arts Pvt. Ltd., M/s Macro Soft Technology Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sangam Distributors Pvt. Ltd., merely for the reason that evidences in the fonn of statement on oath of the relevant entry operators were not available on record.

4. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Prithvi Vinimay Pvt. Ltd. and M/s Birla Arts Pvt. Ltd., M/s Macro Soft Technology' Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., M/s Sangam Distributors Pvt. Ltd., despite the fact that the directors or Principal Officers of these companies were never produced before the AO for examination despite number of opportunities provided by the AO for producing and also ignoring the fact that the assessee neither expressed its inability in producing the lenders nor produced them either.

& CO 44/JP/2018 3 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

4. Whether on the facts and circumstances of the case and in law, the C1T(A) was justified in deleting the addition of unsecured loans allegedly obtained from M/s Prithvi Vinimay Pvt. Ltd. and M/s Birla Arts P\4. Ltd., M/s Macro Soft Technology Pvt. Ltd., M/s Sangam Distributors Pvt. Ltd., M/s Teac Consultants Pvt. Ltd., merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Directors of lender companies and some Directors/Officers were also produced before the AO despite the fact that even the Directors which were produced before the AO failed to substantiate the genuineness of the alleged transactions. 6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of unsecured loans fay observing that the appellant cannot be fastened upon the burden to produce the lenders before the AO and in not considering the decision of the Hon’ble Supreme Court in Navodaya Castles (p) Ltd Vs CIT(2015) 56 taxmann.com 18(8C) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the disallowance of Rs. 52,43,029/- made by the AO by invoking the provisions of section 14A of the IT Act. 8. Whether on the facts and circumstances of the case in law, the C1T(A) was justified in deleting the disallowance of Rs. 7,50,385/- made by the AO on account of retention charges. The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal”.

2. Grounds No. 1 to 6 of the revenue’s appeal are regarding the addition made by the A.O. U/s 68 of the Act on account of unexplained loans as well as unexplained share application money received from five companies which was deleted by the ld. CIT(A) on the ground that the & CO 44/JP/2018 4 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

A.O. was not having any material in his possession to substantiate the addition as the A.O. was not having even the statement of the alleged entry operator whereas the assessee has produced all the documentary evidences in support of the claim. The assessee is a group concern of Kota Dall Mill (KDM) group and subjected to the search and seizure action U/s 132 of the Act carried out on 02/07/2015. The A.O. initiated the proceedings U/s 153A of the Act in pursuant to the search for the A.Y. 2010-11 to 2013-14 and 2015-16 and made various additions U/s 68 of the Act on account of share application money, special deposits against the issue of preferential equity shares treating the same as accommodation entries availed by the assessee from the entry providers.

The assessee challenged the orders passed by the A.O. before the ld. CIT(A) and contended that the A.O. has made the addition merely on the basis of the statements recorded by the Investigation Wing, Kolkata and without any incriminating material found or seized during the search and seizure action in the case of the assessee. The assessee also raised objection against the additions made by the A.O. on the ground that the assessee was not given an opportunity of cross examination of the witnesses whose statement was relied upon by the A.O. while passing the assessments. The ld. CIT(A) did not accept these objections raised by the assessee, however, on merits of the addition, the ld. CIT(A) has deleted & CO 44/JP/2018 5 DCIT Vs. M/s Hadoti Punji Vikas Ltd. the major part of the addition for which the A.O. was not having any material in his possession but confirmed the addition in respect of which the statement of the alleged entry provider was with the A.O.. Thus, both the assessee as well as the revenue are aggrieved by the impugned order of the ld. CIT(A) and filed appeal as well as the cross objection for the respective assessment year.

3. The A.O. has observed that the assessee received share capital and unsecured loan from various companies. The A.O. issued show cause notice to the assessee as to why unsecured loan and share capital received from five companies should not be treated as unexplained U/s 68 of the Act. After considering the explanation of the assessee, the A.O. held that the share capital and unsecured loan received from five companies amounting to Rs. 18.72 crores is unexplained cash credit and accordingly made an addition of the said amount to the total income of the assessee. While making the addition, the A.O. has relied upon the report of the Investigation Wing, Kolkata wherein it was reported that these five companies are managed and controlled by the entry operators and therefore, these are accommodations entries provided by these entry operators. On appeal, the ld. CIT(A) has deleted the addition in respect of all the transactions of unsecured loan and share capital on the ground that the A.O. was not having any documentary evidence to even the & CO 44/JP/2018 6 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

statement of the persons who have allegedly provided accommodation entries to the assessee through these companies.

Investigation Wing, Kolkata. In these circumstances, it cannot be a case of addition made without any incriminating material, but the A.O. was having sufficient material disclosing the undisclosed income in the shape of unexplained cash credit introduced by the assessee in the garb of share capital. Once the A.O. has brought on record the report of the Investigation Wing, Kolkata to prove that the said company is a shell company and engaged in providing bogus accommodation entries then the assessee was duty bound to discharge its onus of proving the genuineness of the transactions. The assessee has failed to produce the Principal Officer or the Director of the loan creditor before the A.O. for examination despite various opportunities given by the Assessing Officer.

He has relied upon the decision of Hon’ble Delhi High Court in the case of CIT Vs. Navodaya Castles Pvt. Ltd. 226 Taxman 190 and the SLP filed by the assessee was dismissed by the Hon'ble Supreme Court reported in 230 Taxman 268 (S.C.)

to the search, the assessment completed U/s 143(3) of the Act and there was no defect found by the A.O. in the claim of the assessee as the genuineness of the transaction of share application money received from this company. Further nothing has either been found or seized during the course of search and seizure action U/s 132 of the Act which can support the case of the A.O. in treating the said share application money as bogus transaction and consequently unexplained cash credit U/s 68 of the Act.

The ld AR of the assessee has submitted that even otherwise the assessee has produced all relevant documentary evidence in support of its claim and to establish the identity, creditworthiness of the share applicant and genuineness of the transaction. He has referred to the relevant documentary evidence filed by the assessee which are placed at page Nos. 415 to 605 of the paper book and submitted that the assessee produced income tax return of the share applicant, books of account/financial statements for the A.Y. under consideration, bank statement showing the payments made by the share applicant, ledger statement, share allotment advice, affidavit of the Director of the share applicant company, financial statement of the share applicant for six years from F.Y. 2009-10 to 2015-16 to show the creditworthiness of the share applicant and availability of the funds. He has referred to the details and submitted that the said company was having sufficient fund as its is & CO 44/JP/2018 9 DCIT Vs. M/s Hadoti Punji Vikas Ltd. manifest from the financial statement and particularly the share capital and reserves of the said company as on 31/3/2012 was Rs. 97,21,54,685/- whereas the said company has paid the share application money to the assessee of Rs. 19.75 crores only. The department has accepted the transaction while passing the assessment orders U/s 143(3) of the Act in the share applicant. He has referred the assessment orders for the A.Y. 1998-99 to 2001-02, 2008-09 and 2014-15 which were undergone scrutiny assessment and the A.O. has accepted the transaction of investment made by the said company in the shares of the assessee.

Even as per the ROC record, the status of the said company is shown as active and not as a shell company. Hence, the ld AR has submitted that once the assessee has produced all the relevant documents to establish the identity, creditworthiness of the share applicant and genuineness of the transaction, which were not disturbed by the department in the assessment in the case of the share applicant then the said transaction cannot be treated as the bogus in the hand of the assessee. He has supported the order of the ld. CIT(A). The ld AR has also relied upon the series of decisions on this point and submitted that once the assessee has discharged its onus by producing the documentary evidence then in absence of any contrary material brought by the Assessing Officer, the addition made by the Assessing Officer is not sustainable. He has also & CO 44/JP/2018 10 DCIT Vs. M/s Hadoti Punji Vikas Ltd. referred to the report of the Kolkata Investigation Wing and submitted that even the notice issued U/s 133(6) of the Act was duly responded by the said company and hence no adverse report has been given by the DDIT (Inv), Kolkata. The only objection is non-production of the Director of the said company, however, the assessee has duly produced the affidavit of the Director of the share applicant. As regards the unsecured loan taken from three companies namely Birla Art Pvt. Ltd., Prithvi Vinimay Pvt. Ltd. and Macro Soft Pvt. Ltd. The ld. AR has submitted that during the year itself, the assessee has repaid the entire loan amount and nothing was outstanding as on 31/3/2010, therefore, once the assessee has repaid the loan amount during the year under consideration then the addition made by the A.O. on account of unexplained cash credit is not sustainable as the said credit was not more outstanding in the books of the assessee. He has referred to the details of the loan and the repayment of the same during the year under consideration. The ld AR has pointed out that the last transaction of repayment was made on 13/10/2009 and thereafter nothing was pending our outstanding in respect of these loan amounts taken from these three companies.

respect of unsecured loan and share capital received by the assessee, the details of which are as under:

Assessment Nature of Description of addition Addition Total year Addition Made additions for Amount the Assessment year 2010-11 Unsecured M/s Birla Arts Pvt. Ltd. 7,76,00,000 Loans Unsecured M/s Prithvi Vinimay Pvt. 7,47,50,000 Loans Ltd Unsecured M/s Macrosoft 8,50,000 Loans Technology Pvt. Ltd Share M/s Sangam Distributors 3,10,00,000 Capital Pvt. Ltd Share M/s Teac Consultants Pvt. 30,00,000 Capital Ltd Others Disallowance u/s 14A of 52,43,029 I.T. Act. Others Addition on account of 7,50,385 19,31,93,414 disallowance of retention charges The first three transactions are in respect of unsecured loans taken by the assessee from three companies. There is no dispute that all these loan amounts were repaid by the assessee during the year under consideration and the repayment of loan was paid on 13/10/2009, therefore, as on the closing of previous year i.e. 31/3/2010 nothing was outstanding in respect of unsecured loans. Once the receipt as well as repayment of the loan in question are through banking channel then even if the A.O. has doubted the transaction of receipt of loan as an accommodation entry if the assessee has repaid the same during the year under consideration then it & CO 44/JP/2018 12 DCIT Vs. M/s Hadoti Punji Vikas Ltd. has neutralized the effect of accommodation entry. Even otherwise we note that the A.O. has made the addition based on the report of the DDIT (Inv.), Kolkata and was not having any other documentary evidence in his possession to support the decision of treating the transaction of unsecured loan as bogus transaction being accommodation entries. The said report of the DDIT(Inv.), Kolkata was also not based on any documentary evidence but the narration of the statements of the alleged entry operators, however, the A.O. was not having even the statement of the alleged entry operators. On the contrary, the assessee produced all the supporting documentary evidence which includes the ITR of the loan creditors and shareholders, their financial statements including the balance sheet, bank statement showing the entry of payment to the assessee as well as the repayment made by the assessee of the loan amount in case of share application, the assessee also produced copy of the ledger showing the transaction with share applicant, share allotment advice, affidavit of the Directors of the companies who had paid share capital, financial statement of last 5-6 years showing the source of funds with the share applicants as well as loan creditors, copy of earlier orders passed by the A.O. in the cases of share applicants and loan creditors wherein the transactions of giving loan as well as investment made in the shares of the assessee company were not disturbed by the A.O.. The & CO 44/JP/2018 13 DCIT Vs. M/s Hadoti Punji Vikas Ltd. assessee also produced copy of ROC master data wherein all these companies status was shown as active or amalgamated in some of the cases. There is no dispute that all these companies are registered NBFCs and the summons issued by the DDIT(Inv), Kolkata were duly responded by these companies, therefore, even otherwise the existence of these companies are not in dispute. The whole case of the A.O. is based that these are shell companies, however when these companies are registered NBFCs and subjected to scrutiny assessment for all the relevant years and further the ROC is showing the status of these companies as active then in absence of any material to show that these companies are shell companies. The decision of the A.O. is not based on any cogent material or evidence but merely based on the report of the DDIT(Inv.), Kolkata wherein it is alleged that as per the statements of the entry operators who are managing and controlling these companies then indulged in providing accommodations entries in the shape of share application as well as loan etc. We note that in respect of these five companies, the assessee has produced following documents, which are as under:

M/s Teac Consultants Pvt. Ltd (AY 2010-11).

S. No. Particulars of Documents S. No. of PB where documents annexed AY 2010-11/VOL- II 1 Copy of Ack. of ITR of AY 2010-11 along with 477-478 computation sheet & CO 44/JP/2018 14 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

2 Copy of Balance sheet of AY 2010-11 along 479-484 with enclosures 3 Copy of relevant page of bank statement 485 showing the entry of payment made to assessee. 4 Copy of share application form of equity 486-487 share 5 Copy of ledger showing the transaction with 488-489 share applicant 6 Share Allotment advice 490 7 Copy of affidavit of Mr Jitendra Sharma 491-494 director of company. 8 Copy of balance sheet of company of 495-501 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 9 Copy of assessment order passed in the case 502-521 of above named company for AY 2005-06, AY 2006-07, AY 2012-13 and 2014-15. 10 Copy of ROC master data. 522-523 11 Copy of PAN card. 524 12 Certificate of Incorporation. 525 13 Copy of Certificate of NBFC Registration. 526 14 Copy of Summon no. 1433 dated 13.10.2017 527-530 and reminder summon no.-1592 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961 to M/s Teac Consultants Private Limited. 15 Copy of reply in response to summon issued 531-533 to the company. 16 Copy of letter for confirmation of source of 534-537 funds used for applying the shares along with supporting documents

M/s Sangam Distributors Pvt. Ltd (AY 2010-11).

S. Particulars of Documents S. No. of PB where No. documents annexed AY 2010-11/VOL- II 1 Copy of Ack. of ITR of AY 2010-11 along with 538-539 computation sheet & CO 44/JP/2018 15 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

2 Copy of Balance sheet of AY 2010-11 along 540-541 with enclosures 3 Copy of relevant page of bank statement 542-543 showing the entry of payment made to assessee. 4 Copy of share application form of equity 544-546 share 5 Copy of affidavit of Mrs Neelam Gautam 547-550 director of company. 6 Copy of order passed by Calcutta High Court 551-577 regarding amalgamation of other companies in this company 7 Copy of balance sheet of company of 578-581 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 8 Copy of assessment order passed in the case 582-593 of above named company for AY 2006-07, AY 2007-08 and 2013-14. 9 Copy of ROC master data. 594-595 10 Copy of PAN card. 596 11 Certificate of Incorporation. 597

M/s Birla Arts Pvt Ltd (AY 2010-11).

S. Particulars of Documents S. No. of PB where No. documents annexed AY 2010-11/VOL- III 1 Copy of Ack. of ITR of AY 2010-11 along with 598-599 computation sheet 2 Copy of Balance sheet of AY 2010-11 along 600-606 with enclosures 3 Copy of relevant page of bank statement 607-613 showing the entry of payment made to assessee. 4 Copy of account confirmation from books of 614-615 unsecured loan creditor 5 Copy of ledger showing the transaction with 616-617 unsecured loan creditor 6 Copy of affidavit of Mrs Neelam Gautam 618-621 director of company. 7 Copy of Calcutta High Court order regarding 622-648 the amalgamation of another companies with assessee company & CO 44/JP/2018 16 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

8 Copy of balance sheet of company of 649-655 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 9 Copy of assessment order passed in the case 656-676 of above named company for AY 2006-07, AY 2012-13, AY 2013-14 and 2014-15. 10 Copy of ROC master data. 677-678 11 Copy of PAN card. 679 12 Certificate of Incorporation. 680 13 Copy of Certificate of NBFC Registration. 681

M/s Macrosoft Technology Private Limited (AY 2010-11).

S. Particulars of Documents S. No. of PB where No. documents annexed AY 2010-11/VOL- III 1 Copy of Ack. of ITR of AY 2010-11 along with 682-683 computation sheet 2 Copy of Balance sheet of AY 2010-11 along 684-688 with enclosures 3 Copy of relevant page of bank statement 689-692 showing the entry of payment made to assessee. 4 Copy of account confirmation from books of 693 unsecured loan creditor 5 Copy of ledger showing the transaction with 694 unsecured loan creditor 6 Copy of affidavit of Mrs Deepa Kriplani 695-698 director of company. 7 Copy of balance sheet of company of 699-705 31.03.2010, 31.03.2011, 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016. 8 Copy of assessment order passed in the case 706-725 of above named company for AY 2009-10, AY 2011-12, 2012-13 and 2014-15. 9 Copy of ROC master data. 726-727 & CO 44/JP/2018 17 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

10 Copy of Certificate dated 06.11.2011 issued 728 by registrar of company regarding modification of charges 11 Copy of PAN card. 729 12 Certificate of Incorporation. 730 13 Copy of summon no. 2116 dated 31.10.2017 731 issued by DCIT (CC), Kota u/s 131(1) of the Income Tax Act 1961. 14 Copy of reply in response to summon no. 732-733 2116 dated 31.10.2017 issued by DCIT (CC), Kota u/s 131(1) of the Income Tax Act 1961. 15 Copy of notice no. 1612 dated 21.09.2017 734 issued by DCIT (CC), Kota u/s 133(6) of the Income Tax Act 1961. 16 Copy of reply in response to notice no. 1612 735-736 dated 21.09.2017 issued by DCIT (CC), Kota u/s 133(6) of the Income Tax Act 1961 along with dispatch proof.

M/s Prithvi Vinimay Private Limited (AY 2010-11)

S. Particulars of Documents S. No. of PB where No. documents annexed AY 2010-11/VOL- III 1 Copy of Ack. of ITR of AY 2010-11 along with 737-738 computation sheet 2 Copy of Balance sheet of AY 2010-11 along 739-744 with enclosures 3 Copy of relevant page of bank statement 745-768 showing the entry of payment made to assessee. 4 Copy of account confirmation from books of 769-770 unsecured loan creditor 5 Copy of ledger showing the transaction with 771-772 unsecured loan creditor 6 Copy of affidavit of Mr. Ravi Mundra director 773-776 of company. 7 Copy of order passed by Calcutta High Court 777-802 regarding amalgamation of other companies in this company & CO 44/JP/2018 18 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

8 Copy of balance sheet of company of 803-806 31.03.2010, 31.03.2011, 31.03.2012, and 31.03.2013. 9 Copy of assessment order passed in the case 807-815 of above named company for AY 2006-07, and 2014-15. 10 Copy of ROC master data. 816-817 11 Copy of Certificate dated 08.02.2013 issued 818 by registrar of company regarding modification of charges 12 Copy of PAN card. 819 13 Certificate of Incorporation. 820 14 Copy of summon no. 1440 dated 13.10.2017 821-824 and reminder summon no.1578 dated 31.10.2017 issued by Deputy Director Investigation, Unit 1(3) Kolkata u/s 131 of the Income Tax Act 1961. 15 Copy of reply in response to summon no. 825-827 1440 dated 13.10.2017 and reminder summon no.1578 dated 31.10.2017 issued by Deputy Director Investigation, Unit 1(3) Kolkata u/s 131 of the Income Tax Act 1961.

We further note that all these companies were also assessed by the A.O.

U/s 143(3) of the Act and the assessee produced the assessment orders passed for the A.Y. 2005-06 to 2014-15. Once the identity and creditworthiness of these companies are proved with the supporting evidence then in absence of any contrary material to disprove the evidence produced by the assessee, the addition made by the A.O. is not sustainable. It is also not in dispute that all the transactions are carried out through banking channel and the A.O. has not brought any material or fact on record to show that prior to the transaction of loan and share & CO 44/JP/2018 19 DCIT Vs. M/s Hadoti Punji Vikas Ltd. capital, any cash deposit is made in the bank account of the share applicant and loan creditor company. Even the assessee has produced the details of the availability of the funds with all these companies and those financial statements showing the funds with these companies were accepted by the A.O. while passing the assessment order U/s 143(3) of the Act. At the outset, we note that in the case of group concern M/s Kota Dall Mill Vs DCIT in to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018, the Tribunal while deciding the identical issues vide order dated 31/12/2018 has considered the transactions of unsecured loan taken from these companies namely Birla Art Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. in para 15 as under:

“15. We have considered the rival submissions as well as the relevant material on record. The AO has made the addition on account of unsecured loans taken from all the parties whereas the ld. CIT (A) has deleted the addition in respect of the loans taken from M/s. Birla Arts Pvt. Ltd., M/s. Teac Consultant Pvt. Ltd and M/s. Sangam Distributors Pvt. Ltd. and confirmed the addition made on account of loan taken from M/s. Jalsagar Commerce Pvt. Ltd. The issue of addition made in respect of the unsecured loans taken from M/s. Jalsagar Commerce Pvt. Ltd. was considered and decided by us in the assessee’s appeal. The revenue is aggrieved by the order of the ld. CIT (A) as the unsecured loans taken from these three companies were deleted on the ground that the AO was not having any material to substantiate that these & CO 44/JP/2018 20 DCIT Vs. M/s Hadoti Punji Vikas Ltd. companies are controlled by so called entry operators. The relevant finding of the ld. CIT (A) in para 6.1 to 6.14 are as under :

6.1 As discussed in para 4.4.8 above, in respect of these three lenders namely M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited adverse findings alongwith eloquent evidences in the form of statement on oath of relevant entry operators are not visible in the reports dated 28.11.2017 and 06.12.2017 from Investigation Directorate, Kolkata and therefore it could not be treated as shell company.

6.2 Now, coming to the loan from M/s Birla Arts Private Limited no notice under Section 131 or 133(6) of the Act was issued to this company, either by the AO or by the concerned AO or by the DDIT (Inv.) Kolkata. This shows that no independent enquiry was done by the AO to establish that the said companies were shell companies, blind reliance has been placed by the AO on the investigation report of the DDIT, Kolkata. Also, on bare perusal of the assessment order, it is evident that the name of the said companies does not appear in the statement of any of the entry operators as reproduced by the AO in the Assessment Order.

6.3 As far as the remaining lender companies namely, M/s Teac Consultants Private Limited and M/s Sangam Distributors Pvt. Ltd. are concerned, it is evident from the documents placed on record that Notice was issued by DDIT, Kolkata u/s 131 to these companies which was duly complied with and relevant documents were filed. There is no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed providing unsecured loan to the Appellant and source of providing the said loan. Also, it & CO 44/JP/2018 21 DCIT Vs. M/s Hadoti Punji Vikas Ltd. is evident from the assessment Order that no statement/evidence has been relied upon or provided by the AO for substantiating that these companies are controlled by the so-called Entry Operators.

6.4 For these three creditors namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited, the Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents along with assessment orders in case of lender companies, which are available at page no.443 to 644 of PB. From these documentary evidences placed on record, identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to these companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited totaling to Rs. 12,36,40,000/- is unjustified; firstly, on the ground that no inquiries were made to rebut the evidences filed by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, & CO 44/JP/2018 22 DCIT Vs. M/s Hadoti Punji Vikas Ltd. creditworthiness of creditor and genuineness of the transaction. In particular, none of the material or statements have been provided in the Assessment Order wherein names of the said companies are mentioned. Notably, the transactions with the said four companies are duly verifiable from confirmation of accounts placed at page no. 453 to 455, 532 to 534 & 588 to 589 of PB with supporting bank statements placed at page no. 444 to 452, 521 to 531 & 571 to 587 PB and have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions.

6.5 Furthermore, from the perusal of documentary evidences submitted by the Appellant, it is seen that transactions have been done through banking channels and on the date of making of loans, there is balance available in the accounts of the borrowers, which proves the creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of any of the creditors at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedent in case of CIT V. VARINDER RAWLLEY [2014] 366 ITR 232 (PUNJAB & HARYANA), CIT V. VIJAY KUMAR JAIN [2014] 221 TAXMAN 180, CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271, Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat) and others as referred by the Appellant, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that no notice u/s 131 or 133(6) of the IT Act were issued to M/s Birla Arts Private Limited, however as far as the companies M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited are concerned, these have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO.

& CO 44/JP/2018 23 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

6.6 The AO during assessment proceedings took negative inference from the statement of Shri Rajendra Agarwal recorded during search u/s 132(4) wherein he made disclosure in respect of Long Term Capital Gain in his individual hands. I have gone through the statement of Shri Rajendra Agarwal and his disclosure made in his statement, Notably, the disclosure made was in his personal capacity only and with respect to LTCG only and not in respect of any other transactions be it be receipt of unsecured loans. Further, Rajendra Agarwal is not a partner in the Appellant Firm. Therefore, I find that in the absence of any nexus of the Statement of Shri Rajendra Agarwal with the appellant firm or its total income, this basis of addition adopted by the AO is farfetched & cannot be concurred.

6.7 It is further seen that AO has not brought any specific defect / discrepancies in the direct evidence brought on record by the Appellant. The AO has observed that on the date of debit in the account statement of creditor, there is corresponding credit entry of equal amount, however, this observation of the AO is itself not sufficient to prove beyond doubt that Appellant routed its unaccounted income by these companies rather it proves the source in the hands of the Appellant. It is usual business practice, while making loans to party, funds are required to be arranged by the lender, therefore reflection of such entries in bank statement doesn’t lead to draw any adverse inference against the Appellant. Needless to say that Appellant is not required to prove source of the source u/s 68 of the Act in view of the settled judicial precedents.

6.8 In my considered view, mere not believing an explanation cannot lead to a conclusion that the borrowed amount is the income of the assessee(borrower) from some undisclosed sources while in the & CO 44/JP/2018 24 DCIT Vs. M/s Hadoti Punji Vikas Ltd. present case, no evidences of any generation of undisclosed income or their utilization in the form of unsecured loans has been found and brought on record.

6.9 Similarly, I find that various observations of the AO on balance sheet / ITR of the lender companies are misconstrued, misconceived and are factually incorrect. I further find that the various other allegations / observations of the AO are misconceived and premature only and in view the appellant’s submission made in para 10 as reproduced in Para No. 4.2 of this order, the same does not lead any where to draw any adverse inference against the Appellant. Further, the various case laws relied upon by the AO are distinguishable from the facts of the present case as categorically countered by the Appellant in his written submissions as mentioned in para 16 as reproduced in Para No. 4.2 above.

6.10 It is settled judicial precedents that under the income tax law primary burden u/s 68 of the Act is on the Appellant and once this burden is discharged u/s 68 of the Act, no addition u/s 68 of the Act is justifiable in the hands of the Assessee in view of the judgments in case of Shree Barkha Synthetics Ltd. V/s Assistant Commissioner of Income-tax (2006) 155 TAXMAN 289 (RAJ.), COMMISSIONER OF INCOME-TAX, JAIPUR -II V. MORANI AUTOMOTIVES (P.) LTD. [2014] 264 CTR 86 (RAJASTHAN- HC), CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC), Commissioner of Income-tax v/s Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Madras)(MAG.), Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Rajasthan), CIT v/s. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom), Commissioner of Income-tax-I v. Patel RamniklalHirji [2014] 222 Taxman 15 (Gujarat)(MAG.), Principal & CO 44/JP/2018 25 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

Commissioner of Income-tax-4 v. G & G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recently by Hon’ble Delhi Tribunal in case of ITO vs. Softline Creations (P) Ltd. in vide its order dated 10.02.2016. Further, Hon’ble Apex Court as well as High Court has held that once the identity of creditor is established, the department is free to reopen the assessment of creditor and no addition can be made in the hand of borrower as rightly held in case of CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC), Commissioner of Income-tax v. Rock Fort Metal & Minerals Ltd. [2011] 198 TAXMAN 497 (Delhi), Divine Leasing & Finance Limited [2008] 299 ITR 268 (Delhi) CIT v. Orissa Corporation (P.) Ltd. [1986) 159 ITR 78/25 Taxman 80F (SC) and others on this question of law.

6.11 Further, power to call for information/production of evidences or enforcing attendance under the law is given to the income tax authorities only and therefore, in view of the judgment CIT v/s Victor Electrodes Ltd. [2010] 329 ITR 271, the Appellant cannot be fastened upon the burden to produce the lenders before the assessing authorities though in the instance case, appellant has cooperated in assessment by showing his willingness to produce the directors of lender companies and some directors/officer were also produced before the AO. Thus, in view of the judicial precedents referred above, under the facts and circumstances of the present case it is untenable to make any addition for alleged non- appearance by the concerned person before the authorities though they complied with the notices/summon issued to them.

6.12 In the present case in hand, I find that AO asked Assessee to produce lender companies without verifying the facts of lending money from respective jurisdiction assessing officer and without & CO 44/JP/2018 26 DCIT Vs. M/s Hadoti Punji Vikas Ltd. verifying their returns of income and balance sheet wherein these transactions are reported, accordingly the AO has not followed the principles laid down under section 68 of the Act. The Hon’ble Gujrat High Court in the case of Commissioner of Income-tax v. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) has held that:- Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15]

Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16]

In the instance case before me, the AO has not followed the due procedure of law u/s 68 of the Act. Therefore, requiring the Assessee to produce the directors of the lender company was not legally tenable in view of the judgment of Gujarat High Court (supra).

6.13 It is noted that no clinching evidences has been brought on record that any unaccounted income was routed through unsecured loans by the Appellant Firm as no evidences as to receipt/payment of cash for receipt of unsecured loans were found during search in case of the Appellant. Mere suspicion howsoever strong cannot take place of evidence. Thus, in the absence of any incriminating material found during search to rebut the evidences filed by the & CO 44/JP/2018 27 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

Appellant, the impugned addition made in respect of unsecured loan u/s 68 of the Act is legally untenable and unjustified.

6.14 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon’ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition in respect of unsecured loans from 03 companies namely, M/s Birla Arts Private Limited, M/s Teac Consultants Private Limited and M/s Sangam Distributors Private Limited totaling to Rs.12,36,40,000/- is not sustainable and hence the same stands deleted.”

Thus the ld. CIT (A) was of the view that so far as the loans taken from M/s. Jalsagar Commerce Pvt. Ltd., the AO was having the statement of Shri Anand Sharma to the effect that the said company was involved in providing accommodation entry and controlled by the entry operator whereas in respect of these three companies the AO was not having any document or even the statement of any person who are entry operators and controlling these companies so as to establish that the transactions are in the nature of bogus accommodation entries. We have already considered the issue on merits in respect of the addition made on account of unsecured loans taken from M/s. Jalsagar Commerce Pvt. Ltd. whereas the loans taken from these companies are even as per the revenue on better footings of genuineness than M/s. Jalsagar Commerce Pvt. Ltd. There is no dispute that the AO was not having any evidence or even any statement to impugn the transactions as bogus accommodation entries. Further, the assessee has produced all the relevant supporting documentary evidence as we have reproduced in the foregoing paras as referred by the ld. A/R of the assessee and & CO 44/JP/2018 28 DCIT Vs. M/s Hadoti Punji Vikas Ltd. these creditor companies were subject to regular assessments and scrutiny assessments under section 143(3) were completed by the department as per the details reproduced. Therefore, once these creditor companies are regularly assessed to tax and duly examined by the department at the scrutiny assessments, then the transactions of loans cannot be held as bogus when the same were accepted in the hands of the creditors. We further note that these companies were having sufficient funds in the shape of share capital, reserves and surplus. The details of the share capitals of these companies are as under :-

M/s Birla Arts Pvt. Ltd Assessment Year Financial Year Share capital raised 1998-1999 1997-1998 12,90,000 1999-2000 1998-1999 16,82,000 2003-2004 2002-2003 50,00,000 2004-2005 2003-2004 2,74,40,000 2005-2006 2004-2005 3,69,50,000 2007-2008 2006-2007 3,26,00,000 2010-2011 2009-2010 250,00,000 2011-2012 2010-2011 20,00,000 2014-2015 2013-2014 67,57,37,000

M/s Teac Consultants Pvt. Ltd Assessment Year Financial Year Share capital raised 1996-1997 1995-1996 26,00,000 2001-2002 2000-2001 73,98,000 2003-2004 2002-2003 1,00,00,000 2005-2006 2004-2005 4,85,50,000 2007-2008 2005-2006 3,35,00,000 2010-2011 2009-2010 2,76,00,000 2011-2012 2010-2011 94,00,000 & CO 44/JP/2018 29 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

M/s Sangam Distributors Pvt. Ltd. Assessment Year Financial Year Share capital raised 2005-2006 2004-2005 2,47,50,000 2006-2007 2005-2006 10,50,00,000 2007-2008 2006-2007 7,93,50,000 2011-2012 2010-2011 2,50,00,000 2013-2014 2012-2013 13,00,00,000 These details clearly show that at the time of granting of loans to the assessee these companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As we have discussed earlier that the AO has not pointed out any discrepancy in the financial statements or in the bank account statements of the loan creditors to show that there was deposit or introduction of the cash prior to giving the loan to the assessee, accordingly, in view of the facts and circumstances of the case as well as our finding on the issue of addition in case of M/s. Jalsagar Commerce Pvt. Ltd., we do not find any error or illegality in the order of ld. CIT (A) qua this issue.

7. The remaining two companies namely, M/s Prithvi Vinimay Pvt. Ltd. and M/s Macro Soft Technology Pvt. Ltd. were also considered and decided by the Tribunal in the case of M/s Kota Dall Mill (supra) in para 19 as under:

“19. Having considered the rival submissions as well as the relevant material on record, we note that the AO has made the addition of & CO 44/JP/2018 30 DCIT Vs. M/s Hadoti Punji Vikas Ltd. the amount of partners’ capital from these four corporate entities on identical reasoning as the addition was made on account of unsecured loans. During the year under consideration, the assessee firm received Rs. 42,47,25,000/- on account of partners’ capital from the corporate partners as under :-

S. Name of the Partner Addition of Capital No. during AY under Appeal 1 M/s Bansidhar Advisory Private Rs. 13,22,20,000/- Limited 2 M/s Vasundhara Advisory Private Rs. 8,96,45,000/- Limited

3 M/s Prithvi Vinimay Private Limited Rs. 13,93,45,000/-

4 M/s Macro Soft Technology Private Rs. 6,35,15,000/- Limited Total Rs. 42,47,25,000/-

We find that the assessee produced all the relevant documentary evidence in support of the transactions before the AO. The summary of these documents are as under :- S.No Particulars Paper book Page No.

M/s Vasundhara Advisory Pvt. Ltd. • Copy of ledger a/c of partner from books of accounts of assessee. 1 843-845 • Copy of Ack. of ITR of AY 2010-11 and computation of total income. 2 846-847 • Copy of Balance sheet of AY 2010-11 3 848-855 • Confirmation of a/c of the assessee from books of accounts of partner. 4 856-859 • Copies of relevant bank a/c of partner showing the entries of payment 5 860-872 made to assessee against capital introduce. • Copy of affidavit executed by Mr. Ravi Mundra director of Doshi 6 873-875 Management Pvt. Ltd on behalf of amalgamated Company M/s Vasundhara Advisory Pvt Ltd, • Copy of order of Calcutta High Court regarding amalgamation of 7 876-900 company in Doshi Management Pvt. Ltd • Copy of balance sheet of company of 31.03.2010, 31.03.2011, 8 901-904 31.03.2012 and 31.03.2013. • Copy of assessment order passed in the case of above named company 9 905-908 for AY 2014-15. & CO 44/JP/2018 31 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

• Copy of ROC master data. 10 909 • Copy of certificate dated 06.11.2011 issued by registrar of companies 11 910 regarding modification of charges/mortgage. • Copy of PAN card. 12 911 • Copy of Summon No. 1439 dated 13.10.2017 and reminder notice No. 13 912-915 1579 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. • Copy of reply submitted by the company in response to 14 916-918 summon/notice issued to it along with dispatched proof M/s. Prithivi Vinimay Pvt. Ltd. • Copy of ledger a/c of partner from books of accounts of assessee. 15 919-921 • Copy of Ack. of ITR of AY 2010-11 and computation of total income. 16 922-923 • Copy of Balance sheet of AY 2010-11 17 924-942 • Confirmation of a/c of the assessee from books of accounts of partner. 18 943-946 • Copies of relevant bank a/c of partner showing the entries of payment 19 947-958 made to assessee against capital introduce • Copy of affidavit executed by Mr. Ravi Mundra director of Doshi 20 959-962 Management Pvt. Ltd on behalf of amalgamated Company M/s Prithvi Vinimay Pvt Ltd, • Copy of order of Calcutta High Court regarding amalgamation of 21 963-987 company in Doshi Management Pvt. Ltd • Copy of balance sheet of company of 31.03.2010, 31.03.2011, 22 988-991 31.03.2012 and 31.03.2013. • Copy of assessment order passed in the case of above named company 23 992-1000 for AY 2006-07 and 2014-15. • Copy of ROC master data. 24 1001-1002 • Copy of certificate dated 08.02.2013 issued by registrar of companies 25 1003 regarding modification of charges/mortgage. • Copy of PAN card. 26 1004 • Copy of Summon No. 1440 dated 13.10.2017 and reminder notice No. 27 1005-1008 1578 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. • Copy of reply submitted by the company in response to 28 1009-1011 summon/notice issued to it along with displaced proof M/s Macro Soft Technology Pvt. Ltd. • Copy of ledger a/c of partner from books of accounts of assessee. 29 1012-1013 • Copy of Ack. of ITR of AY 2010 and computation of total income. 30 1014-1015 • Copy of Balance sheet of AY 2010-11 31 1016-1024 • Confirmation of a/c of the assessee from books of accounts of partner. 32 1025-1027 • Copies of relevant bank a/c of partner showing the entries of payment 33 1028-1033 made to assessee against capital introduce. • Copy of affidavit of Deepa Kriplani director of company. 34 1034-1037 • Copy of balance sheet of company of 31.03.2010, 31.03.2011, 35 1038-1044 31.03.2012, 31.03.2013, 31.03.2014, 31.03.2015 and 31.03.2016.

& CO 44/JP/2018 32 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

• Copy of assessment order passed in the case of above named company 36 1045-1064 for AY 2009-10, 2011-12, AY 2012-13 and 2014-15. • Copy of ROC master data. 37 1065-1066 • Copy of certificate dated 06.11.2011 issued by registrar of companies 38 1067 regarding modification of charges/mortgage. • Copy of PAN card. 39 1068 • Copy of notice No. 1604 dated 21.09.2017 issued by DCIT, CC, Kota 40 1069 u/s 131 of Income Tax Act, 1961. • Copy of Reply of Notice submitted by the company 41 1070 • Copy of Summon No. 2115 dated 31.10.2017 issued by DCIT, CC, 42 1071 Kota u/s 131 of Income Tax Act, 1961. • Copy of Reply of Notice submitted by the company on 13.11.2017 and 43 1072-1074 23.11.2017. M/s Banshidhar Advisory Pvt. Ltd • Copy of ledger a/c of partner from books of accounts of assessee. 44 1075-1077 • Copy of Ack. of ITR of AY 2010-11 and computation of total income. 45 1078-1079 • Copy of Balance sheet of AY 2010-11 46 1080-1089 • Confirmation of a/c of the assessee from books of accounts of partner. 47 1090-1093 • Copies of relevant bank a/c of partner showing the entries of payment 48 1094-1100 made to assessee against capital introduce. • Copy of affidavit executed by Mr. Ravi Mundra director of Doshi 49 1101-1103 Management Pvt. Ltd on behalf of amalgamated Company M/s Banshidhar Advisory Pvt Ltd, • Copy of order of Calcutta High Court regarding amalgamation of 50 1104-1128 company in Doshi Management Pvt. Ltd • Copy of balance sheet of company of 31.03.2010, 31.03.2011, 51 1129-1132 31.03.2012 and 31.03.2013. • Copy of assessment order passed in the case of above named company 52 1133-1137 for AY 2014-15. • Copy of ROC master data. 53 1138-1139 • Copy of certificate dated 06.11.2011 issued by registrar of companies 54 1140 regarding modification of charges/mortgage. • Copy of PAN card. 55 1141 • Copy of Summon No. 1438 dated 13.10.2017 and reminder notice No. 56 1142-1145 1580 dated 31.10.2017 issued by DDIT (Investigation), Unit-1(3), Kolkata u/s 131 of Income Tax Act, 1961. • Copy of reply submitted by the company in response to 57 1146-1148 summon/notice issued to it along with dispatched proof Thus it is apparent that in support of the claim of identity of the corporate partners, their capacity and genuineness of the transactions, relevant documentary evidences were already filed before the AO. The assessee has also produced the assessment orders passed under section 143(3) for various assessment years in case of these four corporate partners who have & CO 44/JP/2018 33 DCIT Vs. M/s Hadoti Punji Vikas Ltd. introduced the partners’ capital in the assessee firm. The details of the assessment orders passed under section 143(3) are as under :- Assessment u/s 143(3) Name of Company Assessment Paper Book page no. year M/s Vasundhara Advisory Pvt. Ltd. 2014-15 905

M/s Prithivi Vinimay Pvt. Ltd. 2006-07 992 M/s Prithivi Vinimay Pvt. Ltd. 2014-15 998 M/s Macro Soft Technology Pvt. Ltd. 2009-10 1048-1050 M/s Macro Soft Technology Pvt. Ltd. 2011-12 1052-1053 M/s Macro Soft Technology Pvt. Ltd. 2012-13 1059-1060 M/s Macro Soft Technology Pvt. Ltd. 2014-15 1061-1062 M/s Banshidhar Advisory Pvt. Ltd 2014-15 1133-1134

All these four companies status has been shown in the Master data of ROC as “Active” and three of which, namely, M/s. Banshidhar Advisory Pvt. Ltd., M/s.Prithvi Vinimay Pvt. Ltd. and M/s. Vasundhara Advisory Pvt. Ltd. status was shown as “Amalgamated”. Therefore, these companies have already under gone process of amalgamation through the approval of the Hon’ble High Court. Hence, there cannot be any dispute about the identity and the affairs of these companies as genuine. The assessee also produced the records about the availability of the funds with these four companies which were sufficient to introduce the partners’ capital. The details of the source of funds of these four companies as submitted by the assessee are as under:-

M/s Vasundhra Advisory Pvt. Ltd. Assessment Financial Share capital Year Year raised 2006-07 2005-06 5,76,00,000 2010-11 2009-10 6,61,50,000 2011-12 2010-11 5,43,50,000 2014-15 2013-14 10,82,35,000 & CO 44/JP/2018 34 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

M/s Prithvi Vinimay Pvt. Ltd Assessment Financial Share capital Year Year raised 2005-06 2004-05 1,51,00,000 2006-07 2005-06 4,68,20,000 2007-08 2006-07 2,72,20,000 2010-11 2009-10 7,84,00,000 2011-12 2010-11 1,96,00,000 2014-15 2013-14 12,87,50,000

M/s Macro Soft Technology Pvt.Ltd Assessment Financial Share capital Year Year raised 2002-03 2001-02 9,98,000 2004-05 2003-04 9,75,00,000

M/s Bansidhar Advisory Pvt. Ltd Assessment Financial Share capital Year Year raised 2006-07 2005-06 5,76,00,000 2010-11 2009-10 10,64,00,000 2011-12 2010-11 1,61,00,000 2014-15 2013-14 15,00,00,000 The assessee has also submitted the records regarding the corporate guarantee of Rs. 73.60 crores given by the SBBJ in favour of M/s. Bansidhar Advisory Pvt. Ltd. and, therefore, it was brought on record the fact that the bank has issued the corporate guarantee only after verification of the financial condition of the said company. We find that the bank guarantee to the company of Rs. 73.60 crores issued by the bank is always secured by the liquid-able assets of the company which shows that the company was having underlined assets to secure the said bank guarantee and consequently the creditworthiness of the said company was duly examined by the bank. The ld. CIT (A) has considered all these facts while deciding this issue in para 7.3 to 7.3.9 as under :- 7.3 It may be mentioned that same procedure of remand report have been done as discussed in para 4.3 above and the same is not & CO 44/JP/2018 35 DCIT Vs. M/s Hadoti Punji Vikas Ltd. repeated here. Similarly, as discussed in para 4.4.3 this matter too was referred by the AO for verification by issuing commission u/s 131(1)(d) to the Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata vide same letters and same reports as discussed in para 4.4.4 were received from The Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata. As observed in para 4.4.5 & 4.4.6, the two reports dated 28.11.2017 and 06.12.2017 from The Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata are capable to findout where the appellant has employed foul means and where the transaction are of rutine business requirements. From the careful perusal of these the two reports dated 28.11.2017 and 06.12.2017 from the Deputy Director of Income Tax (Inv), Unit-1(3), Kolkata. I don’t find adverse findings alongwith eloquent evidences in the form of statement on oath of relevant entry operators in respect of capital contributions by four companies, namely, M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited. The same is evident from the respective details for above lenders in the above reports dated 28.11.2017 and 06.12.2017 as under:- “With reference to your above quoted letter, this office has issued Summon notices u/s 131 of the Income Tax Act, 1961 dated 13.10.2017 to the following sixteen (16) companies based in Kolkata as mentioned in your above quoted letter requesting to furnish the requisite details related to share application money/share premium/special deposits/unsecured loan/capital introduced by partners or any transactions made with group concerns of the KDM Group for the period from F.Y. 2009-10 to 2015-16 within & CO 44/JP/2018 36 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

05 (five) days of receipt of Summon Notices. As regards 5 (five) assesses, Summons notices u/s 131 of the Income tax Act, 1961 has not been issued since it is observed that the present address of five (5) companies is located either in Rajasthan or Patiala. ............. In response to said both notices dated 13.10.2017 & 31.10.2017, none of the directors appeared personally but the following companies have submitted their reply containing various details by post on different dates, the details of which is mentioned under and the same is being forwarded herewith in original for your further necessary action at your end:” S. No. NAME OF CONCERNS PARTICULARS OF Date of submission SUBMISSION received by post

13. VASUNDHARA Nature of business, 07.11.2017 ADVISORY PVT LTD copy of Hon’ble High (AMALGAMATED WITH Court order in respect DOSHI MANAGEMENT of Amalgamation, PVT LTD) transactions related to investment in equity shares and capital & CO 44/JP/2018 37 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

contribution with KDM group concern, bank statement depicting the transactions with KDM group concerns, audited accounts for F.Y. 09-10 to 12-13, source of fund, copy of certificate of incorporation & PAN Card, copy of ledger & copy of assessment order u/s 143(3) for the A.Y. 14-15.

14. PRITHVI VINIMAY PVT Transactions details, 07.11.2017 LTD (AMALGAMATED copy of ledger along WITH DOSHI with supporting MANAGEMENT PVT documents incl. Share LTD) applications, share allotment, account confirmation from Kota Dall Mill, Form- 2, audited accounts for F.Y. 09-10 to 12- 13, copy of assessment order u/s 143(3) for A.Y. 14-15, copy of certificate of incorporation and PAN card, details regarding source of fund, bank statement depicting the transactions details & copy of Hon’ble High Court order in respect of Amalgamation. No summons were issued for M/s Macro soft Technology Pvt. Ltd by DDIT (Inv.) Unit 1(3) Kolkata

“.......this office has also verified the companies as per database of paper/shell companies/entities prepared by Directorate of Investigation Wing, Kolkata on the basis of statements of various entry operators at different occasions before the Income Tax Department. On verification, the following facts has been emerged out from the database & CO 44/JP/2018 38 DCIT Vs. M/s Hadoti Punji Vikas Ltd. which reveals that some companies are listed in the database of paper/shell companies controlled & managed by entry operators and the same is being produced as under in the tabular form: SL. NAME OF PAN ADDRESS GIVEN IN NOTICE ENTRY DUMMY NO. CONCERNS COMMISSION ISSUED OPERATOR DIRECTOR 12BANSIDHAR AACCB7815M 11A ESPLANADE NOTICE This company SHASHI EAST 3RD FLOOR, ADVISORY PVT LTD ISSUED U/S is KUMARI (AMALGAMATED KOLKATA – 700069 131 AT amalgamated RAMANI- WITH DOSHI GIVEN with M/s The name of MANAGEMENT ADDRESS Doshi these PVT LTD) Management dummy Pvt Ltd which directors are has been listed in identified as database, paper/shell who company worked/wor controlled & ks under managed by different entry entry operator operators for Anand Sharma different period, the details of which has been given below in tabular form. 13VASUNDHARA AACCV1837B 11A ESPLANADE NOTICE This company PUNAM EAST 3RD FLOOR, ADVISORY PVT LTD ISSUED U/S is amalgamate RAMANI – (AMALGAMATED KOLKATA – 700069 131 AT with M/s The name of WITH DOSHI GIVEN Doshi these MANAGEMENT ADDRESS Management dummy PVT LTD) Pvt Ltd which directors are has been listed in identified as database, paper/shell who company worked/wor controlled & ks under managed by different entry entry operator operators for Anand Sharma different period, the details of which has been given below in tabular form. 14PRITHVI VINIMAY AADCP4531D 11A ESPLANADE NOTICE This company DEEPAK EAST 3RD FLOOR, PVT LTD ISSUED U/S is TIBREWAL – (AMALGAMATED KOLKATA – 700069 131 AT amalgamated The name of & CO 44/JP/2018 39 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

WITH DOSHI GIVEN with M/s these MANAGEMENT ADDRESS Doshi dummy PVT LTD) Management directors are Pvt Ltd which listed in has been database, identified as who paper/shell worked/wor company ks under controlled & different managed by entry entry operators for operator different Anand Sharma period, the details of which has been given below in tabular form. It may be mentioned here that amalgamation took place in July 2014 where as statement of Shri Anand Sharma are prior to March 2014.

“Further, the verification and investigation of past and present directors of following companies has been carried out with the help of Database of Entry Operators prepared by Directorate of Investigation Wing, Kolkata which reveal that the directors of these companies have been listed under the name of various entry operators who are engaged in the business of providing accommodation entries by appointing various dummy directors by known entry operators whose names has been mentioned in the under mentioned table. S. No. Name of Name of Period Name of Entry company Director(s) Operator

It may be mentioned here that three companies namely; M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited were amalgamated with M/s Doshi Management Pvt Ltd in July 2014 in accordance with permission from Kolkata High Court, whereas the statements entry operator Anand Sharma are dated 02.07.2013 and 06.02.2017 i.e. prior to March 2014 by which M/s Doshi Management Pvt. Ltd. Might have been identified as paper/shell company. Neither statement of Shri Anand Sharma not any list or annexure of said statements indentifying M/s Doshi Management Pvt. Ltd. Is available on record, though it is included in the report of DDIT (Inv.), Unit 1(3), Kolkatta. Therefore, the label of paper/shell company cannot be applied to M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as at the relevant time they were not part of M/s Doshi Management Pvt. Ltd. Moreover, in data base of directorships for these companies; M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as reproduce above also clearly show no direct control or influence of the alleged entry operator Anand Sharma. Similarly, the statement of Ankit Bagri is not implicating M/s Bansidhar Advisory Pvt. Ltd. in any manner as Shell Company. There are no statements from Nawal Kishore Jalan and Pankaj Agarwal on record implicating M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited as shell companies. 7.3.1 In view of above ground reality I am treating M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited not as shell company as treated by the AO as nowhere adverse facts, details and & CO 44/JP/2018 41 DCIT Vs. M/s Hadoti Punji Vikas Ltd. corroboratory evidences in the form of statements of the alleged entry operator Anand Sharma or Ankit Bagri implicating them are found in the reports dated 28.11.2017 and 06.12.2017 from Investigation Directorate, Kolkata. I have also considered the assessment order, the remand report along with its all enclosures, the relevant statements reproduced in the Assessment Order by the AO, the submissions made by the appellant along with paper book for the year under consideration and all relevant material placed on record and could not find a single piece of evidence to say that any one of above could be shell company. 7.3.2 It is seen that during this year, the AO has made additions in the hands of Assessee on account of partner’s capital from four companies, namely, M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited. The AO alleged that despite providing huge capital contribution, none of the newly introduced Partner is interested in the business activities of the Assessee Firm as there is no working Partner on their behalf and none of them have nominated any Director or other Officer of the Company to act as Working Partner in the Assessee Firm. 7.3.3 However, the A/R of the Appellant while representing the case has argued the matter in detail and has filed detailed submissions as reproduced above in response to the findings and allegations of the AO. A summarized form of the submissions and arguments put forth by the A/R is given hereunder: a) The Appellant has duly discharged the initial onus cast upon it u/s 68 of the Act by furnishing the Name, Address, PAN, Copy of ITR, Copy of Bank Statement and Confirmation from the Partners, Balance Sheet etc. Through the said documents, identity, creditworthiness of the corporate & CO 44/JP/2018 42 DCIT Vs. M/s Hadoti Punji Vikas Ltd. partners along with the genuineness of the transactions carried out with them was duly established. b) The AO has not observed anything in the assessment order regarding any defect or flaw in the documents submitted. c) The capital contributions of the companies that have been treated as unexplained by the AO were introduced in AY 2012-13. In the assessment proceedings of AY 2012-13 which was completed u/s 143(3) of the Act, such capital contributions were treated as genuine. Thus, once in the completed assessment proceedings the capital contribution of those companies has been considered as genuine than there is no reason to treat the capital received from such companies during the year as non genuine without having any material and only on presumption, assumption and surmises. d) Submission made in Ground No. 2 in respect of unsecured loans may also be treated as a submissions for the purpose of this ground of appeal. e) All the partners must be working partners is not mandatory under any of the laws in force. f) All the transactions were done through proper banking channels. g) The notices issued to the four companies u/s 131/133(6) of the Act were duly complied with along with the copy of the relevant documents. h) Affidavits of the directors of all companies were submitted wherein the Directors confirmed their investment as partner’s capital in the Appellant Firm. i) No reliance can be placed on rejected books of account for working out peak credit for the purpose of making additions in the hands of the appellant.

& CO 44/JP/2018 43 DCIT Vs. M/s Hadoti Punji Vikas Ltd. j) The reports/inspection report and statements relied upon by the AO were not provided to the appellant during assessment proceedings and directly reproduced in the assessment order.

7.3.4 In my considered view, as far as the partner’s capital from the companies namely, M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited is concerned, it is evident from the documents placed on record that Notice was issued by DDIT, Kolkata u/s 131/133(6) to these companies which was duly complied with and relevant documents were filed. There is no fact on record that the notices remained unserved or these companies were not found existent on the given addresses. Furthermore, Affidavit of the directors were also submitted wherein the Directors confirmed investment in the Appellant Firm in the form of partner’s capital. 7.3.5 The only allegation of the AO is that the Directors of these companies have not been nominated as working partners. In my view, such allegation is without any substance as there is no legal obligation on a partnership firm to appoint all the partners as working partners. There are various partners in firms which only do investment in the firm and do not participate in the regular business activities of the firm. Such partners are called sleeping partners and the said partners do exist in the normal business parlance. 7.3.6 The Appellant in discharge of its onus u/s 68 of the Act has filed confirmation of accounts as well as bank statement reflecting the transactions with other substantiating documents as well as the relevant assessment orders, which are available at page no. 645 to 867 of PB. From these documentary evidences placed on record, & CO 44/JP/2018 44 DCIT Vs. M/s Hadoti Punji Vikas Ltd. identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Pat), the Hon'ble Patna High Court has held "if the loans are given by an account paying cheque, it amounts to identification of the parties and discharge of burden by the borrower." In view of the above, it is clear that Appellant discharged its burden u/s 68 of the Act. Even otherwise, there is no adverse finding of any investigation conducted by the department in relation to the said companies. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the Appellant, I find that the addition in respect of the partner’s capital from the aforesaid 04 companies totaling to Rs. 42,47,25,000/- is unjustified; firstly, on the ground that no inquiries were made to rebut the evidences filed by the Appellant and secondly, on the ground that Appellant duly discharged its burden casted upon u/s 68 of the Act to explain nature and source of the transactions by proving the identity, creditworthiness of the corporate partners and genuineness of the transaction. Notably, the transactions with the said four companies are duly verifiable from confirmation of accounts filed at page 650 to 653, 708 to711, 763 to 766 & 830 to 832 of PB with supporting bank statements placed at page 654 to 660, 712 to716, 767 to 778 & 833 to 838 of PB and have been carried out through banking channels only and thus, appellant has duly proved the identity, creditworthiness and genuineness of the transactions. 7.3.7 Furthermore, from the perusal of documentary evidences submitted by the Appellant, it is seen that transactions have been & CO 44/JP/2018 45 DCIT Vs. M/s Hadoti Punji Vikas Ltd. done through banking channels and on the date of making of loans, there is balance available in the accounts of the borrowers, which proves the creditworthiness and genuineness of the transactions. There is no case of any cash deposition in the account of any of the investor companies at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, in view of the settled judicial precedents as already relied upon and mentioned in Ground No. 2 above, I am of the considered view that Appellant duly discharged its burden casted upon it u/s 68 of the Act. It is further seen that M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited have duly replied to the notices issued by DCIT/DDIT(Inv.), Kolkata in respect of commission, these facts remain uncontroverted by the AO. 7.3.8 Further, it is evident from the Assessment Order that other findings and allegations of the AO with respect to the partner’s capital are similar to the findings made by the AO with respect to the unsecured loans of the Appellant. As the said similar findings and allegations have already been dealt with in Ground No. 2 above, these are not again dealt with for the sake of brevity. However, my view regarding the findings and allegations as already discussed in Ground No. 2 above, shall mutatis mutandis apply to the findings and allegations of the AO with respect to partner’s capital made in this ground of appeal.

7.3.9 In view of the above discussion of relevant facts and following the several ratios on the subject from Hon’ble Apex Court, High Courts including jurisdictional High Courts, Tribunals including jurisdictional Tribunals, the impugned addition of Rs.

& CO 44/JP/2018 46 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

42,47,25,000/- on account of partner’s capital from M/s Bansidhar Advisory Private Limited, M/s Vasundhara Advisory Private Limited, M/s Prithvi Vinimay Private Limited and M/s Macro Soft Technology Private Limited is not sustainable and hence the same stands deleted.” Thus the finding of the ld. CIT (A) are based on the facts as well as the documentary evidence produced by the assessee whereas the AO has not brought on record any contrary evidence except the allegation made in the report of the Investigation Wing Kolkata. Therefore, the documentary evidences brought by the assessee cannot be negated merely on the basis or allegation made in the report which is nothing but narration of the statements recorded of certain persons. The report of the DDIT Investigation cannot substitute the documentary evidence. Accordingly, in view of the facts and circumstances, we do not find any error or illegality in the order of the ld. CIT (A) qua this issue.

The finding of the ld. CIT(A) for the year under consideration is based on the identical grounds as in the case of M/s Kota Dall Mill while deleting the addition made by the A.O. in respect of all these five companies. Thus having regard to the facts and circumstances of the case as well as the documentary evidence produced by the assessee in respect of the claim, the addition made by the A.O. based on merely allegations in the report of DDIT (Inv.), Kolkata without any supporting cogent material or documentary evidence is not sustainable. Therefore, in view of the earlier order as well as evidence produced by the assessee, we do not find any & CO 44/JP/2018 47 DCIT Vs. M/s Hadoti Punji Vikas Ltd. error or illegality in the order of the ld. CIT(A) in deleting the addition.

Hence, we uphold the same.

8. Ground No. 7 of the revenue’s appeal is regarding the disallowance U/s 14A of the Act. The A.O. has observed that the assessee has incurred interest expenditure of Rs. 51,20,219/- and was considered to be an expenditure directly incurred in respect of investment in shares and income from such investment does not form part of the total income.

Accordingly, the A.O. made disallowance of interest expenditure of Rs. 51,20,219/- and further a disallowance on account of in direct expenditure under Rule 8D(2)(ii) of the Income Tax Rules, 1962 was also made 1% of the average investment. On appeal, the ld. CIT(A) has deleted the addition on the ground that the A.O. has even not recorded any satisfaction that the alleged expenditure has any direct nexus with the investment when the assessee was having sufficient interest free funds.

We further note that there is no fresh investment made by the assessee during the year but all these investments were old investments, therefore, in absence of any finding that the assessee has used the borrowed fund at the time of making the investment, the disallowance on the ground of interest expenditure is not warranted. As regards the indirect expenditure, the ld. CIT(A) has noted that the A.O. has applied amended provisions of Rule 8D(2)(ii) of the Rules, however, that the amendment is w.e.f.

02/6/2016 and not applicable for the year under consideration even otherwise when these investments are old investments and the A.O. has not identified which of the indirect expenditure for any direct or proxy nexus for earning the exempt income. The disallowance by invoking the provisions of Rule 8D of the Rules is not automatic, there may be case when the assessee does not claim any expenditure or the expenditure claimed by the assessee is less than the amount of disallowance computed under Rule 8D of the Rules then the disallowance if any cannot be more than the actual claim of expenditure. The ld. CIT(A) has considered this issue in para 9.3 and 9.3.1 as under:

"9.3 I have considered the rival submissions and perused the material on record.

9.3.1 In my considered view, the AO has legally erred in directly applying the provision of section 14A of the Act, without recording any satisfaction as to the correctness of the claim made by the Appellant. In the assessment order, there is no satisfaction recorded by the AO as & CO 44/JP/2018 49 DCIT Vs. M/s Hadoti Punji Vikas Ltd. required by section 14A(1) of the Act before proceeding further to make any disallowance u/s 14A of the Act. Further, it is seen that AO has mechanically applied the Rule 8D as amended w.e.f. 02.06.2016, which was not even applicable to relevant assessment year. In my considered view, the law cannot be applied mechanically and that too retrospectively. It is seen that AO has not established any nexus of investment with borrowed funds, rather availability of sufficient interest free funds justifies the case of the Appellant that disallowance u/s 14A of the Act is unwarranted. Further, it is seen that AO has neither pointed out nor given any specific findings in the assessment order that any exempt income was earned during the relevant assessment year. Therefore, in the relevant cases also wherein section 14A of the Act is applicable, only the relevant portion of expenditure is required to be disallowed and not the complete expenses, which in the instance case, the AO has done without making any case for disallowance u/s 14A of the Act. Therefore, in view of the non-fulfilment of such statutory requirement as laid down in various judicial precedents and Circulars as relied upon by the A/R in his submission, in my considered view, the disallowance u/s 14A of the Act of Rs. 52,43,029/- is unwarranted. Accordingly, the same is deleted. In view of the above, addition of Rs. 52,43,029/- is deleted and these grounds of appeals are allowed."

The revenue has not brought any fact or material to controvert the finding of the ld. CIT(A) or to point out that the finding of the ld. CIT(A) is perverse. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. Hence, we uphold the same.

the assessee. The assessee challenged the addition made by the A.O. before the ld. CIT(A) and submitted that this amount was paid as fee to the RIICO for not supporting the commercial activity at the industrial site allotted by the RIICO to the assessee. Thus, it was contended that this is a business expenditure incurred by the assessee. The ld. CIT(A) has allowed the claim of assessee and deleted the addition made by the A.O.

12. In the cross objection for the A.Y. 2010-11, the assessee has raised following grounds:

“1. On the facts and in the circumstances of the case and in law the order passed U/s 153A read with Section 143(3) of the Income Tax & CO 44/JP/2018 51 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

Act, 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT(A) erred in holding that the contention of the assessee cannot be accepted in view of SLP’s admitted in various cases. The ld. CIT(A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only.

2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in not declaring the assessment order as bad in law and void ab initio. It is contended that the A.O. passed the assessment order against the doctrine of “audi alterm partem”, violating the principle of natural justice and not giving the opportunity of cross examination of the alleged accommodation entry providers, therefore, the assessment order ought to hold as bad in law and deserves to be annulled. The findings of the ld. CIT(A) in this regard are perverse and erroneous.

3. The appellant craves leave to add, alter, amend, any of the grounds of appeal at or before the time of hearing of appeal.”

13. In the cross objection, the assessee has raised issue regarding the addition made by the A.O. without any incriminating material as well as the order of the A.O. is not sustainable when the assessee was not given the opportunity of cross examination. We have heard the ld AR of the assessee as well as the ld CIT-DR and considered the relevant material on record. We find that this issue is common as raised in all the group concerns of Kota Dall Mill which are subjected to the search and seizure action on 02/7/2015. We have considered these two issues in the case of M/s Multimetals Limited Vs. DCIT in to 1026, 1100 to 1104 & CO 44/JP/2018 52 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

& 1230/JP/2018 and C.O. 38 & 39/JP/2018 vide order dated 29/01/2019 in para 9 and 14 as under:

“9. We have considered the rival submissions as well as relevant material on record. Undisputedly the assessment for the A.Y. 2010-11 to 2012- 13 were not pending on the date of search on 02/7/2015 as the original assessment U/s 143(3) of the Act were also completed prior to the date of search. Thus, the assessment for these three assessment years were not got abated by virtue of search U/s 132 of the Act on 02/7/2015 and therefore the Assessing Officer would assess the total income of the assessee as per the provisions of Section 153A of the Act in respect of these three assessment years having regard to the fact that whether any incriminating material was found or came to the knowledge of the Assessing Officer during the search and seizure proceedings. Since these assessment years were not pending as on the date of search, therefore, the proceedings U/s 153A of the Act in respect of these three assessment years would be in the nature of reassessment and not in the nature of assessment as in the case of the remaining assessment years in the A.Y. 2014-15 and 2015-16 which were got abated by virtue of search and seizure action U/s 132 of the Act on 02/7/2015. At the outset we note that the assessments framed by the Assessing Officer U/s 153A of the Act in the case of the assessee before us is solely on the basis of the information received from the Kolkata Investigation Wing which contains the statement of one Shri Anand Sharma in respect of some assessments and the statement of Shri Ankit Bagri in respect of some other assessments. Thus, undisputedly the Assessing Officer has made the addition while completing the assessment U/s 153A of the Act for all the assessment years on the basis of the information received from the Investigation Wing, Kolkata and not on the basis of & CO 44/JP/2018 53 DCIT Vs. M/s Hadoti Punji Vikas Ltd. any material or information gathered during the course of search and seizure action in the case of the assessee. We find that the assessment framed by the Assessing Officer as well as the orders passed by the ld. CIT(A) in the case of the assessee are identical and based on similar facts and circumstances as in the case of M/s Kola Dall Mill pursuant to the same search and seizure action carried out on 02/7/2015. This Tribunal in the case of Kota Dall Mill Vs DCIT vide order dated 31/12/2018 in to 1002/JP/2018, 1119/JP/2018, 1057 to 1062/JP/2018 and 1210/JP/2018 has considered and decided this issue in para 6 as under: “6. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessments for the assessment years 2010-11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of these four assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in respect of these four assessment years would be in the nature of reassessment and not in the nature of assessment as in the cases of the remaining two assessment years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee’s total income, the addition to the income that has already been assessed & CO 44/JP/2018 54 DCIT Vs. M/s Hadoti Punji Vikas Ltd. can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The provisions of section 132 read with section 153A of the Act stipulate two types of situations – one where the assessment of any assessment year falling within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :- “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on & CO 44/JP/2018 55 DCIT Vs. M/s Hadoti Punji Vikas Ltd. the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.” Thus the Hon’ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon’ble High Court has also referred the term used in section 153A as “assess” which is relatable to abated proceedings and the word “reassess” related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property & CO 44/JP/2018 56 DCIT Vs. M/s Hadoti Punji Vikas Ltd. discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon’ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under :- “1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act.

six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified.

Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with."

(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made."

would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

& CO 44/JP/2018 60 DCIT Vs. M/s Hadoti Punji Vikas Ltd. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."

assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.

16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.

& CO 44/JP/2018 62 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

& CO 44/JP/2018 63 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms."

AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017.

proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon’ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the ld. CIT (A). The relevant observations of the Hon’ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under :-

“53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A).”

Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon’ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon’ble Jurisdictional High Court in & CO 44/JP/2018 66 DCIT Vs. M/s Hadoti Punji Vikas Ltd. case of M/s. Jai Steel India vs. ACIT (supra) wherein the Hon’ble High Court has held in para 23 to 30 as under:- “23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:— "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.

duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.

income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken.

& CO 44/JP/2018 69 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

& CO 44/JP/2018 70 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

In the case in hand, the transactions of unsecured loans as well as introduction of capital by the partners were duly recorded in the books of account and available with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners’ capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners’ capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolkata. It is pertinent to note that the said information was available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015. Therefore, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkata and statement of one Shri Anand Sharma, who is stated to be an entry operator and managed various concerns/companies including M/s.Royal Crystal Dealers, one of the loan creditors of the assessee. Except the said statement and report of the Investigation Wing Kolkata, the AO has neither referred to or was having in possession of any material to indicate that the unsecured loans shown in the books of accounts as well as partners’ capital received by the assessee are nothing but assessee’s own unaccounted and undisclosed income routed back in the garb of unsecured loans and partners’ capital. There is no dispute that these transactions of unsecured loans and partners’ capital contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the & CO 44/JP/2018 71 DCIT Vs. M/s Hadoti Punji Vikas Ltd. assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while framing the assessment under section 153A of the Act for the assessment years 2010-11 to 13-14. It is appropriate to refer relevant part of the assessment order in para 12 pages 48 to 50, para 19 page 83 and para 22 page 86 as under :-

“ 12. Submissions made on behalf of the assessee firm have been duly considered. However, even the very elaborate and case laws loaded submissions of the assessee are totally off the mark. Against the self- speaking facts of the very nature of the activities of the so called partner’s providing huge partner’s capital in the most uninterested manner and providing huge unsecured loans without any collateral or other security, the emphasis of the assessee firm in its submissions has been on seeking protection under various judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances; a. The department has very sound basis to treat, the receipts of unsecured loan and partner’s capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not & CO 44/JP/2018 72 DCIT Vs. M/s Hadoti Punji Vikas Ltd. based on any presumption, assumption, guess or bare suspicion. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source as enumerated the Hon’ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC). Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT (1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT (1977) 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68. b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evidences to show that the unsecured loan and partner’s capital are assessee’s own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner’s capital. c. The department has carried out search over the assessee group and during the course of search action u/s 132 of the I.T. Act, 1961, the incriminating documents seized during search proceedings vide pg no. 21 to 26 of Annexure AS-1 of Party B-1, wherein the details of year-wise LTCG earned by Shri Rajendra Agrawal and his family members, is maintained, which during search action has been accepted to be bogus by all family members in their respective statements.”

& CO 44/JP/2018 73 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

“19. In view of above facts of the case and in the light of above judicial decision, it is established that genuineness of the transaction has not been proved. Section 68 of the I.T. Act provides for charging to income tax on any sum credited in the books of the assessee maintained for any previous year if the assessee offers no explanation about the nature and source thereof or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. It places no duty upon the Assessing Officer to point to the source from which the money was received by the assessee. Where an assessee fails to prove satisfactorily the source and the nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender’s identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner’s capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circumstances, I am left with no option than to tax the entire unexplained credits by way of partner’s capital and Unsecured loans received from the persons mentioned in para 5 above as unexplained cash credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective assessment years.”

“ 22. After examination of the information and details placed on record and discussion with the assessee, the total income of the assessee is computed as under :- Returned income as per ITR u/s 153A of Rs. 2,82,83,460/- the Act. Additions| Unexplained cash credits u/s Rs. 67,20,14,999/- |68 of the Act in the form of |unsecured loan and partner’s |capital Assessed income Rs. 70,02,98,459/- R/o Rs. 70,02,98,459/-

The total income of the assessee in the status of Firm for Assessment Year 2010-11 relevant to Previous Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is & CO 44/JP/2018 74 DCIT Vs. M/s Hadoti Punji Vikas Ltd. hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately.”

The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon’ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :-

“3.2.2 As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years.(emphasis supplied by me). (The decisive words used in the provisions are to 'assessee or reassess the total income'). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO.

3.2.3 The concept of ‘assess or reassess’ and ‘shall abate’ as contemplated u/s 153A is under hot judicial debate. I find that legally, this issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., and SLP has been filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court has granted leave vide order dated & CO 44/JP/2018 75 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

12.10.2015 as reported in 64 taxmann.com 34 (S.C.). Similarly, in the case of Kabul Chawla SLP has also been filed.

3.2.4 In view of SLPs admitted in case of Kabul Chawla, M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., (supra), assessee’s contention cannot be accepted. Moreover, in any case, the additions are to be adjudicated on merits as per relevant ground of appeal, the issue raised in this ground for present remains for academic discussion only. Accordingly, issue raised in ground no. 12 is dismissed.”

Therefore, neither in the assessment order nor in the order of the ld. CIT (A) there is any mention or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was also dismissed by the Hon’ble Supreme Court, the additions made by the AO while passing the assessment & CO 44/JP/2018 76 DCIT Vs. M/s Hadoti Punji Vikas Ltd. orders under section 153A for the assessment years 2010-11 to 13- 14 are not sustainable and accordingly the same are liable to be deleted. We order accordingly.”

The foundation of the assessment order is the information received from the Investigation Wing, Kolkata and statement of Shri Anand Sharma and Shri Ankit Bagri in respect of the different transactions of unsecured loan/special deposits for issuing special preferential equity shares. The ld. CIT(A) though has not disputed the legal proposition on this issue, however, the ground raised by the assessee was dismissed merely on the reason that the SLP filed by the revenue in the case of CIT Vs. Kabul Chawla (Supra) and M/s All Cargo Global Logistics Ltd. (supra) have been admitted for decision by the Hon'ble Supreme Court. The relevant findings of ld. CIT(A) in the case of Kota Dall Mill has been reproduced by the Tribunal in the order cited (supra) and we find that an identical finding has been given by the ld. CIT(A) in the case of assessee. Therefore, neither in the assessment order, the Assessing Officer has referred or relied upon any incriminating material found during the course of search and seizure action in the case of assessee nor the ld. CIT(A) has disputed this fact that the Assessing Officer was not having any incriminating material in his possession found and seized during the course of search and seizure action in the case of the assessee which has disclosed any unaccounted or undisclosed income of the assessee. The information received from the Investigation Wing, Kolkata as well as the statement of Shri Anand Sharma and Shri Ankit Bagri cannot be regarded as incriminating material unearthed during the course of search and seizure U/s 132 of the Act in the case of the assessee. Hence, in view of the decisions/binding precedents as relied upon by the ld AR and also considered by this & CO 44/JP/2018 77 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

Tribunal in the case of Kota Dall Mill (supra), we have no reason to take a different view on this issue. Accordingly, by following the earlier decision of this Tribunal in the case of group concern M/s Kota Dall Mill we hold that the addition made by the Assessing Officer while passing the assessment orders for the A.Y. 2010-11 to 2012-13 U/s 153A of the Act are not sustainable and liable to be deleted. Hence, this ground of the assessee’s appeal is allowed. x x x x x x x x x x 14. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee demanded the cross examination of the witnesses, therefore, statements have been relied upon by the Assessing Officer while framing the assessments under consideration. The ld. CIT(A) though while calling the remand report of the Assessing Officer directed to allow the cross examination to the assessee, however, when the Assessing Officer has expressed his inability to produce the witnesses for cross examination, the ld. CIT(A) has finally rejected the objection raised by the Assessing Officer. An identical issue has been considered by us in the case of Kota Dall Mill (supra) vide order dated 31/12/2018 in para 11.1 as under: “11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment & CO 44/JP/2018 78 DCIT Vs. M/s Hadoti Punji Vikas Ltd. proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examination to the assessee. However, the AO has expressed his inability to allow the assessee for cross examination of the witnesses due to the reason that the witnesses belong to Kolkata and it is not possible for AO to make such arrangement. The ld. CIT(A) has finally denied the cross examination to the assessee by giving his finding in para 5.11 at page 188 already reproduced in the earlier part of this order and, therefore, the only reason for denial of cross examination by the ld.CIT(A) is that the statements are so vocal and undeniable that cross examination of such accommodation entry provided by thousands of beneficiaries across India is neither practicable nor viable and therefore uncalled for. We find that the assessee has demanded the cross examination only in respect of the alleged transactions of loans and not for the entire business of the entry providers providing the bogus entries. Undisputedly, the statement of Shri Anand Sharma was recorded by the Investigation Wing Kolkata at the back of the assessee, even the proceedings by the Investigation were conducted at the back of the assessee, therefore, the said statement of Shri Anand Sharma cannot be the sole basis of assessment without giving an opportunity of cross examination to the assessee. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held in para 6 to 9 as under :- 6. “According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even & CO 44/JP/2018 79 DCIT Vs. M/s Hadoti Punji Vikas Ltd. when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them”.

7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this court in CCE v. Andaman Timber Industries Ltd., order dated 17.3.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. No costs.” Once the assessee has disputed the correctness of the statement and wanted to cross examine the witness which was not given by the AO as well as ld. CIT (A), then the orders passed based on such statement are not sustainable in law. The Hon’ble Delhi High Court in case of CIT vs. Ashwani Gupta, 322 ITR 396 (Delhi) while dealing with the issue of not & CO 44/JP/2018 80 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

providing the opportunity to cross examine the witnesses has held in para 5 to 7 as under :-

“5. Secondly, in fact, a rectification application being MA 264/Delhi/2008 under section 254(2) of the Income-tax Act, 1961 had been filed by the revenue before the said Tribunal. In that also, in paragraph (g) of the Miscellaneous Application, the revenue had submitted as under:— "(g )Because, although findings of the Tribunal are factually correct but the decision of the Tribunal is not acceptable because violation of the canons of natural justice in itself is not fatal enough so as to jeopardize the entire proceedings. In the interest of justice, the Tribunal could have set aside the assessment order with the limited purpose of offering assessee an opportunity to cross-examine Shri Manoj Aggarwal before completing the proceedings." [Emphasis supplied] 6. A reading of the said paragraph (g) makes it clear that the revenue had accepted the findings of the Tribunal on facts as also the position that there had been a violation of principles of natural justice. However, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-11-2008.

vs. ACIT, 387 ITR 561 (Bombay) has also considered the issue of not providing opportunity of cross examination in para 11 to 17 as under :-

“11. We have therefore proceeded to hear and decide the matter unassisted by the revenue. In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather & Platt (India) Ltd.(supra) and submitted that merely because a person is not found at an address after several years it cannot be held that he is non existent and that the assessee had discharged his primary onus by identifying the source of the amount paid. The Court observed that once the primary onus is discharged, the onus shifted to the revenue to verify genuineness of the transaction. In the present case no such effort was made by the revenue. We find that in S. Hastimal (supra) the Madras High Court observed that after a lapse of several years the assessee should not be placed upon the rack and called upon to explain not only merely, the origin and source of his capital contribution but the origin of origin and the source of source as well. In yet another case of Bahri Brothers (P) Ltd. (supra) the Division Bench of Patna High Court observed that where the assessee upon whom the initial burden lies, produces bank certificate to establish that the transaction was carried out through account payee cheques thus disclosing the identity of the creditors as also the source of income, the burden shifts on to the department and the department cannot add the cash credits to his income from undisclosed source.

12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the instant case by virtue of the fact that the transaction was completed by cheque payments, the appellant has contended that it had satisfied all the three tests.

14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer neither since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the & CO 44/JP/2018 82 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained.

assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in has considered this issue in para 2.8 to 2.11 as under :- “2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impugned assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties alongwith necessary documents to establish the genuineness of the transaction. In response, the assessee submitted that Shri Bhanwarlal Jain is not known to him and regarding various incriminating documentary evidences seized during the course of search and statements recorded of Shri Bhanwarlal Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn’t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the cross-examination of any of these persons. While & CO 44/JP/2018 84 DCIT Vs. M/s Hadoti Punji Vikas Ltd. doing so, the AO stated that “in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the assessee.” Further, regarding cross examination, the AO stated that “the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns.” The AO further relied upon the decision of Hon’ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon’ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn’t want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer.

& CO 44/JP/2018 85 DCIT Vs. M/s Hadoti Punji Vikas Ltd.

2.10 In this regard, the Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) (Copy at Case Law PB 812-818) has held that “The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Sinqh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it.” It was held in that case that “In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing.”

The Hon’ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that “the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard.” The Hon’ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that “whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the & CO 44/JP/2018 86 DCIT Vs. M/s Hadoti Punji Vikas Ltd. letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 16-8-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the manager of the bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the income- tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him.”

2.11 In light of above proposition in law and especially taking into consideration the decision of the Hon’ble Supreme Court in case of C. Vasantlal & Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to & CO 44/JP/2018 87 DCIT Vs. M/s Hadoti Punji Vikas Ltd. cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed.” Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the case where the assessee has repeatedly requested and demanded the cross examination of the witnesses whose statements were relied upon by the AO in the assessment order and further the report of the DDIT Investigation Kolkata is also based on the statement of such person then the denial of cross examination by the AO as well as ld. CIT (A) despite the fact that the assessee was ready to bear the cost of the cross examination of the witnesses is a gross violation of principles of natural justice. Thus the additions made by the AO on the basis of such statement without any tangible material is not sustainable in law and liable to be deleted. Accordingly the addition made by the AO is also deleted on merits apart from the legal issue decided in favour of the assessee.”

The facts and circumstances in both the cases are identical and therefore, following the earlier order of this Tribunal in case of Kota Dall Mill, we hold that the addition made by the Assessing Officer on the basis of the information/report of the DDIT (Investigation), Kolkata as well as the statements of Shri Anand Sharma and Shri Ankit Bagri without giving an opportunity of cross examination is not sustainable as & CO 44/JP/2018 88 DCIT Vs. M/s Hadoti Punji Vikas Ltd. the addition is solely based on the statement and information which is nothing but summary of statements recorded by the DDIT(Inv), Kolkata. Hence, the addition made by the Assessing Officer is deleted. Ground No. 2 of the appeal is decided in favour of the assessee.

We find that the A.O. has not referred any incriminating material found during the search and seizure proceedings but what is relied upon by the A.O. is the report of the Investigation Wing, Kolkata, which was preexisting the search and seizure action in the case of the assessee.

Accordingly in view of the earlier orders of this Tribunal, the addition made by the A.O. are otherwise not sustainable in law.

11. As regards the order passed by the A.O. without giving the opportunity of cross examination, we find that the facts on this issue are identical as in the case of other group concerns of Kota Dall Mill. In the case of M/s Multimetals Limited Vs DCIT (supra), the Tribunal has again considered this issue and followed the decision of the Tribunal in the case of Kota Dall Mill (supra). The relevant findings of the Tribunal are reproduced in the foregoing paras of this order. Hence, following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue.