INCOME TAX OFFICER-12(3)(1), MUMBAI, MUMBAI vs. MANJU DIAMONDS PVT. LTD., MUMBAI

3. We have heard rival submissions on the issue of the admission of We have heard rival submissions on the issue of the admission of We have heard rival submissions on the issue of the admission of the grounds raised in Application filed under Rule 27 of the Rules. raised in Application filed under Rule 27 of the Rules. raised in Application filed under Rule 27 of the Rules. We find that the legal ground raised in Rule 27 were raised before We find that the legal ground raised in Rule 27 were raised before We find that the legal ground raised in Rule 27 were raised before the Ld. CIT(A) but the Ld. CIT(A) though has discussed the issue of the Ld. CIT(A) but the Ld. CIT(A) though has discussed the issue of the Ld. CIT(A) but the Ld. CIT(A) though has discussed the issue of validity of the reassessment u/s 147 of the Act in favour of the validity of the reassessment u/s 147 of the Act in favour of th validity of the reassessment u/s 147 of the Act in favour of th assessee but no specific finding has been given in respect of ground assessee but no specific finding has been given in respect of ground assessee but no specific finding has been given in respect of ground No. 1 raised in application under Rule 27 of the ITAT RulesIt is well- No. 1 raised in application under Rule 27 of the ITAT Rules No. 1 raised in application under Rule 27 of the ITAT Rules settled that a legal plea going to the root of the matter, and which settled that a legal plea going to the root of the matter, and which settled that a legal plea going to the root of the matter, and which affects the very jurisdiction of the assessing affects the very jurisdiction of the assessing authority, can be authority, can be entertained at any stage of the proceedings. The objection as to the entertained at any stage of the proceedings. The objection as to the entertained at any stage of the proceedings. The objection as to the proper statutory route proper statutory route — whether under Section 147 or Section whether under Section 147 or Section 153C — is not merely academic but foundational, given that each is not merely academic but foundational, given that each is not merely academic but foundational, given that each provision operates in different factual co provision operates in different factual contexts and is governed by ntexts and is governed by distinct procedural safeguards. Consequently, the objection raised distinct procedural safeguards. Consequently, the objection raised distinct procedural safeguards. Consequently, the objection raised in the Rule 27 application is not only maintainable but necessary to in the Rule 27 application is not only maintainable but necessary to in the Rule 27 application is not only maintainable but necessary to be adjudicated upon in the interest of justice. In light of the above, be adjudicated upon in the interest of justice. In light of the above, be adjudicated upon in the interest of justice. In light of the above, the legal ground raised the legal ground raised by the assessee under Rule 27 of the ITAT by the assessee under Rule 27 of the ITAT Rules is admitted for adjudication. Rules is admitted for adjudication.

4.1 Subsequently, Subsequently, Subsequently, the the the Assessing Assessing Assessing Officer Officer Officer received received received certain certain certain information from the Deputy Commissioner of Income-tax, Central information from the Deputy Commissioner of Income information from the Deputy Commissioner of Income Circle-2(2), Kolkata, by communication dated 04.03.2021. The said 2(2), Kolkata, by communication dated 04.03.2021. The said 2(2), Kolkata, by communication dated 04.03.2021. The said information emanated from a search and seizure operation carried information emanated from a search and seizure operation carr information emanated from a search and seizure operation carr out under Section 132 of the Act on 27.05.2018 in the case of one out under Section 132 of the Act on 27.05.2018 in the case of one out under Section 132 of the Act on 27.05.2018 in the case of one Mr. Sushil Lahoti and his group entities. It was revealed therein Mr. Sushil Lahoti and his group entities. It was revealed therein Mr. Sushil Lahoti and his group entities. It was revealed therein that entities controlled by Mr. Lahoti were allegedly engaged in that entities controlled by Mr. Lahoti were allegedly engaged in that entities controlled by Mr. Lahoti were allegedly engaged in providing accommodation entries by way of fictitious unsecured providing accommodation entries by way of fictitious un providing accommodation entries by way of fictitious un loans and share capital in lieu of commission. loans and share capital in lieu of commission.

4.2 Based on the aforesaid information, the Assessing Officer Based on the aforesaid information, the Assessing Officer Based on the aforesaid information, the Assessing Officer recorded reasons to believe that income chargeable to tax had recorded reasons to believe that income chargeable to tax had recorded reasons to believe that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act. escaped assessment within the meaning of Section 147 of the Act. escaped assessment within the meaning of Section 147 of the Act. Accordingly, a notice under Section 148 of the Act was issued on a notice under Section 148 of the Act was issued on a notice under Section 148 of the Act was issued on 31.03.2021 and duly served upon the assessee. In compliance 31.03.2021 and duly served upon the assessee. In compliance 31.03.2021 and duly served upon the assessee. In compliance therewith, the assessee filed its return of income on 31.05.2021, therewith, the assessee filed its return of income on 31.05.2021, therewith, the assessee filed its return of income on 31.05.2021, reiterating the same income as declared in the original return reiterating the same income as declared in the original return reiterating the same income as declared in the original return 4.3 In the course of reassessment proceedings, the Assessing rse of reassessment proceedings, the Assessing rse of reassessment proceedings, the Assessing Officer noted that the assessee had received unsecured loans Officer noted that the assessee had received unsecured loans Officer noted that the assessee had received unsecured loans aggregating to ₹75,50,000/ 75,50,000/- from the following four entities, stated from the following four entities, stated to be controlled by Mr. Sushil Lahoti. to be controlled by Mr. Sushil Lahoti. The detail of the parties is detail of the parties is reproduced as under: as under:

Name of the entity providing Name of the entity providing PAN Amount in Rs. Amount in Rs. accommodation entry accommodation entry

Esquire Vyapaar Pvt. Ltd. Esquire Vyapaar Pvt. Ltd. AABCE9245M 28,50,000 28,50,000

Indralok Agency Pvt. Ltd. Indralok Agency Pvt. Ltd. AACCI0219G 10,00,000 10,00,000 Gateway Agency Pvt. Ltd. Gateway Agency Pvt. Ltd. AADCG3632J 12,00,000 12,00,000

Shivdarbar Vanijya Pvt. Ltd. Shivdarbar Vanijya Pvt. Ltd. AANCS8451K 25,00,000 ,00,000 Total Amount 75,50,000 75,50,000 4.4 The Assessing Officer, by notice dated 28.06.2021, called upon The Assessing Officer, by notice dated 28.06.2021, called upon The Assessing Officer, by notice dated 28.06.2021, called upon the assessee to explain the nature and purpose of the aforesaid the assessee to explain the nature and purpose of the aforesaid the assessee to explain the nature and purpose of the aforesaid transactions. In response, the assessee submitted that the loans transactions. In response, the assessee submitted that the loans transactions. In response, the assessee submitted that the loans were taken to meet its working capital requirements. It furnished were taken to meet its working capital requirements. It furnishe were taken to meet its working capital requirements. It furnishe loan loan loan confirmations, confirmations, confirmations, relevant relevant relevant bank bank bank statements, statements, statements, and and and e e-mail e correspondence with Mr. Sushil Lahoti. It was further stated in correspondence with Mr. Sushil Lahoti. It was further stated correspondence with Mr. Sushil Lahoti. It was further stated reply filed on 25.01.2022 reply filed on 25.01.2022 that, since the loans were facilitated that, since the loans were facilitated through Mr. Lahoti, the confirmations were procured by him and through Mr. Lahoti, the confirmations were procured by him and through Mr. Lahoti, the confirmations were procured by him and subsequently forwarded to the assessee. quently forwarded to the assessee.

4.5 Notwithstanding the aforesaid, the Assessing Officer, by Notwithstanding the aforesaid, the Assessing Officer, by Notwithstanding the aforesaid, the Assessing Officer, by communication dated 02.03.2022, expressed the view that the communication dated 02.03.2022, expressed the view that the communication dated 02.03.2022, expressed the view that the documents submitted by the assessee were no more than routine documents submitted by the assessee were no more than routine documents submitted by the assessee were no more than routine papers and did not satisfactorily rebut the incriminating material papers and did not satisfactorily rebut the incriminating material papers and did not satisfactorily rebut the incriminating material unearthed during the search, including the statement of Mr. Lahoti during the search, including the statement of Mr. Lahoti during the search, including the statement of Mr. Lahoti that he had provided accommodation entries to various concerns. A that he had provided accommodation entries to various concerns. A that he had provided accommodation entries to various concerns. A show-cause notice was thus issued proposing to treat the said cause notice was thus issued proposing to treat the said cause notice was thus issued proposing to treat the said amount of ₹75,50,000/ 75,50,000/- as unexplained cash credit under Section as unexplained cash credit under Section 68 of the Act. In reply, the assessee In reply, the assessee submitted that submitted that the addition proposed was very huge and therefore proposed was very huge and therefore specifically sought the specifically sought the opportunity to cross opportunity to cross-examine Mr. Lahoti, asserting that the examine Mr. Lahoti, asserting that the proposed addition was based solely on his untested statement and proposed addition was based solely on his untested statement and proposed addition was based solely on his untested statement and that the right to cross ight to cross-examination formed an essential facet of examination formed an essential facet of natural justice. However, the Assessing Officer rejected this request natural justice. However, the Assessing Officer rejected this request natural justice. However, the Assessing Officer rejected this request and proceeded to make the addition of ₹75,50,000/ and proceeded to make the addition of 75,50,000/- under Section 68 of the Act.

4.6 Aggrieved thereby, the assessee preferred an a Aggrieved thereby, the assessee preferred an appeal before the ppeal before the ld CIT(A), challenging both the validity of the reassessment ld CIT(A), challenging both the validity of the reassessment ld CIT(A), challenging both the validity of the reassessment proceedings as well as the merits of the addition. proceedings as well as the merits of the addition. Before the CIT(A), Before the CIT(A), it was contended that neither was the assessee furnished with a it was contended that neither was the assessee furnished with a it was contended that neither was the assessee furnished with a copy of the statement of Mr. Lahoti, nor was copy of the statement of Mr. Lahoti, nor was it afforded the opportunity to cross opportunity to cross-examine him, despite specific and timely examine him, despite specific and timely requests to that effect. It was submitted that such denial amounted requests to that effect. It was submitted that such denial amounted requests to that effect. It was submitted that such denial amounted to a grave infraction of the principles of natural justice. to a grave infraction of the principles of natural justice. to a grave infraction of the principles of natural justice.

4.7 The ld. CIT(A), upon consideration of the mat The ld. CIT(A), upon consideration of the mat The ld. CIT(A), upon consideration of the material on record, found found found that that that the the the entire entire entire addition addition addition was was was predicated predicated predicated upon upon upon the the the uncorroborated uncorroborated uncorroborated statement statement statement of of of Mr. Mr. Mr. Sushil Sushil Sushil Lahoti, Lahoti, Lahoti, who who who had had had purportedly admitted to engaging in the business of providing purportedly admitted to engaging in the business of providing purportedly admitted to engaging in the business of providing accommodation entries. It was observed that the Assessing Officer accommodation entries. It was observed that the Assessing Officer accommodation entries. It was observed that the Assessing Officer had failed to adhere to the foundational requirements of law, ad failed to adhere to the foundational requirements of law, ad failed to adhere to the foundational requirements of law, namely. The Ld. CIT(A) observed that the Assessing Officer failed to . The Ld. CIT(A) observed that the Assessing Officer failed to . The Ld. CIT(A) observed that the Assessing Officer failed to adhere to either of two essential mandates : adhere to either of two essential mandates :

(i) Ensuring fair process and compliance with natural justice by process and compliance with natural justice by process and compliance with natural justice by allowing cross-examination of Mr. Lahoti and xamination of Mr. Lahoti and (ii) Discharging the Revenue’s burden of proof after the assessee had Discharging the Revenue’s burden of proof after the assessee had Discharging the Revenue’s burden of proof after the assessee had submitted primary evidence. submitted primary evidence.

4.8 The ld CIT(A), thus, held that the assessment order stood The ld CIT(A), thus, held that the assessment order stood The ld CIT(A), thus, held that the assessment order stood vitiated both on account of procedural impropriety and failure to vitiated both on account of procedural impropriety and failure to vitiated both on account of procedural impropriety and failure to substantiate the addition with independent and cogent evidence. substantiate the addition with independent and cogent evidence. substantiate the addition with independent and cogent evidence. Consequently, the addition made by the Assessing Officer was Consequently, the addition made by the Assessing Officer was Consequently, the addition made by the Assessing Officer was deleted. The relevant finding of the Ld. CIT(A) is reproduced as The relevant finding of the Ld. CIT(A) is reproduced as The relevant finding of the Ld. CIT(A) is reproduced as under:

“I have perused the facts of the case and have examined the I have perused the facts of the case and have examined the I have perused the facts of the case and have examined the assessment order passed by the AO and also the detailed assessment order passed by the AO and also the detailed assessment order passed by the AO and also the detailed submissions tendered by the assessee. From the assessment submissions tendered by the assessee. From the assessment submissions tendered by the assessee. From the assessment order passed by t order passed by the AO it is clear that the entire addition is based he AO it is clear that the entire addition is based entirely upon the statement of Sh. Lahoti wherein he has stated entirely upon the statement of Sh. Lahoti wherein he has stated entirely upon the statement of Sh. Lahoti wherein he has stated that he is in the business of providing accommodation entries to that he is in the business of providing accommodation entries to that he is in the business of providing accommodation entries to clients in lieu of commission. clients in lieu of commission. Now whenever an addition is based on evidenc Now whenever an addition is based on evidence discovered on the e discovered on the premises of a third party or is based on the statements of third premises of a third party or is based on the statements of third premises of a third party or is based on the statements of third parties, certain principles of natural justice have to be strictly parties, certain principles of natural justice have to be strictly parties, certain principles of natural justice have to be strictly followed failing which the assessment loses its force and is followed failing which the assessment loses its force and is followed failing which the assessment loses its force and is reduced to a nullity In this case it is see reduced to a nullity In this case it is seen that the appellant was n that the appellant was not granted an opportunity to cross examine Sh. Lahoti and neither not granted an opportunity to cross examine Sh. Lahoti and neither not granted an opportunity to cross examine Sh. Lahoti and neither was the statement of Sh. Lahoti made available to the assessee. was the statement of Sh. Lahoti made available to the assessee. was the statement of Sh. Lahoti made available to the assessee. This tantamounts to using 'evidence' against the assessee behind This tantamounts to using 'evidence' against the assessee behind This tantamounts to using 'evidence' against the assessee behind his back and without giving him any his back and without giving him any opportunity whatsoever to opportunity whatsoever to rebut the 'evidence'. The Hon'ble Supreme Court in Andaman rebut the 'evidence'. The Hon'ble Supreme Court in Andaman rebut the 'evidence'. The Hon'ble Supreme Court in Andaman Timber Industries (2015) 281 CTR 214 (SC) held that denial to the Timber Industries (2015) 281 CTR 214 (SC) held that denial to the Timber Industries (2015) 281 CTR 214 (SC) held that denial to the assessee of the right to cross examine the witness whose assessee of the right to cross examine the witness whose assessee of the right to cross examine the witness whose statement was made the basis of the impugned or statement was made the basis of the impugned order is a serious der is a serious flaw which renders the order a nullity in as much as it amounted flaw which renders the order a nullity in as much as it amounted flaw which renders the order a nullity in as much as it amounted to violation of the principles of natural justice. A number of other to violation of the principles of natural justice. A number of other to violation of the principles of natural justice. A number of other High Courts and Tribunals have endorsed the principle mentioned High Courts and Tribunals have endorsed the principle mentioned High Courts and Tribunals have endorsed the principle mentioned above. A few of these judgments are given above. A few of these judgments are given as under:- In Laxmanbhai S. Patel vs CIT, 327 ITR 281(2010), the Hon'ble In Laxmanbhai S. Patel vs CIT, 327 ITR 281(2010), the Hon'ble In Laxmanbhai S. Patel vs CIT, 327 ITR 281(2010), the Hon'ble High Court of Gujrat has considered the legal effect of a statement High Court of Gujrat has considered the legal effect of a statement High Court of Gujrat has considered the legal effect of a statement recorded behind the back of the assessee and where no copy recorded behind the back of the assessee and where no copy recorded behind the back of the assessee and where no copy thereof was furnished to the assessee and neither was a thereof was furnished to the assessee and neither was a thereof was furnished to the assessee and neither was an opportunity of cross examination granted. The High Court held that opportunity of cross examination granted. The High Court held that opportunity of cross examination granted. The High Court held that if the addition was made in this manner then the same is required if the addition was made in this manner then the same is required if the addition was made in this manner then the same is required to be deleted on the ground of violation of the principles of natural to be deleted on the ground of violation of the principles of natural to be deleted on the ground of violation of the principles of natural justice. In M/s R.W. Promotions (P) Ltd., Mumbai v/ justice. In M/s R.W. Promotions (P) Ltd., Mumbai v/s ACIT (ITA No. s ACIT (ITA No. 1489 of 2013) the Hon'ble High Court of Mumbai held that the 1489 of 2013) the Hon'ble High Court of Mumbai held that the 1489 of 2013) the Hon'ble High Court of Mumbai held that the right to cross examine is a part of the 'Audi Alterem' principle and right to cross examine is a part of the 'Audi Alterem' principle and right to cross examine is a part of the 'Audi Alterem' principle and the same can be denied only on exceptional and extraordinary the same can be denied only on exceptional and extraordinary the same can be denied only on exceptional and extraordinary grounds and that too after recording them in writ grounds and that too after recording them in writing and then ing and then communicating the same to the assessee. The Court held that communicating the same to the assessee. The Court held that communicating the same to the assessee. The Court held that denial of the right to cross examine rendered the order passed denial of the right to cross examine rendered the order passed denial of the right to cross examine rendered the order passed against the assessee null and void. against the assessee null and void. In Prarthana Construction (P) Ltd. v/s DCIT (2001) 118 Taxman In Prarthana Construction (P) Ltd. v/s DCIT (2001) 118 Taxman In Prarthana Construction (P) Ltd. v/s DCIT (2001) 118 Taxman 112 (ITAT Ahmedabad) i 112 (ITAT Ahmedabad) it was held that loose papers and t was held that loose papers and documents seized from the premises of third parties and documents seized from the premises of third parties and documents seized from the premises of third parties and statements recorded behind the back of the assessee without the statements recorded behind the back of the assessee without the statements recorded behind the back of the assessee without the assessee being afforded any opportunity to cross examine and assessee being afforded any opportunity to cross examine and assessee being afforded any opportunity to cross examine and rebut these statements could not be made t rebut these statements could not be made the basis for adding he basis for adding undisclosed income in the hands of the assessee. undisclosed income in the hands of the assessee. In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) it In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) it In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) it was held that where the document in questioned was not was held that where the document in questioned was not was held that where the document in questioned was not recovered from the assessee's possession but was receovered from recovered from the assessee's possession but was receovered from recovered from the assessee's possession but was receovered from somebody else's possession and the assessee was not allowed omebody else's possession and the assessee was not allowed omebody else's possession and the assessee was not allowed any opportunity to cross examine that person no addition could be any opportunity to cross examine that person no addition could be any opportunity to cross examine that person no addition could be made based on such document in the hands of the assessee. made based on such document in the hands of the assessee. made based on such document in the hands of the assessee. Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) 167 Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) 167 Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) 167 ITR 488 the Supreme Court held that it is an elementary principle the Supreme Court held that it is an elementary principle the Supreme Court held that it is an elementary principle of natural justice that the assessee should have knowledge of the of natural justice that the assessee should have knowledge of the of natural justice that the assessee should have knowledge of the material that is being used against him so that he may be able to material that is being used against him so that he may be able to material that is being used against him so that he may be able to meet it, where for instance the statement of a person is recorded meet it, where for instance the statement of a person is recorded meet it, where for instance the statement of a person is recorded or evidence gathered behind the back of the assessee but the same is evidence gathered behind the back of the assessee but the same is evidence gathered behind the back of the assessee but the same is not tested by cross examination, such a statement or evidence not tested by cross examination, such a statement or evidence not tested by cross examination, such a statement or evidence cannot be allowed to be used to the prejudice of the assessee. cannot be allowed to be used to the prejudice of the assessee. cannot be allowed to be used to the prejudice of the assessee. Hence, from the above discussion it is clear that by not affor Hence, from the above discussion it is clear that by not affor Hence, from the above discussion it is clear that by not affording an opportunity to the assessee to cross examine Sh. Lahoti who an opportunity to the assessee to cross examine Sh. Lahoti who an opportunity to the assessee to cross examine Sh. Lahoti who had alleged that he had provided accommodation entries to the had alleged that he had provided accommodation entries to the had alleged that he had provided accommodation entries to the appellant, the order of the AO has been vitiated as it violates a appellant, the order of the AO has been vitiated as it violates a appellant, the order of the AO has been vitiated as it violates a fundamental tenet of the principles of natural justice, name fundamental tenet of the principles of natural justice, name fundamental tenet of the principles of natural justice, namely, 'Audi AlteramPartem' i.e. that the other side will be heard and that 'Audi AlteramPartem' i.e. that the other side will be heard and that 'Audi AlteramPartem' i.e. that the other side will be heard and that no evidence/statement shall be used against the assessee without no evidence/statement shall be used against the assessee without no evidence/statement shall be used against the assessee without affording him an opportunity to cross examine the person making affording him an opportunity to cross examine the person making affording him an opportunity to cross examine the person making the statement and thus enabling him to rebut the evide the statement and thus enabling him to rebut the evide the statement and thus enabling him to rebut the evidence being used against him. The presumption u/s 132(4A) can be drawn used against him. The presumption u/s 132(4A) can be drawn used against him. The presumption u/s 132(4A) can be drawn only against the person in whose case the search was authorised only against the person in whose case the search was authorised only against the person in whose case the search was authorised i.e. ShLahoti and from whom incriminating documents have been i.e. ShLahoti and from whom incriminating documents have been i.e. ShLahoti and from whom incriminating documents have been found and whose statement has been recorded. The presumption found and whose statement has been recorded. The presumption found and whose statement has been recorded. The presumption thus cannot be used against the appellant who was never thus cannot be used against the appellant who was never thus cannot be used against the appellant who was never subjected to a search. subjected to a search. The other issue which needs to be considered here is that the The other issue which needs to be considered here is that the The other issue which needs to be considered here is that the assessee had duly furnished loan confirmations and bank assessee had duly furnished loan confirmations and bank assessee had duly furnished loan confirmations and bank statements to the AO during the course of the re statements to the AO during the course of the re statements to the AO during the course of the re-assessment proceedings. Thus, the assessee discharged the initial onus cast proceedings. Thus, the assessee discharged the initial onus cast proceedings. Thus, the assessee discharged the initial onus cast upon him u/s 68 by the AO by furnishing details of the identity, upon him u/s 68 by the AO by furnishing details of the identity, upon him u/s 68 by the AO by furnishing details of the identity, credit worthiness of the lenders and the genuineness of the loan credit worthiness of the lenders and the genuineness of the loan credit worthiness of the lenders and the genuineness of the loan transaction. In other words, the onus was shifted back onto transaction. In other words, the onus was shifted back onto transaction. In other words, the onus was shifted back onto the AO and it was for him to advance evidence in order to rebut the AO and it was for him to advance evidence in order to rebut the AO and it was for him to advance evidence in order to rebut the evidence filed by the assessee. This the AO failed to do by not evidence filed by the assessee. This the AO failed to do by not evidence filed by the assessee. This the AO failed to do by not bringing a single piece of evidence to discount the evidence bringing a single piece of evidence to discount the evidence bringing a single piece of evidence to discount the evidence furnished by the assessee. This proposition of Income tax law t furnished by the assessee. This proposition of Income tax law t furnished by the assessee. This proposition of Income tax law that once the initial burden cast by section 68 is discharged, the AO once the initial burden cast by section 68 is discharged, the AO once the initial burden cast by section 68 is discharged, the AO has to produce further evidence in order to be able to make the has to produce further evidence in order to be able to make the has to produce further evidence in order to be able to make the addition is supported by numerous decisions. In Hindustan Tea addition is supported by numerous decisions. In Hindustan Tea addition is supported by numerous decisions. In Hindustan Tea Trading Co. Ltd. 263 ITR 289(Cal), the Hon'ble High Court of Trading Co. Ltd. 263 ITR 289(Cal), the Hon'ble High Court of Trading Co. Ltd. 263 ITR 289(Cal), the Hon'ble High Court of Calcutta while examining the scope of powers of AO under section Calcutta while examining the scope of powers of AO under section Calcutta while examining the scope of powers of AO under section 68 of the Act held: 68 of the Act held: Section 68 of the income Section 68 of the income-tax Act, 1961, empowers the Assessing tax Act, 1961, empowers the Assessing Officer to treat any sum found credited in the books of account of Officer to treat any sum found credited in the books of account of Officer to treat any sum found credited in the books of account of the assessee for any previous year, if t the assessee for any previous year, if the assessee fails to offer he assessee fails to offer explanation about the nature and sources of such fund or if the explanation about the nature and sources of such fund or if the explanation about the nature and sources of such fund or if the explanation offered by the assessee is not, in the opinion of the explanation offered by the assessee is not, in the opinion of the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, as income from undisclosed Assessing Officer, satisfactory, as income from undisclosed Assessing Officer, satisfactory, as income from undisclosed sources and charge the same to tax as i sources and charge the same to tax as income of the assessee of ncome of the assessee of that previous year. Therefore, it appears that the power of the that previous year. Therefore, it appears that the power of the that previous year. Therefore, it appears that the power of the assessing officer under section 68 is not an absolute one. It is assessing officer under section 68 is not an absolute one. It is assessing officer under section 68 is not an absolute one. It is subject to its satisfaction where an explanation is offered. The subject to its satisfaction where an explanation is offered. The subject to its satisfaction where an explanation is offered. The power is absolute where the assessee power is absolute where the assessee offers no explanation. The offers no explanation. The satisfaction with regard to the explanation is in effect an in satisfaction with regard to the explanation is in effect an in satisfaction with regard to the explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. It safeguard in section 68 protecting the interest of the assessee. It safeguard in section 68 protecting the interest of the assessee. It provides for an opportunity to the assessee to explain the nature provides for an opportunity to the assessee to explain the nature provides for an opportunity to the assessee to explain the nature and source of the fund. On and source of the fund. Once it is explained, it is incumbent on the ce it is explained, it is incumbent on the assessing officer to consider the same and form an opinion assessing officer to consider the same and form an opinion assessing officer to consider the same and form an opinion whether the explanation is satisfactory or not. The expression whether the explanation is satisfactory or not. The expression whether the explanation is satisfactory or not. The expression used in the section clearly lays the burden on the assessee to used in the section clearly lays the burden on the assessee to used in the section clearly lays the burden on the assessee to explain the nature and sourc explain the nature and source of the fund. Unless an explanation e of the fund. Unless an explanation is offered, the Assessing Officer is free to treat the fund as income is offered, the Assessing Officer is free to treat the fund as income is offered, the Assessing Officer is free to treat the fund as income of the assessee from undisclosed sources chargeable to tax. Once of the assessee from undisclosed sources chargeable to tax. Once of the assessee from undisclosed sources chargeable to tax. Once an explanation is offered, the Assessing Officer is bound to an explanation is offered, the Assessing Officer is bound to an explanation is offered, the Assessing Officer is bound to consider the same. Such consider the same. Such consideration is guided by sound consideration is guided by sound principles of law. The opinion so formed must be reasonable and principles of law. The opinion so formed must be reasonable and principles of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of the based on materials and shall not be perverse. The extent of the based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the materials power of the Assessing Officer while considering the materials power of the Assessing Officer while considering the materials produced by the assessee is ver produced by the assessee is very wide. It is a question of y wide. It is a question of examining as to whether the apparent is real. The Assessing examining as to whether the apparent is real. The Assessing examining as to whether the apparent is real. The Assessing Officer is empowered to lift the corporate veil and examine the real Officer is empowered to lift the corporate veil and examine the real Officer is empowered to lift the corporate veil and examine the real nature of the transaction. In the process, he may exercise its nature of the transaction. In the process, he may exercise its nature of the transaction. In the process, he may exercise its power of examining the materials. He power of examining the materials. He may require the assessee to may require the assessee to produce further materials if so required. He may seek information produce further materials if so required. He may seek information produce further materials if so required. He may seek information from other sources on the basis of the material produced. In the from other sources on the basis of the material produced. In the from other sources on the basis of the material produced. In the process of enquiry, the assessee has no right of hearing. But the process of enquiry, the assessee has no right of hearing. But the process of enquiry, the assessee has no right of hearing. But the assessee has a right to challe assessee has a right to challenge the conclusion arrived at on the nge the conclusion arrived at on the basis of the enquiry made. The assessee may point out the basis of the enquiry made. The assessee may point out the basis of the enquiry made. The assessee may point out the perversity in the finding. It may question the validity of the process perversity in the finding. It may question the validity of the process perversity in the finding. It may question the validity of the process undertaken. It may point out that aw particular material was not undertaken. It may point out that aw particular material was not undertaken. It may point out that aw particular material was not considered. It may also p considered. It may also point out that the enquiry made was not oint out that the enquiry made was not reasonable or was half reasonable or was half-heartedly done. The process of enquiry is heartedly done. The process of enquiry is such that the assessee has to offer the explanation and produce such that the assessee has to offer the explanation and produce such that the assessee has to offer the explanation and produce the material in support of such explanation and then it can do no the material in support of such explanation and then it can do no the material in support of such explanation and then it can do no further. The onus then further. The onus then shifts on the Revenue to scrutinise the shifts on the Revenue to scrutinise the materials and form an opinion on the basis thereof. For the materials and form an opinion on the basis thereof. For the materials and form an opinion on the basis thereof. For the purpose of scrutinising the materials, it may utilise its powers to purpose of scrutinising the materials, it may utilise its powers to purpose of scrutinising the materials, it may utilise its powers to seek attendance of any witness or disclosure of any information in seek attendance of any witness or disclosure of any information in seek attendance of any witness or disclosure of any information in exercise of its powe exercise of its power under section 131. It may seek information r under section 131. It may seek information from other sources in exercise of its power under section 133. Once from other sources in exercise of its power under section 133. Once from other sources in exercise of its power under section 133. Once a reasonable enquiry is made, then the assessing officer can do no a reasonable enquiry is made, then the assessing officer can do no a reasonable enquiry is made, then the assessing officer can do no further except arriving at a conclusion on the basis of such further except arriving at a conclusion on the basis of such further except arriving at a conclusion on the basis of such materials. If t materials. If the conclusion is adverse wholly or in part to the he conclusion is adverse wholly or in part to the interest of the assessee, it is incumbent on the Assessing Officer to interest of the assessee, it is incumbent on the Assessing Officer to interest of the assessee, it is incumbent on the Assessing Officer to intimate or inform the conclusion arrived at to the assessee." intimate or inform the conclusion arrived at to the assessee." intimate or inform the conclusion arrived at to the assessee." The Hon'ble Supreme court in case of CIT vs. P. Mohanakala The Hon'ble Supreme court in case of CIT vs. P. Mohanakala The Hon'ble Supreme court in case of CIT vs. P. Mohanakala [2007] 161 Tax [2007] 161 Taxman 169 (SC) while dealing with scope of provision man 169 (SC) while dealing with scope of provision of the section 68 of the Act held that "The opinion of the AO that of the section 68 of the Act held that "The opinion of the AO that of the section 68 of the Act held that "The opinion of the AO that the explanation furnished by the assessee as not satisfactory is the explanation furnished by the assessee as not satisfactory is the explanation furnished by the assessee as not satisfactory is required to be based on proper appreciation of material and other required to be based on proper appreciation of material and other required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the ng circumstances available on record. The opinion of the ng circumstances available on record. The opinion of the assessing officer is required to be formed objectively with reference assessing officer is required to be formed objectively with reference assessing officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine to the material available on record. Application of mind is the sine to the material available on record. Application of mind is the sine quo non for forming the opinion." In other words, once the a quo non for forming the opinion." In other words, once the a quo non for forming the opinion." In other words, once the assessee submits primary evidence with regard to identity and credit submits primary evidence with regard to identity and credit submits primary evidence with regard to identity and credit worthiness of creditor and the genuineness of the transaction the worthiness of creditor and the genuineness of the transaction the worthiness of creditor and the genuineness of the transaction the onus shifts on the AO to consider the material provided and make onus shifts on the AO to consider the material provided and make onus shifts on the AO to consider the material provided and make independent inquiry in order to find out genuineness of t independent inquiry in order to find out genuineness of t independent inquiry in order to find out genuineness of the evidence or bring material contrary to fact explained by the evidence or bring material contrary to fact explained by the evidence or bring material contrary to fact explained by the assessee. The AO cannot reject the primary evidence furnished by assessee. The AO cannot reject the primary evidence furnished by assessee. The AO cannot reject the primary evidence furnished by the assessee without appreciating the facts available on record or the assessee without appreciating the facts available on record or the assessee without appreciating the facts available on record or without bringing contrary material to form the belief that p without bringing contrary material to form the belief that p without bringing contrary material to form the belief that primary document or explanation furnished by the assessee is not document or explanation furnished by the assessee is not document or explanation furnished by the assessee is not satisfactory." From the above discussion, it is clear that the order of the AO From the above discussion, it is clear that the order of the AO From the above discussion, it is clear that the order of the AO suffers from fatal short comings. The order has been passed in suffers from fatal short comings. The order has been passed in suffers from fatal short comings. The order has been passed in violation of all the established principles of nat violation of all the established principles of natural justice namely ural justice namely that the assessee will be given full opportunity to cross examine that the assessee will be given full opportunity to cross examine that the assessee will be given full opportunity to cross examine and rebut the evidence gathered behind his back and that he will and rebut the evidence gathered behind his back and that he will and rebut the evidence gathered behind his back and that he will be heard in that respect. Further, once the initial onus cast upon be heard in that respect. Further, once the initial onus cast upon be heard in that respect. Further, once the initial onus cast upon the assessee by the AO u/s 68 was disc the assessee by the AO u/s 68 was discharged, the AO did not harged, the AO did not produce any evidence to rebut the assessee's submission but produce any evidence to rebut the assessee's submission but produce any evidence to rebut the assessee's submission but relied blindly on the statement made by Sh. Lahoti during the relied blindly on the statement made by Sh. Lahoti during the relied blindly on the statement made by Sh. Lahoti during the search conducted on Sh. Lahoti. Hence, the AO's order stands search conducted on Sh. Lahoti. Hence, the AO's order stands search conducted on Sh. Lahoti. Hence, the AO's order stands vitiated on both these counts and fails the test o vitiated on both these counts and fails the test of appeal. The f appeal. The addition made by the AO of Rs. 75,00,000/ addition made by the AO of Rs. 75,00,000/- u/s 68 is hereby u/s 68 is hereby deleted and the assessee's appeal deleted and the assessee's appeal is allowed.”

5.1 Regarding the first challenge of the assessee for validity of the Regarding the first challenge of the assessee for validity of the Regarding the first challenge of the assessee for validity of the reassessment completed u/s 147 of the Act is concerned, before the reassessment completed u/s 147 of the Act is concerned, before the reassessment completed u/s 147 of the Act is concerned, before the Ld. CIT(A), the assessee Ld. CIT(A), the assessee referred to the provisions of section 153C of referred to the provisions of section 153C of the Act and submitted that information was obtained from the the Act and submitted that information was obtained from the the Act and submitted that information was obtained from the search and survey proceeding wherein it was revealed that the search and survey proceeding wherein it was revealed that the search and survey proceeding wherein it was revealed that the assessee had received accommodation entries in the form of assessee had received accommodation entries in the form of assessee had received accommodation entries in the form of unsecured loans from the co unsecured loans from the company managed by Shri Lahoti. Before mpany managed by Shri Lahoti. Before us, the core contention of the assessee is that information leading he core contention of the assessee is that information leading he core contention of the assessee is that information leading to the reopening of the assessment emanated from a search and to the reopening of the assessment emanated from a search and to the reopening of the assessment emanated from a search and seizure operation conducted in the case of Shri Sushil Lahoti. It is seizure operation conducted in the case of Shri Sushil Lahoti. It is seizure operation conducted in the case of Shri Sushil Lahoti. It is submitted that durin submitted that during the said operation, incriminating material g the said operation, incriminating material was allegedly found indicating that the assessee had received was allegedly found indicating that the assessee had received was allegedly found indicating that the assessee had received accommodation entries in the form of unsecured loans from entities accommodation entries in the form of unsecured loans from entities accommodation entries in the form of unsecured loans from entities controlled by Shri Lahoti. Invoking the non controlled by Shri Lahoti. Invoking the non-obstante clause of obstante clause of Section 153C, it is urged that the correct jurisdictional route would urged that the correct jurisdictional route would urged that the correct jurisdictional route would have been under that provision alone and not under Section 147. It have been under that provision alone and not under Section 147. have been under that provision alone and not under Section 147. was contention of the assessee that search conducted on Shri was contention of the assessee that search conducted on Shri was contention of the assessee that search conducted on Shri Sushil Lahoti yielded documents, materials pertaining to the Sushil Lahoti yielded documents, materials pertaining to the Sushil Lahoti yielded documents, materials pertaining to the assessee, therefore, any assessment or reassessment if required ore, any assessment or reassessment if required ore, any assessment or reassessment if required must have been conducted strictly under the provisions of section must have been conducted strictly under the provisions of section must have been conducted strictly under the provisions of section 153C of the Act and not u/s 148 of the Act. 153C of the Act and not u/s 148 of the Act.

5.2 The The The Departmental Departmental Departmental Representative Representative Representative (DR), (DR), (DR), however, however, however, has has has countered this argument by submitting that no material pertaining countered this argument by submitting that no material pertaining countered this argument by submitting that no material pertaining to the assessee was actually recovered or seized during the search to the assessee was actually recovered or seized during the search to the assessee was actually recovered or seized during the search operation conducted on Shri Lahoti operation conducted on Shri Lahoti nor any information contained nor any information contained there in such seized material was found to be related to the n such seized material was found to be related to the n such seized material was found to be related to the assessee.. Rather, the only basis for initiating proceedings was the . Rather, the only basis for initiating proceedings was the . Rather, the only basis for initiating proceedings was the statement of Shri Lahoti recorded under Section 132(4), wherein he statement of Shri Lahoti recorded under Section 132(4), wherein he statement of Shri Lahoti recorded under Section 132(4), wherein he admitted to being in the business of providing accommodation admitted to being in the business of providing accommodation admitted to being in the business of providing accommodation entries through companies controlled by him. According to the DR, es through companies controlled by him. According to the DR, es through companies controlled by him. According to the DR, such a statement, in the absence of any seized document or asset such a statement, in the absence of any seized document or asset such a statement, in the absence of any seized document or asset relatable to the assessee, would not attract the provisions of Section relatable to the assessee, would not attract the provisions of Section relatable to the assessee, would not attract the provisions of Section 153C. In the reasons recorded, the Assessing Officer has me In the reasons recorded, the Assessing Officer has me In the reasons recorded, the Assessing Officer has mentioned about the statement of Shri Sushil Lahoti admitting of having about the statement of Shri Sushil Lahoti admitting of having about the statement of Shri Sushil Lahoti admitting of having engaged engaged engaged in in in providing providing providing accommodation accommodation accommodation entries entries entries through through through the the the companies controlled by him companies controlled by him. As the information of statement of sh . As the information of statement of sh Lahoti was only forwarded to the Assessing Officer of the assess only forwarded to the Assessing Officer of the assessee, only forwarded to the Assessing Officer of the assess thus the conditions of thus the conditions of section 153C of material pertaining to the material pertaining to the assessee and information contained therein related to assessee and information contained therein related to assessee and information contained therein related to assessee found in the course of search from party found in the course of search from party is not fulfilled. Further, the is not fulfilled. Further, the Ld. DR submitted that statement recorded u/s 132(4) of the Act of Ld. DR submitted that statement recorded u/s 132(4) of the Act of Ld. DR submitted that statement recorded u/s 132(4) of the Act of Shri Sushil Lahoti did not constitute any incriminating material as Shri Sushil Lahoti did not constitute any incriminating material as Shri Sushil Lahoti did not constitute any incriminating material as upheld by the Hon'ble Delhi High Court in decision dated Hon'ble Delhi High Court in decision dated Hon'ble Delhi High Court in decision dated 10/03/2016 in the case of 10/03/2016 in the case of Harjeevlal Agrawal in ITA 8/2004. in ITA 8/2004.

“Assessment of income of any other person. Assessment of income of any other person. 68 153C. 69 [(1)] 70[Notwithstanding anything contained in [Notwithstanding anything contained in section 139, [Notwithstanding anything contained in section 147, section 148 section 148, section 149, section 151 and and section 153, where the Assessing Officer is satisfied that, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or any money, bullion, jewellery or other valuable article or any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, 71belongs to; or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or any books of account or documents, seized or any books of account or documents, seized or requisitioned, pertains or pertain to, or any requisitioned, pertains or pertain to, or any requisitioned, pertains or pertain to, or any information contained therein, relates to information contained therein, relates to, information contained therein, relates to a person other than the person referred to in a person other than the person referred to in section 153A section 153A, then, the books of account or documents or assets, seized or requisitioned books of account or documents or assets, seized or requisitioned books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction shall be handed over to the Assessing Officer having jurisdiction shall be handed over to the Assessing Officer having jurisdiction over such other person] over such other person] 72[and that Assessing Officer shall proceed [and that Assessing Officer shall proceed against each such other person and issue notice and assess or against each such other person and issue notice and assess or against each such other person and issue notice and assess or reassess the income of the other person in accordance with the reassess the income of the other person in accordance with the reassess the income of the other person in accordance with the provisions of section 153A section 153A, if, that Assessing Officer is satisfied that is satisfied that the books of account or documents or assets seized or requisitioned the books of account or documents or assets seized or requisitioned the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other have a bearing on the determination of the total income of such other have a bearing on the determination of the total income of such other person 73[for six assessment years immediately preceding the [for six assessment years immediately preceding the [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is sment year relevant to the previous year in which search is sment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment conducted or requisition is made and] for the relevant assessment conducted or requisition is made and] for the relevant assessment year or years referred to in sub year or years referred to in sub-section (1) of section 153A section 153A] :] ………………………. …………………………… ……………….. ………………..”

6.1 From the plain reading of the above section it is clear that if From the plain reading of the above section it is clear that if From the plain reading of the above section it is clear that if (i) any cash money, bullion, jewellery etc. belonging to the third person any cash money, bullion, jewellery etc. belonging to the third person any cash money, bullion, jewellery etc. belonging to the third person is found during the course of the search of searched person or (ii) any is found during the course of the search of searched person or is found during the course of the search of searched person or books of accounts or the documents pertaining to third person or the documents pertaining to third person or any information contained therei information contained therein related to the third person is found in n related to the third person is found in the search of the searched searched person, then only provisions of section then only provisions of section 153C of the Act can be invoked and proceedings u/s 147 can be can be invoked and proceedings u/s 147 can be can be invoked and proceedings u/s 147 can be resorted in view of non in view of non-obstante clause in section 153 of the Act. in section 153 of the Act. The jurisdictional requirement under Section 153C is thus The jurisdictional requirement under Section 153C is thus The jurisdictional requirement under Section 153C is thus contingent upon (i) the recovery of assets belonging to the assessee, contingent upon (i) the recovery of assets belonging to the assessee, contingent upon (i) the recovery of assets belonging to the assessee, or (ii) the seizure of books or documents that pertain to or contain or (ii) the seizure of books or documents that pertain to or contain or (ii) the seizure of books or documents that pertain to or contain information relating to the assessee during the search of a third information relating to the assessee during the search of a third information relating to the assessee during the search of a third party.

6.2 In the case under consideration, t In the case under consideration, the Ld. Counsel for the he Ld. Counsel for the assessee has not filed a copy of reasons recorded. Before us, the assessee has not filed a copy of reasons recorded. Before us, the assessee has not filed a copy of reasons recorded. Before us, the assessee has filed a copy of the notice u/s 143(2) of the Act dated assessee has filed a copy of the notice u/s 143(2) of th assessee has filed a copy of the notice u/s 143(2) of th 28.06.2021 and a copy of show cause notice issued by the 28.06.2021 and a copy of show cause notice issued by the 28.06.2021 and a copy of show cause notice issued by the Assessing Officer on 02.03.2022 Assessing Officer on 02.03.2022, where there is a reference of the where there is a reference of the reasons recorded. The relevant part of the information available in reasons recorded. The relevant part of the information available in reasons recorded. The relevant part of the information available in show cause notice dated 02.03.2022 show cause notice dated 02.03.2022, available on pap available on paper book page 64 is reproduced as under: 64 is reproduced as under:

Subsequently, a credible information dt 04.3.2021 was received Subsequently, a credible information dt 04.3.2021 was received Subsequently, a credible information dt 04.3.2021 was received from the DCIT, Central Circle from the DCIT, Central Circle-2(2), Kolkata that a search & seizure 2(2), Kolkata that a search & seizure operation was conducted in the case of Mr. Sushil Lahoti & his operation was conducted in the case of Mr. Sushil Lahoti & his operation was conducted in the case of Mr. Sushil Lahoti & his companions on 21.5.201 companions on 21.5.2018. A survey operation u/s 133A was also 8. A survey operation u/s 133A was also conducted at the premises of Mr. Sushil Lahoti group on conducted at the premises of Mr. Sushil Lahoti group on conducted at the premises of Mr. Sushil Lahoti group on 24.11.2015. During the course of such operations, it was revealed 24.11.2015. During the course of such operations, it was revealed 24.11.2015. During the course of such operations, it was revealed that Mr. Sushil Lahoti group companies are involved in providing that Mr. Sushil Lahoti group companies are involved in providing that Mr. Sushil Lahoti group companies are involved in providing pre-arranged accommodation en arranged accommodation entries in lieu of commission. These tries in lieu of commission. These companies are controlled and managed by Mr. Sushil Lahoti. The companies are controlled and managed by Mr. Sushil Lahoti. The companies are controlled and managed by Mr. Sushil Lahoti. The Directors of these companies are dummy directors and they work Directors of these companies are dummy directors and they work Directors of these companies are dummy directors and they work on the directions of Mr. Sushil Lahoti. During the course of search on the directions of Mr. Sushil Lahoti. During the course of search on the directions of Mr. Sushil Lahoti. During the course of search & seizure and survey procee & seizure and survey proceedings (supra), Mr. Sushil Lahoti has dings (supra), Mr. Sushil Lahoti has admitted in his recorded statement that he had provided admitted in his recorded statement that he had provided admitted in his recorded statement that he had provided accommodation entries in the form of bogus Unsecured Loans and accommodation entries in the form of bogus Unsecured Loans and accommodation entries in the form of bogus Unsecured Loans and Share Capital/Premium in lieu of commission. From perusal of the Share Capital/Premium in lieu of commission. From perusal of the Share Capital/Premium in lieu of commission. From perusal of the above information, it revealed that above information, it revealed that the assessee company had the assessee company had availed of accommodation entries in the form of fictitious availed of accommodation entries in the form of fictitious availed of accommodation entries in the form of fictitious unsecured loans from the companies controlled and managed by unsecured loans from the companies controlled and managed by unsecured loans from the companies controlled and managed by Mr. Lahoti as as follows:

Name of the entity providing Name of the entity providing PAN Amount in Rs. Amount in Rs. accommodation entry accommodation entry

Esquire Vyapaar Pvt. Ltd. Pvt. Ltd. AABCE9245M 28,50,000 28,50,000

Indralok Agency Pvt. Ltd. Indralok Agency Pvt. Ltd. AACCI0219G 10,00,000 10,00,000

Gateway Agency Pvt. Ltd. Gateway Agency Pvt. Ltd. AADCG3632J 12,00,000 12,00,000

Shivdarbar Vanijya Pvt. Ltd. Shivdarbar Vanijya Pvt. Ltd. AANCS8451K 25,00,000 25,00,000

Total Amount 75,50,000 75,50,000

The aforesaid details gathered coupled with the data The aforesaid details gathered coupled with the data The aforesaid details gathered coupled with the data available with respect to the assessee company had led to the formation of with respect to the assessee company had led to the formation of with respect to the assessee company had led to the formation of belief that income to the extent of Rs 75,50,000/ belief that income to the extent of Rs 75,50,000/- has escaped has escaped assessment for the assessment for the A.Y. 2017-18.” 6.3 On perusal of the extract of the reasons recorded, we find that On perusal of the extract of the reasons recorded, we find that On perusal of the extract of the reasons recorded, we find that there is no reference of any seized material found from the search of there is no reference of any seized material found from the search of there is no reference of any seized material found from the search of Mr. Sushil Lahoti and only reference of the information based on Mr. Sushil Lahoti and only reference of the information based on Mr. Sushil Lahoti and only reference of the information based on admission admission admission of of of Shri Shri Shri Sushil Sushil Sushil Lahoti Lahoti Lahoti that that that he he he had had had provided provided provided accommodation entry in the form of bogus unsecured loan in lieu of mmodation entry in the form of bogus unsecured loan in lieu of mmodation entry in the form of bogus unsecured loan in lieu of commission and the assessee commission and the assessee was one of the beneficiary of the one of the beneficiary of the unsecured loan from the entities managed and controlled by Shri unsecured loan from the entities managed and controlled by Shri unsecured loan from the entities managed and controlled by Shri Sushil Lahoti. In the instant case, the materials on record do not In the instant case, the materials on record do not In the instant case, the materials on record do not indicate that any such books of accounts or documents or assets indicate that any such books of accounts or documents or assets indicate that any such books of accounts or documents or assets were found in the course of search of Shri Lahoti that pertained to were found in the course of search of Shri Lahoti that pertained to were found in the course of search of Shri Lahoti that pertained to or related to the assessee. The reasons recorded for reopening — a or related to the assessee. The reasons recorded for reopening or related to the assessee. The reasons recorded for reopening portion of which was reflected in the show cause notice dated portion of which was reflected in the show cause notice d portion of which was reflected in the show cause notice d 02.03.2022 — only mention the only mention the admission of Shri Lahoti in his of Shri Lahoti in his statement under Section 132(4), wherein he confessed to providing statement under Section 132(4), wherein he confessed to providing statement under Section 132(4), wherein he confessed to providing accommodation entries. There is no reference to any seized accommodation entries. There is no reference to any seized accommodation entries. There is no reference to any seized document relating to the assessee. document relating to the assessee. Therefore, we are of opinion Therefore, we are of opinion that the Assessing Officer has validly reopened the assessment u/s 147 he Assessing Officer has validly reopened the assessment u/s 147 he Assessing Officer has validly reopened the assessment u/s 147 of the Act. The Hon’ble Delhi High Court in the case of Harjeevlal of the Act. The Hon’ble Delhi High Court in the case of Harjeevlal of the Act. The Hon’ble Delhi High Court in the case of Harjeevlal Aggrawal (supra) has clearly held that statement recorded u/s Aggrawal (supra) has clearly held that statement recorded u/s Aggrawal (supra) has clearly held that statement recorded u/s 132(4) of the Act does not 132(4) of the Act does not constitute an incriminating m incriminating material. Since, no cash, money or valuable article or jewellery belonging to money or valuable article or jewellery belonging to money or valuable article or jewellery belonging to the assessee was found in the course of search of Mr. Sushil Lahoti found in the course of search of Mr. Sushil Lahoti found in the course of search of Mr. Sushil Lahoti and no books of accounts and no books of accounts or the documents pertaining to the the documents pertaining to the assessee or information contained therei or information contained therein related t n related to the assessee was found from the premises of Shri Sushil Lahoti, therefore, was found from the premises of Shri Sushil Lahoti was found from the premises of Shri Sushil Lahoti provisions of section 153C of the Act are validly not invoked and provisions of section 153C of the Act are validly not invoked and provisions of section 153C of the Act are validly not invoked and thus the non-obstante clause was not applicable in the case of the tante clause was not applicable in the case of the tante clause was not applicable in the case of the assessee. Hence, reassessment proceedings has reassessment proceedings has reassessment proceedings has been validly initiated u/s 147 of the Act. The ground No. 1 of the application initiated u/s 147 of the Act. The ground No. 1 of the application initiated u/s 147 of the Act. The ground No. 1 of the application under Rule 27 is accordingly rejected. under Rule 27 is accordingly rejected.

7.1 We have heard rival submission of parties on the issue in We have heard rival submission of parties on the issue in We have heard rival submission of parties on the issue in dispute and perused the relevant material ion record. The Ld. dispute and perused the relevant material ion record. dispute and perused the relevant material ion record. Counsel for the assessee Counsel for the assessee firstly, submitted that source of submitted that source of information was not referred in the reasons recorded. We find that information was not referred in the reasons recorded. We find that information was not referred in the reasons recorded. We find that the assessee had not provided a copy of the reasons recorded but the assessee had not provided a copy of the reasons recorded but the assessee had not provided a copy of the reasons recorded but from the materials placed before us from the materials placed before us — notably the show cause notably the show cause notice dated 02.03.2022 notice dated 02.03.2022 — it is evident that the AO received nt that the AO received credible information from the Deputy Commissioner of Income-tax, credible information from the Deputy Commissioner of Income credible information from the Deputy Commissioner of Income Central Circle-2(2), Kolkata, indicating that the assessee had 2(2), Kolkata, indicating that the assessee had 2(2), Kolkata, indicating that the assessee had availed accommodation entries in the form of fictitious unsecured availed accommodation entries in the form of fictitious unsecured availed accommodation entries in the form of fictitious unsecured loans from entities controlled by Shri loans from entities controlled by Shri Lahoti. The information Lahoti. The information included specific names of companies, PAN details, and quantum of included specific names of companies, PAN details, and quantum of included specific names of companies, PAN details, and quantum of alleged bogus loans aggregating Rs. 75,50,000 alleged bogus loans aggregating Rs. 75,50,000. He has also referred e has also referred to the date of the letter of the DCIT. He has referred to the search to the date of the letter of the DCIT. He has referred to the search to the date of the letter of the DCIT. He has referred to the search and seizure action at the pr and seizure action at the premises of Shri Sushil Lahoti and his emises of Shri Sushil Lahoti and his admission that he was engaged in providing accommodation entries admission that he was engaged in providing accommodation entries admission that he was engaged in providing accommodation entries of the unsecured loans. of the unsecured loans. In view of source of information being from In view of source of information being from a credible source the contention of the assessee are rejected. a credible source the contention of the assessee are rejected. a credible source the contention of the assessee are rejected. Further, we find that t Further, we find that the Hon’ble Supreme Court in Hon’ble Supreme Court in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR 500 (SC)] has laid [(2007) 291 ITR 500 (SC)] has laid Jhaveri Stock Brokers Pvt. Ltd. down the principle that, at the stage of formation of belief under down the principle that, at the stage of formation of belief under down the principle that, at the stage of formation of belief under Section 147, the AO is only required to have relevant material from Section 147, the AO is only required to have relevant material from Section 147, the AO is only required to have relevant material from which a reasonable person could form a requite belief that income sonable person could form a requite belief that income sonable person could form a requite belief that income chargeable to tax has escaped assessment. It is not necessary to chargeable to tax has escaped assessment. It is not necessary to chargeable to tax has escaped assessment. It is not necessary to establish the escapement of income to a final conclusion at the establish the escapement of income to a final conclusion at the establish the escapement of income to a final conclusion at the stage of recording reasons. stage of recording reasons. Since in the case in hand material Since in the case in hand material referred is relevant to the assessee, therefore, we do not find any is relevant to the assessee, therefore, we do not find any is relevant to the assessee, therefore, we do not find any error in the requisite error in the requisite belief recorded by the Ld. Assessing Officer. recorded by the Ld. Assessing Officer. The assessee’s argument that the AO did not possess the full The assessee’s argument that the AO did not possess the full The assessee’s argument that the AO did not possess the full statement of Shri Lahoti at the time of recording reasons remains statement of Shri Lahoti at the time of recording reasons remains statement of Shri Lahoti at the time of recording reasons remains unsubstantiated. No material has been brought on record to unsubstantiated. No material has been brought on record to unsubstantiated. No material has been brought on record to demonstrate that such a statement was unavailable or that the AO demonstrate that such a statement was unavailable or that the AO demonstrate that such a statement was unavailable or that the AO proceeded in absence of adequate information. On the contrary, the proceeded in absence of adequate information. On the contrary, the proceeded in absence of adequate information. On the contrary, the reasons recorded — — as partly reproduced — indicate the AO’s indicate the AO’s reliance on detailed inputs provided by the Investigation Wing. nce on detailed inputs provided by the Investigation Wing. nce on detailed inputs provided by the Investigation Wing. therefore, the allegation of allegation of the assessee are misplaced placed and based merely on the guess guess work. The assessee has nowhere brought work. The assessee has nowhere brought on record whether he had asked for reasons recorded or copy of record whether he had asked for reasons recorded record whether he had asked for reasons recorded statement recorded from from the Assessing Officer during the course of the Assessing Officer during the course of reassessment proceedings. reassessment proceedings. 7.2 The Ld. Counsel for the assessee before us relied on the The Ld. Counsel for the assessee before us relied on the The Ld. Counsel for the assessee before us relied on the decision of the Hon’ble Bombay High Court in the case of Prashant decision of the Hon’ble Bombay High Court in the case of Prashant decision of the Hon’ble Bombay High Court in the case of Prashant S. Joshi v. ITO [2010] 324 ITR 154 (Bombay HC) S. Joshi v. ITO [2010] 324 ITR 154 (Bombay HC) wherein it is held wherein it is held that reasons which are recorded by the Assessing Officer for reasons which are recorded by the Assessing Officer for reasons which are recorded by the Assessing Officer for reopening in assessment are the only reasons which can be reopening in assessment are the only reasons which can be reopening in assessment are the only reasons which can be considered when the formation of the belief is impugned. It is further considered when the formation of the belief is impugned considered when the formation of the belief is impugned held that recording of the re recording of the reasons distinguishes an objective distinguishes an objective from a subjective exercise of power subjective exercise of power. We find that in the instant case before . We find that in the instant case before us, assessee has not filed any copy of the reasons recorded and us, assessee has not filed any copy of the reasons recorded and us, assessee has not filed any copy of the reasons recorded and therefore, allegation of the assessee cannot be of the assessee cannot be substantiated. substantiated. 7.3 Further, the Ld. Counsel Further, the Ld. Counsel referred to the decision of Hon’ble referred to the decision of Hon’ble Bombay High Court in the case of Bombay High Court in the case of Hindustan Lever Ltd. v. R.B. Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332 (Bombay) wherein it is held that Wadkar [2004] 268 ITR 332 (Bombay) wherein it is held that Wadkar [2004] 268 ITR 332 (Bombay) wherein it is held that reasons are required to be read as they were recorded by the reasons are required to be read as they were recorded by the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or Assessing Officer. No substitution or deletion is permissible. No deletion is permissible. No additions can be made to those reasons. The reasons recorded additions can be made to those reasons. The reasons recorded additions can be made to those reasons. The reasons recorded should be self-explanatory and should not keep the assessee explanatory and should not keep the assessee explanatory and should not keep the assessee guessing for the reasons. We find in the instant case, the assessee We find in the instant case, the assessee guessing for the reasons. has not filed a copy of the reasons re copy of the reasons recorded, however from the however from the extract referred by the Assessing Officer, w erred by the Assessing Officer, we find that the reasons e find that the reasons have been based on the relevant material and thus fulfilling the have been based on the relevant material and thus fulfilling the have been based on the relevant material and thus fulfilling the requirement laid down in the decision of the Hon’ble Supreme Court requirement laid down in the decision of the Hon’ble Supreme Court requirement laid down in the decision of the Hon’ble Supreme Court in the case of Rajesh Jhaveri S in the case of Rajesh Jhaveri Stock brokers P Ltd (supra) tock brokers P Ltd (supra). 7.4 Upon careful consideration of the submissions advanced and Upon careful consideration of the submissions advanced and Upon careful consideration of the submissions advanced and the material available on record, we are satisfied that: the material available on record, we are satisfied that: the material available on record, we are satisfied that:

 The preconditions for invoking Section 153C are not met, as The preconditions for invoking Section 153C are not met, as The preconditions for invoking Section 153C are not met, as no material relating to the assessee was found no material relating to the assessee was found no material relating to the assessee was found during the search;  The AO has recorded reasons based on specific and credible The AO has recorded reasons based on specific and credible The AO has recorded reasons based on specific and credible information that prima facie indicated escapement of income; information that prima facie indicated escapement of income; information that prima facie indicated escapement of income;  The procedural safeguards envisaged under Section 147 have The procedural safeguards envisaged under Section 147 have The procedural safeguards envisaged under Section 147 have been adequately complied with; been adequately complied with;  There is no material to sup There is no material to support the claim that the information port the claim that the information was unverified or that the reasons recorded were vague or was unverified or that the reasons recorded were vague or was unverified or that the reasons recorded were vague or non-specific.

7.5 Accordingly, the reassessment proceedings initiated under Accordingly, the reassessment proceedings initiated under Accordingly, the reassessment proceedings initiated under Section 147 of the Act are held to be legally valid. Both grounds Section 147 of the Act are held to be legally valid. Both grounds Section 147 of the Act are held to be legally valid. Both grounds raised in the applicatio raised in the application under Rule 27 stand rejected. n under Rule 27 stand rejected.

In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) In Amarjit Singh Bakshi (HUF) vs ACIT (2003) 86 ITD 13 (Delhi) it was held that where the doc it was held that where the document in questioned was not ument in questioned was not recovered from the assessee's possession but was receovered recovered from the assessee's possession but was receovered recovered from the assessee's possession but was receovered from somebody else's possession and the assessee was not from somebody else's possession and the assessee was not from somebody else's possession and the assessee was not allowed any opportunity to cross examine that person no allowed any opportunity to cross examine that person no allowed any opportunity to cross examine that person no addition could be made based on such document in the ha addition could be made based on such document in the ha addition could be made based on such document in the hands of the assessee. of the assessee. Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) Finally, in Kalra Glass Factory vs Sales Tax Tribunal (1987) 167 ITR 488 the Supreme Court held that it is an elementary 167 ITR 488 the Supreme Court held that it is an elementary 167 ITR 488 the Supreme Court held that it is an elementary principle of natural justice that the assessee should have principle of natural justice that the assessee should have principle of natural justice that the assessee should have knowledge of the material that is being used against h knowledge of the material that is being used against h knowledge of the material that is being used against him so that he may be able to meet it, where for instance the statement that he may be able to meet it, where for instance the statement that he may be able to meet it, where for instance the statement of a person is recorded or evidence gathered behind the back of of a person is recorded or evidence gathered behind the back of of a person is recorded or evidence gathered behind the back of the assessee but the same is not tested by cross examination, the assessee but the same is not tested by cross examination, the assessee but the same is not tested by cross examination, such a statement or evidence cannot be allowed to be used t such a statement or evidence cannot be allowed to be used t such a statement or evidence cannot be allowed to be used to the prejudice of the assessee. the prejudice of the assessee. Hence, from the above discussion it is clear that by not Hence, from the above discussion it is clear that by not Hence, from the above discussion it is clear that by not affording an opportunity to the assessee to cross examine Sh. affording an opportunity to the assessee to cross examine Sh. affording an opportunity to the assessee to cross examine Sh. Lahoti who had alleged that he had provided accommodation Lahoti who had alleged that he had provided accommodation Lahoti who had alleged that he had provided accommodation entries to the appellant, the order of the AO entries to the appellant, the order of the AO has been vitiated as has been vitiated as it violates a fundamental tenet of the principles of natural it violates a fundamental tenet of the principles of natural it violates a fundamental tenet of the principles of natural justice, namely, 'Audi Alteram Partem' i.e. that the other side justice, namely, 'Audi Alteram Partem' i.e. that the other side justice, namely, 'Audi Alteram Partem' i.e. that the other side will be heard and that no evidence/statement shall be used will be heard and that no evidence/statement shall be used will be heard and that no evidence/statement shall be used against the assessee without affording him an oppo against the assessee without affording him an oppo against the assessee without affording him an opportunity to cross examine the person making the statement and thus cross examine the person making the statement and thus cross examine the person making the statement and thus enabling him to rebut the evidence being used against him. The enabling him to rebut the evidence being used against him. The enabling him to rebut the evidence being used against him. The presumption u/s 132(4A) can be drawn only against the person presumption u/s 132(4A) can be drawn only against the person presumption u/s 132(4A) can be drawn only against the person in whose case the search was authorised i.e. ShLahoti and from in whose case the search was authorised i.e. ShLahoti and from in whose case the search was authorised i.e. ShLahoti and from whom incriminating documents have been found and whose m incriminating documents have been found and whose m incriminating documents have been found and whose statement has been recorded. The presumption thus cannot be statement has been recorded. The presumption thus cannot be statement has been recorded. The presumption thus cannot be used against the appellant who was never subjected to a used against the appellant who was never subjected to a used against the appellant who was never subjected to a search. The other issue which needs to be considered here is that the The other issue which needs to be considered here is that the The other issue which needs to be considered here is that the assessee had duly assessee had duly furnished loan confirmations and bank furnished loan confirmations and bank statements to the AO during the course of the re statements to the AO during the course of the re-assessment assessment proceedings. Thus, the assessee discharged the initial onus proceedings. Thus, the assessee discharged the initial onus proceedings. Thus, the assessee discharged the initial onus cast upon him u/s 68 by the AO by furnishing details of the cast upon him u/s 68 by the AO by furnishing details of the cast upon him u/s 68 by the AO by furnishing details of the identity, credit worthiness of the le identity, credit worthiness of the lenders and the genuineness nders and the genuineness of the loan transaction. In other words, the onus was shifted of the loan transaction. In other words, the onus was shifted of the loan transaction. In other words, the onus was shifted back onto the AO and it was for him to advance evidence in back onto the AO and it was for him to advance evidence in back onto the AO and it was for him to advance evidence in order to rebut the evidence filed by the assessee. This the AO order to rebut the evidence filed by the assessee. This the AO order to rebut the evidence filed by the assessee. This the AO failed to do by not bringing a single piece of failed to do by not bringing a single piece of evidence to evidence to discount the evidence furnished by the assessee. This discount the evidence furnished by the assessee. This discount the evidence furnished by the assessee. This proposition of Income tax law that once the initial burden cast proposition of Income tax law that once the initial burden cast proposition of Income tax law that once the initial burden cast by section 68 is discharged, the AO has to produce further by section 68 is discharged, the AO has to produce further by section 68 is discharged, the AO has to produce further evidence in order to be able to make the addition is supported evidence in order to be able to make the addition is supported evidence in order to be able to make the addition is supported by numerous decisions. In Hindustan Tea Trading Co. Ltd. 263 numerous decisions. In Hindustan Tea Trading Co. Ltd. 263 numerous decisions. In Hindustan Tea Trading Co. Ltd. 263 ITR 289(Cal), the Hon'ble High Court of Calcutta while ITR 289(Cal), the Hon'ble High Court of Calcutta while ITR 289(Cal), the Hon'ble High Court of Calcutta while examining the scope of powers of AO under section 68 of the Act examining the scope of powers of AO under section 68 of the Act examining the scope of powers of AO under section 68 of the Act held: Section 68 of the income Section 68 of the income-tax Act, 1961, empowers the Assessing tax Act, 1961, empowers the Assessing Officer to treat any sum found credited in the books of account Officer to treat any sum found credited in the books of account Officer to treat any sum found credited in the books of account of the assessee for any previous year, if the assessee fails to of the assessee for any previous year, if the assessee fails to of the assessee for any previous year, if the assessee fails to offer explanation about the nature and sources of such fund or offer explanation about the nature and sources of such fund or offer explanation about the nature and sources of such fund or if the explanation offered by the assessee is not, in the opinion the explanation offered by the assessee is not, in the opinion the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, as income from of the Assessing Officer, satisfactory, as income from of the Assessing Officer, satisfactory, as income from undisclosed sources and charge the same to tax as income of undisclosed sources and charge the same to tax as income of undisclosed sources and charge the same to tax as income of the assessee of that previous year. Therefore, it appears that the assessee of that previous year. Therefore, it appears that the assessee of that previous year. Therefore, it appears that the power of t the power of the assessing officer under section 68 is not an he assessing officer under section 68 is not an absolute one. It is subject to its satisfaction where an absolute one. It is subject to its satisfaction where an absolute one. It is subject to its satisfaction where an explanation is offered. The power is absolute where the explanation is offered. The power is absolute where the explanation is offered. The power is absolute where the assessee offers no explanation. The satisfaction with regard to assessee offers no explanation. The satisfaction with regard to assessee offers no explanation. The satisfaction with regard to the explanation is in effect an the explanation is in effect an in-built safeguard in section 68 built safeguard in section 68 protecting the interest of the assessee. It provides for an protecting the interest of the assessee. It provides for an protecting the interest of the assessee. It provides for an opportunity to the assessee to explain the nature and source of opportunity to the assessee to explain the nature and source of opportunity to the assessee to explain the nature and source of the fund. Once it is explained, it is incumbent on the assessing the fund. Once it is explained, it is incumbent on the assessing the fund. Once it is explained, it is incumbent on the assessing officer to consider the same and officer to consider the same and form an opinion whether the form an opinion whether the explanation is satisfactory or not. The expression used in the explanation is satisfactory or not. The expression used in the explanation is satisfactory or not. The expression used in the section clearly lays the burden on the assessee to explain the section clearly lays the burden on the assessee to explain the section clearly lays the burden on the assessee to explain the nature and source of the fund. Unless an explanation is offered, nature and source of the fund. Unless an explanation is offered, nature and source of the fund. Unless an explanation is offered, the Assessing Officer is free to trea the Assessing Officer is free to treat the fund as income of the t the fund as income of the assessee from undisclosed sources chargeable to tax. Once an assessee from undisclosed sources chargeable to tax. Once an assessee from undisclosed sources chargeable to tax. Once an explanation is offered, the Assessing Officer is bound to explanation is offered, the Assessing Officer is bound to explanation is offered, the Assessing Officer is bound to consider the same. Such consideration is guided by sound consider the same. Such consideration is guided by sound consider the same. Such consideration is guided by sound principles of law. The opinion so formed must be rea principles of law. The opinion so formed must be rea principles of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of and based on materials and shall not be perverse. The extent of and based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the the power of the Assessing Officer while considering the the power of the Assessing Officer while considering the materials produced by the assessee is very wide. It is a materials produced by the assessee is very wide. It is a materials produced by the assessee is very wide. It is a question of examining as to whether the apparent is real. The question of examining as to whether the apparent is real. The question of examining as to whether the apparent is real. The Assessing Officer is empowered to lift the corporate veil and g Officer is empowered to lift the corporate veil and g Officer is empowered to lift the corporate veil and examine the real nature of the transaction. In the process, he examine the real nature of the transaction. In the process, he examine the real nature of the transaction. In the process, he may exercise its power of examining the materials. He may may exercise its power of examining the materials. He may may exercise its power of examining the materials. He may require the assessee to produce further materials if so required. require the assessee to produce further materials if so required. require the assessee to produce further materials if so required. He may seek inf He may seek information from other sources on the basis of the ormation from other sources on the basis of the material produced. In the process of enquiry, the assessee has material produced. In the process of enquiry, the assessee has material produced. In the process of enquiry, the assessee has no right of hearing. But the assessee has a right to challenge no right of hearing. But the assessee has a right to challenge no right of hearing. But the assessee has a right to challenge the conclusion arrived at on the basis of the enquiry made. The the conclusion arrived at on the basis of the enquiry made. The the conclusion arrived at on the basis of the enquiry made. The assessee may point assessee may point out the perversity in the finding. It may out the perversity in the finding. It may question the validity of the process undertaken. It may point out question the validity of the process undertaken. It may point out question the validity of the process undertaken. It may point out that aw particular material was not considered. It may also that aw particular material was not considered. It may also that aw particular material was not considered. It may also point out that the enquiry made was not reasonable or was point out that the enquiry made was not reasonable or was point out that the enquiry made was not reasonable or was half-heartedly done. The proc heartedly done. The process of enquiry is such that the ess of enquiry is such that the assessee has to offer the explanation and produce the material assessee has to offer the explanation and produce the material assessee has to offer the explanation and produce the material in support of such explanation and then it can do no further. in support of such explanation and then it can do no further. in support of such explanation and then it can do no further. The onus then shifts on the Revenue to scrutinise the materials The onus then shifts on the Revenue to scrutinise the materials The onus then shifts on the Revenue to scrutinise the materials and form an opinion on the basis th and form an opinion on the basis thereof. For the purpose of ereof. For the purpose of scrutinising the materials, it may utilise its powers to seek scrutinising the materials, it may utilise its powers to seek scrutinising the materials, it may utilise its powers to seek attendance of any witness or disclosure of any information in attendance of any witness or disclosure of any information in attendance of any witness or disclosure of any information in exercise of its power under section 131. It may seek information exercise of its power under section 131. It may seek information exercise of its power under section 131. It may seek information from other sources in exercise of its pow from other sources in exercise of its power under section 133. er under section 133. Once a reasonable enquiry is made, then the assessing officer Once a reasonable enquiry is made, then the assessing officer Once a reasonable enquiry is made, then the assessing officer can do no further except arriving at a conclusion on the basis of can do no further except arriving at a conclusion on the basis of can do no further except arriving at a conclusion on the basis of such materials. If the conclusion is adverse wholly or in part to such materials. If the conclusion is adverse wholly or in part to such materials. If the conclusion is adverse wholly or in part to the interest of the assessee, it is incu the interest of the assessee, it is incumbent on the Assessing mbent on the Assessing Officer to intimate or inform the conclusion arrived at to the Officer to intimate or inform the conclusion arrived at to the Officer to intimate or inform the conclusion arrived at to the assessee." The Hon'ble Supreme court in case of CIT vs. P. Mohanakala The Hon'ble Supreme court in case of CIT vs. P. Mohanakala The Hon'ble Supreme court in case of CIT vs. P. Mohanakala [2007] 161 Taxman 169 (SC) while dealing with scope of [2007] 161 Taxman 169 (SC) while dealing with scope of [2007] 161 Taxman 169 (SC) while dealing with scope of provision of the section 68 of the Act held provision of the section 68 of the Act held that "The opinion of the AO that the explanation furnished by the "The opinion of the AO that the explanation furnished by the "The opinion of the AO that the explanation furnished by the assessee as not satisfactory is required to be based on proper assessee as not satisfactory is required to be based on proper assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances appreciation of material and other attending circumstances appreciation of material and other attending circumstances available on record. The opinion of the assessing officer is available on record. The opinion of the assessing officer is available on record. The opinion of the assessing officer is required to be formed objectively with reference to the material ed to be formed objectively with reference to the material ed to be formed objectively with reference to the material available on record. Application of mind is the sine quo non for available on record. Application of mind is the sine quo non for available on record. Application of mind is the sine quo non for forming the opinion." In other words, once the assessee submits forming the opinion." In other words, once the assessee submits forming the opinion." In other words, once the assessee submits primary evidence with regard to identity and credit worthiness primary evidence with regard to identity and credit worthiness primary evidence with regard to identity and credit worthiness of creditor and the genuineness of the transaction the onus editor and the genuineness of the transaction the onus editor and the genuineness of the transaction the onus shifts on the AO to consider the material provided and make shifts on the AO to consider the material provided and make shifts on the AO to consider the material provided and make independent inquiry in order to find out genuineness of the independent inquiry in order to find out genuineness of the independent inquiry in order to find out genuineness of the evidence or bring material contrary to fact explained by the evidence or bring material contrary to fact explained by the evidence or bring material contrary to fact explained by the assessee. The AO can assessee. The AO cannot reject the primary evidence furnished not reject the primary evidence furnished by the assessee without appreciating the facts available on by the assessee without appreciating the facts available on by the assessee without appreciating the facts available on record or without bringing contrary material to form the belief record or without bringing contrary material to form the belief record or without bringing contrary material to form the belief that primary document or explanation furnished by the that primary document or explanation furnished by the that primary document or explanation furnished by the assessee is not satisfactory." assessee is not satisfactory." From the above discussion, it is clear that the order of the AO the above discussion, it is clear that the order of the AO the above discussion, it is clear that the order of the AO suffers from fatal short comings. The order has been passed in suffers from fatal short comings. The order has been passed in suffers from fatal short comings. The order has been passed in violation of all the established principles of natural justice violation of all the established principles of natural justice violation of all the established principles of natural justice namely that the assessee will be given full opportunity to cross namely that the assessee will be given full opportunity to cross namely that the assessee will be given full opportunity to cross examine and rebut the evidence gathered behind his back and ne and rebut the evidence gathered behind his back and ne and rebut the evidence gathered behind his back and that he will be heard in that respect. Further, once the initial that he will be heard in that respect. Further, once the initial that he will be heard in that respect. Further, once the initial onus cast upon the assessee by the AO u/s 68 was discharged, onus cast upon the assessee by the AO u/s 68 was discharged, onus cast upon the assessee by the AO u/s 68 was discharged, the AO did not produce any evidence to rebut the assessee's the AO did not produce any evidence to rebut the assessee's the AO did not produce any evidence to rebut the assessee's submission but submission but relied blindly on the statement made by Sh. relied blindly on the statement made by Sh. Lahoti during the search conducted on Sh. Lahoti. Hence, the Lahoti during the search conducted on Sh. Lahoti. Hence, the Lahoti during the search conducted on Sh. Lahoti. Hence, the AO's order stands vitiated on both these counts and fails the AO's order stands vitiated on both these counts and fails the AO's order stands vitiated on both these counts and fails the test of appeal. The addition made by the AO of Rs. 75,00,000/ test of appeal. The addition made by the AO of Rs. 75,00,000/ test of appeal. The addition made by the AO of Rs. 75,00,000/- u/s u/s 68 68 is is hereby hereby deleted deleted and a nd the the assessee's assessee's appeal is allowed. allowed.”

8.1 We have heard rival submission of parties and perused relevant We have heard rival submission of parties and perused relevant We have heard rival submission of parties and perused relevant material on record including paper book filed by the assessee. We material on record including paper book filed by the assessee. material on record including paper book filed by the assessee. find that the assessee himself obtained confirmation in respect of find that the assessee himself obtained confirmation in respect of find that the assessee himself obtained confirmation in respect of four parties from Shri Sushil Lahoti a Shri Sushil Lahoti and therefore, he was not nd therefore, he was not justified in asking for cross asking for cross-examination of Shri Sushil Lahoti and amination of Shri Sushil Lahoti and onus was on the assessee to produce him and substantiate assessee to produce him and substantiate assessee to produce him and substantiate that those companies were not controlled by him. The assessee has also those companies were not controlled by him. The assessee has also those companies were not controlled by him. The assessee has also filed a copy of affidavit by Shri Sushil Lahoti retracting affidavit by Shri Sushil Lahoti retracting affidavit by Shri Sushil Lahoti retracting his statement made during search, made during search, which is available on Paper Book which is available on Paper Book page 385-387, therefore , therefore, also onus was on the assessee to produce the assessee to produce him before the Assessing Officer him before the Assessing Officer for his examination by the assessee his examination by the assessee and cross-examination by the Assessing Officer. But no such examination by the Assessing Officer. But no such examination by the Assessing Officer. But no such exercise has been done by the exercise has been done by the assessee, therefore, the assessee has therefore, the assessee has failed to discharge his onus. Further, we find that the Hon’ble Delhi failed to discharge his onus. Further, we find that the failed to discharge his onus. Further, we find that the High Court in the case of Jansampark Advertising ampark Advertising and High Court in the case of marketing P Ltd in ng P Ltd in ITA 525/2014 has held that if the assessing ITA 525/2014 has held that if the assessing officer fails in carrying out the enquiries which are required in the officer fails in carrying out the enquiries which are required in the officer fails in carrying out the enquiries which are required in the matter, then the Ld. CIT(A) is under obligation to carry out such matter, then the Ld. CIT(A) is under obligation to carry out such matter, then the Ld. CIT(A) is under obligation to carry out such enquires and he cannot enquires and he cannot sit idle and allow relief to the either and allow relief to the either of party. The relevant part of decision is reproduced as under: party. The relevant part of decision is reproduced as under: party. The relevant part of decision is reproduced as under:

8.2 Since in this case the Ld. CIT(A) was required to carry out s case the Ld. CIT(A) was required to carry out s case the Ld. CIT(A) was required to carry out inquiry inquiry or or verification verification for examining creditworthiness creditworthiness or or genuineness of the transaction genuineness of the transaction, which has not been carried out which has not been carried out. From the financials of the rom the financials of the four companies filed before us, w four companies filed before us, we find that those companie that those companies are having meagre profit and only source of profit and only source of fund is by way of security premium received, b y of security premium received, b ut the security premium itself was not not justified in those companies and therefore justified in those companies and therefore genuineness of the transaction was not established. All those genuineness of the transaction was not established. All those genuineness of the transaction was not established. All those inquiries were required to be conducted by the Ld. CIT(A) if the red to be conducted by the Ld. CIT(A) if the red to be conducted by the Ld. CIT(A) if the Assessing Officer failed in doing so. Therefore, in the facts and Assessing Officer failed in doing so. Therefore, in the facts and Assessing Officer failed in doing so. Therefore, in the facts and circumstances of the case, we feel it appropriate to restore the circumstances of the case, we feel it appropriate to restore the circumstances of the case, we feel it appropriate to restore the matter involved in issue in dispute involved in issue in dispute back to the file of the Ld. CIT(A) back to the file of the Ld. CIT(A) for carrying out necessary inquiry either himself or through the ing out necessary inquiry either himself or through the ing out necessary inquiry either himself or through the Assessing Officer and adjudicate the issue in dispute after providing Assessing Officer and adjudicate the issue in dispute after providing Assessing Officer and adjudicate the issue in dispute after providing adequate opportunity of being heard to the assessee. The grounds adequate opportunity of being heard to the assessee. The grounds adequate opportunity of being heard to the assessee. The grounds of appeal of the Revenue are accordingly allowed for statistical of appeal of the Revenue are accordingly allowed of appeal of the Revenue are accordingly allowed purposes.