RATUL TEX PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, XIRXLE - 4(3)(1), MUMBAI, MUMBAI

Brief relevant facts for adjudication of this appeal are that the Assessee filed its return of income for the year under consideration on 29th September 2013, declaring total income of Rs. 84,65,238/-, which was assessed under section 143(3) of the Act, vide assessment order dated 16th October 2015.

Subsequently, information was received through the Insight Portal from the office of the Deputy Director of Income Tax (Investigation), Mumbai, to the effect that a search and seizure action had been carried out in the case of Shri Deepak Jain. During the course of investigation, it was ascertained that Shri Deepak Jain was an entry provider, providing accommodation entries through the following entities:

In his statement recorded during investigation, Shri Deepak Jain admitted that he provided accommodation entries in lieu of commission to various persons. The Assessee was also identified as one of the beneficiaries, having received an accommodation entry of Rs. 1,09,53,000/- from M/s Surya Diamonds Pvt. Ltd.

Thus, on the basis of the above information, the case of the Assessee was reopened by issuing notice under section 148 of the Act on 8th June 2021 and assessment was completed under section 147 read with section 144B of the Act, vide order dated 30th March 2022, wherein addition of Rs. 1,09,53,000/- was made under section 69A of the Act.

Subsequently, proceedings under section 148A of the Act were initiated, and after obtaining approval from the Principal CCIT, notice under section 148 was issued again on 29th July 2023 and re-proceedings were carried out.

The Assessing Officer doubted the transaction of Rs. 1,09,53,000/- inter alia, on the following grounds:

Thus, on the aforesaid reasons, the AO ultimately by passing assessment order dated 26-05-2023 treated the transacted amount of Rs. 1,09,53,000/- having been received by the Assessee from M/s Surya Diamonds Pvt. Ltd., as unexplained money under section 69A read with section 115BBE of the Act,

The Assessee being aggrieved with addition made and initiation of reopening of assessment proceedings, preferred 1st appeal before the Ld. Commissioner and to substantiate the transaction or its claim and to discharge its onus cast under relevant provisions of the Act as applicable, furnished various relevant documents including:

Thus, the Assessee being aggrieved has preferred this appeal.

We have heard the parties and perused the material available on record. We observe from the orders passed by the Authorities below that the Assessee during the year under consideration had taken loan of Rs. 1 Crore from the lender involved and during the AY under itself has repaid such loan amount along with interest of Rs. 9,53,000/- and in effect total amount of Rs. 1,09,53,000/-, which is neither in controversy nor in denial by the Revenue. Admittedly the Assessee has furnished relevant documentary evidences, including ITRs, financial statements, confirmations, and bank statements of the lenders. Further, the addition has been made primarily on the basis of the statement of Shri Deepak Jain. However: he was not a director in the lender company during the relevant assessment year. Further no opportunity of cross-examination was provided to the Assessee despite specific request and therefore this constitutes a violation of the principles of natural justice as held by Hon’ble Supreme Court in the case of Andaman Timber Industries vs, Commissioner of Central Excise, Kolkata-II (2015, 62 taxmann.com 3 SC) by observing and holding as under:

In the present case, since the statement of Shri Deepak Jain has been relied upon without granting opportunity of cross-examination, the same cannot be used against the Assessee and thus on this ground alone, the addition is liable to be deleted.

Further, the discrepancies in addresses between confirmation letter and MCA/PAN records, by themselves, are not sufficient to disregard the documentary evidences on record or minor discrepancies such as difference in addresses, cannot override substantive evidence.

It is also a matter of record as observed above that the Assessee has repaid the entire loan amount along with interest, within the same financial year, which strengthens the genuineness of the transaction.

Thus, on the aforesaid analyzations, we are of the considered view that in this case the Assessee by producing the relevant documents which were otherwise substantively not doubted by the Revenue, discharged its burden/onus cast under Sections 69 of the Act. Further the transaction was supported by documentary evidence and repayment. The addition is based on unverified third-party statement, without cross-examination. Further Mr. Deepak Jain on whose statement the Revenue relied on, in fact was not a Director in the Lender company. And therefore on the aforesaid reasons, the addition is un-sustainable and hence the same is deleted.

Since we have deleted the addition involved on merit and therefore other grounds including legal in nature, have otherwise become academic and thus are not adjudicated upon.

In the result, the appeal filed by the Assessee is allowed on the merit itself.