THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S ORIENTAL POWER CABLES LTD.

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ITA/103/2019HC RajasthanRJHC02067920201908 February 2022Bench: AKIL KURESHI,SUDESH BANSAL8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the conclusions of the ITAT were based on an assessment of the evidence on record and were purely factual in nature. The Tribunal had confirmed the CIT(A)'s view that the additions made by the AO were unsustainable. The ITAT observed that the companies through which the assessees allegedly indulged in bogus accommodation entries were not managed or controlled by the alleged kingpin, Mr. Anand Sharma, and there was no link found in the documents and financial statements of the concerned companies. The assessee had produced affidavits, complied with notices under Sections 131 and 133(6), and the director of one company had confirmed the loan transaction. The ITAT further observed that the assessment order was passed solely on the report of the Investigation Wing, Kolkata, and the AO had only the statement of Anand Sharma. The ITAT was of the opinion that the AO could not have made additions based on the Investigation Wing's report without the assessee being privy to it and without granting an opportunity for cross-examination. The High Court noted that in some cases, the ITAT had also held reassessment to be invalid. Since no question of law arose from the deletion of additions, the High Court did not examine the correctness of the ITAT's view on the validity of reassessment. All appeals were dismissed.

What were the facts?

The appeals were filed by the Revenue against judgments of the Income Tax Appellate Tribunal (ITAT) that had deleted additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, concerning unexplained unsecured loans and partner's capital receipts. The Commissioner (Appeals) had also deleted these additions, leading to appeals by the Revenue to the ITAT. The ITAT dismissed the Revenue's appeals, resulting in concurrent findings in favor of the assessees. The appeals before the High Court involved multiple assessees and arose from search actions conducted by the Revenue against the group. The High Court noted defects in some appeals, which were waived, and condoned delays in filing others.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in deleting the addition made by the AO under Section 68 of the Income Tax Act, 1961, on account of unexplained unsecured loans obtained by the assessee? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in upholding the order of the CIT (A) deleting the additions made on account of unsecured loans by observing that the alleged lenders were not shell companies without even considering the financial statements of these companies? (Question of law) 3. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in upholding the order of the CIT (A) on account of unexplained partners' capital receipts from alleged partners by observing that the burden cast upon the assessee under Section 68 of the Income Tax Act, 1961, to explain the nature and source of the transaction has been discharged? (Question of law) 4. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in upholding the order of CIT (A) in deleting the addition of partners' capital despite the fact that the alleged partners were never produced before the learned AO for examination? (Question of law) 5. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in holding the additions made during reassessment proceedings under Section 153A to be unsustainable on the ground that reassessment under Section 153A could not have been made on the basis of information/report of the Information Wing, Kolkata? (Question of law) Assessee's Contentions: The assessee argued that the burden under Section 68 was discharged, and the CIT(A) and ITAT correctly deleted the additions. The ITAT found that the companies involved were not shell companies, there was no link between documents and financial statements, the assessee complied with notices, and the director of one company confirmed the loan transaction. The ITAT also noted that the assessment was based on a report from the Investigation Wing, Kolkata, to which the assessee was not privy, and the assessee was not given an opportunity to cross-examine. The assessee also argued that reassessment under Section 153A was invalid. Revenue's Contentions: The Revenue contended that the ITAT was not justified in deleting the additions made by the AO under Section 68 and in upholding the CIT(A)'s order without considering financial statements and despite alleged partners not being produced. The Revenue also argued that reassessment under Section 153A was valid.

Which sections of the Income-tax Act were involved?

Section 68,Section 153A,Section 131,Section 133(6)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 63/2019 The Deputy Commissioner Of Income Tax, Central Circle, Kota ----Appellant Versus M/s Kota Dall Mill, C-Block, Multymetals Ltd. Campus, 6/7, Heavy Industrial Area, Consua Road, Kota ----Respondent Connected With D.B. Income Tax Appeal No. 58/2019 The Deputy Commissioner Of Income Tax, Central Circle, Kota ----Appellant Versus M/s Kota Dall Mill, C-Block, Multymetals Ltd. Campus, 6/7, Heavy Industrial Area, Consua Road, Kota ----Respondent D.B. Income Tax Appeal No. 59/2019 The Deputy Commissioner Of Income Tax, Central Circle, Kota ----Appellant Versus M/s Kota Dall Mill, C-Block, Multymetals Ltd. Campus, 6/7, Heavy Industrial Area, Consua Road, Kota ----Respondent D.B. Income Tax Appeal No. 61/2019 The Deputy Commissioner Of Income Tax, Central Circle, Kota ----Appellant Versus M/s Kota Dall Mill, C-Block, Multymetals Ltd. Campus, 6/7, Heavy Industrial Area, Consua Road, Kota ----Respondent D.B. Income Tax Appeal No. 62/2019 The Deputy Commissioner Of Income Tax, Central Circle, Kota ----Appellant Versus

(2 of 8) [ITA-63/2019] M/s Kota Dall Mill, C-Block, Multymetals Ltd. Campus, 6/7, Heavy Industrial Area, Consua Road, Kota ----Respondent D.B. Income Tax Appeal No. 74/2019 The Principal Commissioner Of Income Tax (Central), Jaipur ----Appellant Versus M/s Multimetals Limited, Plot No. 6 And 7, Heavy Industrial Area, Kansua Road, Kota, ----Respondent D.B. Income Tax Appeal No. 77/2019 The Principal Commissioner Of Income Tax (Central), Jaipur ----Appellant Versus M/s Multimetals Limited, Plot No. 6 And 7 Heavy Industrial Area, Kansua Road, Kota ----Respondent D.B. Income Tax Appeal No. 103/2019 The Principal Commissioner Of Income Tax, (Central), Jaipur ----Appellant Versus M/s Oriental Power Cables Ltd., Nh-12, Cable Nagar, Po Cable Nagar, Kota-325003 (Raj) ----Respondent D.B. Income Tax Appeal No. 105/2019 The Principal Commissioner Of Income Tax, (Central), Jaipur ----Appellant Versus M/s Oriental Power Cables Ltd., Nh-12, Cable Nagar, Po Cable Nagar, Kota-325003 (Raj) ----Respondent D.B. Income Tax Appeal No. 106/2019 The Principal Commissioner Of Income Tax, (Central), Jaipur ----Appellant Versus

(3 of 8) [ITA-63/2019] M/s Oriental Power Cables Ltd., Nh-12, Cable Nagar, Po Cable Nagar, Kota-325003 (Raj) ----Respondent D.B. Income Tax Appeal No. 107/2019 The Principal Commissioner Of Income Tax, (Central), Jaipur ----Appellant Versus M/s Oriental Power Cables Ltd., Nh-12, Cable Nagar, Po Cable Nagar, Kota-325003 (Raj) ----Respondent D.B. Income Tax Appeal No. 108/2019 The Principal Commissioner Of Income Tax, (Central), New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Edila Business World Pvt. Ltd., 6 And 7, Heavy Industrial Area, C-Block, Multimetal Limited Campus, Kansua Road, Large Scale Industrial Area, Kota ----Respondent D.B. Income Tax Appeal No. 109/2019 The Principal Commissioner Of Income Tax, (Central) New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Edila Business World Pvt. Ltd., 6 And 7, Heavy Industrial Area, C-Block, Multimetal Limited Campus, Kansua Road, Large Scale Industrial Area, Kota ----Respondent D.B. Income Tax Appeal No. 113/2019 The Principal Commissioner Of Income Tax, (Central) New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Tirupati Balaji Estates Pvt. Ltd., Plot No. 6 And 7, C-Block, Multimetals Limited Campus, Kansua Road, Large Scale Industrial Area, Kota ----Respondent

(4 of 8) [ITA-63/2019] D.B. Income Tax Appeal No. 114/2019 The Principal Commissioner Of Income Tax, (Central) New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Hadoti Punj Vikas Ltd., C-Block, 6/7, Multimetals Campus, Large Scale Industrial Area, Kota Rajasthan ----Respondent D.B. Income Tax Appeal No. 115/2019 The Principal Commissioner Of Income Tax, (Central) New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Tirupati Balaji Estates Pvt. Ltd., Plot No. 6 And 7, C-Block, Multimetals Limited Campus, Kansua Road, Large Scale Industrial Area, Kota ----Respondent D.B. Income Tax Appeal No. 116/2019 The Principal Commissioner Of Income Tax, (Central) New Central Revenue Building, Statue Circle, Jaipur ----Appellant Versus M/s Rajasthan Cable Industries Ltd., 4 And 12, Large Scale, Industrial Area, Kansua Road, Kota ----Respondent D.B. Income Tax Appeal No. 162/2019 The Principal Commissioner Of Income Tax, New Central Revenue Building, Rawat Bhata Road, Kota ----Appellant Versus M/s Resonant Wealth Consultancy Pvt. Ltd., 69/331, V.t. Road, Mansarovar, Jaipur Rajasthan ----Respondent For Appellant(s) : Mr. Anil Mehta, Sr. Adv. with Mr. Siddharth Bapna through VC For Respondent(s) : Mr. Sanjay Jhanwar, Sr. Adv. with

(5 of 8) [ITA-63/2019] Mr. Rajat Sharma through VC HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL Judgment 08/02/2022 There are defects in some of the appeals. The same are waived. D.B. Civil Misc. Application Nos.1799/2019 in D.B. ITA No.114/2019

and

D.B.

Civil

Misc.

Application Nos.1800/2019 in D.B. ITA No.116/2019:- For the reasons stated in the applications and those made out before us during the course of arguments, delay caused in filing these appeals is condoned. Applications stand disposed of. D.B. Civil Misc. Application Nos.69776/2019, 69780/2019, 70920/2019, 70927/2019, 48922/2019, 48935/2019, 63367/2019 and 64456/2019:- Since certified copy of the impugned judgment of the tribunal which is common in several appeals is filed in one of them, request for dispensing with filing certified copies in all the appeals is granted. The applications are disposed of. D.B. Income Tax Appeal Nos.63/2019, 58/2019, 59/2019, 61/2019, 62/2019, 74/2019, 77/2019, 103/2019, 105/2019, 106/2019, 107/2019, 108/2019, 109/2019, 113/2019,

114/2019,

115/2019,

116/2019

and 162/2019:- These appeals involve the same group of assessees and arise out of search action carried out by the revenue against the group. Due to commonality of facts, we may refer to the material produced in D.B. Income Tax Appeal No. 63/2019. The appeal is filed by the department to challenge the judgment of the Income Tax Appellate Tribunal. Following questions are presented for our consideration:-

(6 of 8) [ITA-63/2019] 1. Whether, on the facts and in the circumstances of the case the Hon’ble ITAT was justified in deleting the addition made by the assessing officer under Section 68 of the Income Tax Act, 1961 on account of unexplained unsecured loans obtained by the assessee? 2. Whether, on the facts and in the circumstances of the case the Hon’ble ITAT was justified in upholding the order of the CIT (A) deleting the additions made on account of unsecured loans by observing that the alleged lenders were not shell companies without even considering the financial statements of these companies? 3. Whether, on the facts and in the circumstances of the case the Hon’ble ITAT was justified in upholding order of the CIT (A) on account of unexplained partners capital receipts from alleged partners by observing that the burden cast upon the assessee under section 68 of the Income Tax Act, 1961 to explain the nature and source of transaction has been discharged? 4. Whether, on the facts and in the circumstances of the case the Hon’ble ITAT was justified in upholding order of CIT (A) in deleting the addition of partners capital despite the fact that the alleged partners were never produced before the learned assessing officer for examination? 5. Whether, on the facts and in the circumstances of the case the Hon’ble ITAT was justified in holding the additions made during reassessment proceedings

under

Section-153A

be unsustainable on the ground that reassessment under Section-153A could not have been made on the basis of information/report of the Information Wing, Kolkata? Though, five different questions are framed, the central issue is one, namely, the deletion of the addition made by the assessing officer under Section 68 of the Income Tax Act, 1961 (for short ‘the Act’). We may record that the assessing officer having made such additions, in appeal filed by the assessee, the Commissioner (Appeals) had deleted the same. Thus revenue was in appeal before the tribunal. The tribunal had dismissed the revenue’s appeal. Thus, there are concurrent findings by the CIT (Appeals) and the tribunal in favour of the assessee.

(7 of 8) [ITA-63/2019] Further, perusal of rather long order passed by the tribunal, we find that the conclusions are based on assessment of evidence on record. All these findings are thus purely factual in nature. The tribunal confirmed the view of the CIT (Appeals) that the additions made by the assessing officer were not sustainable. It was observed that the companies through which the assessees had indulge into bogus accommodation entries, were not managed or controlled by Mr. Anand Sharma, who was supposed to be the kingpin. Further, it was observed that there was no link found in the documents and the financial statements of the companies concerned. It was noted that the assessee had produced the affidavit and the notices issued by the assessing officer under Section 131 and 133(6) of the Act which was duly complied by the creditors. The statement of director of Ms. Royal Crystal Dealers Pvt. Ltd. was also recorded by the assessing officer while the director has confirmed the transaction of loan. The tribunal further observed that the assessment order was passed solely on the report of the Investigation Wing, Kolkata which merely contained the narration of the statements recorded during the investigation and the assessing officer had in his possession only the statement of Anand Sharma. The tribunal was of the opinion that the assessing officer could not have made the additions in the hands of the assessee on the basis of the Investigation Wing at Kolkata to which the assessee was not privity to. The assessee was also not granted opportunity to cross-examine the persons whose statements were recorded by the investigation wing. We are informed that in some of the cases the tribunal has also held that the reassessment was invalid this was an additional ground to delete the additions. Since in relation to the deletion of

(8 of 8) [ITA-63/2019] additions no question of law arises, we have not examined the correctness of the view of the tribunal on the question of validity of the reassessment. Under the circumstances we do not find any reason to entertain these appeals since no question of law arises. All appeals are dismissed. Pending applications, if any, are also disposed of. (SUDESH BANSAL),J (AKIL KURESHI),CJ BRIJ MOHAN GANDHI/16-33

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