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Income Tax Appellate Tribunal, DELHI BENCH : G : NEW DELHI
Before: SHRI R.K. PANDA & MS SUCHITRA KAMBLE
ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 28th December, 2018 of the CIT(A)-30, New Delhi, relating to Assessment Year 2014-15.
Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and export of tobacco products. It filed its return of income on 30th September, 2014 declaring the loss of Rs.18,78,467/-. The return was processed u/s 143(1) of the Act on 26th November, 2014 at the returned income. Subsequently, the AO reopened the assessment as per the provisions of section 147 of the Act by recording the following reasons:-
In response to the notice u/s 148 of the Act, the assessee filed its return of income on 18th April, 2017 declaring the loss of Rs.18,78,467/-. During the course of assessment proceedings, the AO noted that the assessee company during the year under consideration has received share application money from the following companies:- S.No. Name of the company Address Share application money 1. M/s Binapani Merchandise 7, Ganesh Chandra 1,50,00,000 Avenue, 5th Floor, Kolkata Pvt. Ltd. 2. M/s Kansabati Tradecom 7, Ganesh Chandra 40,00,000 Avenue, 5th Floor, Kolkata Pvt. Ltd. Total 1,90,00,000
3.1 He noted that during the search and post search and survey proceedings in Kuber Group of companies, the details relating to companies giving accommodation entries of share application money, share premium, share capital and unsecured loan came to light. He observed that during the search and seizure operation u/s 132 of the Act on 9th October, 2014 in the Kuber Group of Companies, statement of Shri Mul Chand Malu was recorded u/s 132(4) of the Act in which he has offered to declare undisclosed income of Rs.100 crore of the Kuber Group of companies and their directors under specific head of share capital/share premium/ capital formation out of total undisclosed income of Rs.150 crore. Subsequently, the statement of Shri Mul Chand Malu was again recorded on oath u/s 131 of the Act on 02.01.2015 wherein he reaffirmed his declaration of undisclosed income of Rs.100 crore towards share application money/share premium/ share capital and unsecured loan. In view of the above and considering the fact that during post search investigation, the summons issued u/s 131 of the Act to various accommodation entry giving entities remained ucomplied with, the AO asked the assessee to furnish the details of share application money, share premium and unsecured loan received from the companies and prove their credit worthiness and genuineness of the transactions u/s 68 of the IT Act. The AO further noted that during assessment proceedings in various Kuber Group of companies, enquiries were conducted by issuing commission u/s 131(1)(d) of the Act and information was gathered from the Investigation Wing, Kolkata. As per the information received, M/s Binapani 5
Merchandise Pvt. Ltd. is one of the many paper/jamakharchi companies used in providing accommodation entries by Mr. Vikas Kumar Agarwal. In his statement, Shri Vikas Kumar Agarwal had stated that his main source of income is from commission for providing accommodation entries. He had further stated that the companies managed and controlled by him are basically paper companies without having any actual business and thereby don’t require any actual fund. The main motive of formation of these companies was to provide accommodation entries to various beneficiaries in lieu of commission income. Similarly in the case of M/s Kansabati Tradecom Pvt. Ltd., operated by Mr. Devesh Upadhyaya, the AO noted that Shri Devesh Upadhyaya had also given similar statement.
The AO, therefore, confronted the assessee regarding the above findings and asked the assessee to produce the directors/key persons who are involved in managing the affairs of the companies to prove the genuineness of the share application money received along with the documentary evidences and also asked the assessee to explain as to why the funds credited in the books of account of the company in the form of share application money may not be treated as unexplained credits and charge to income-tax.
In response to the same, the assessee furnished the details in the form of copies of share application forms, confirmations, bank statement, ITR acknowledgement and annual financial statement of respective applicants. However, the assessee failed to produce the directors for examination of the AO.
Since there was persistent non-compliance of the assessee to produce the directors of the assessee company or the directors of the investor companies, the AO, relying on various decisions held that the assessee failed to prove the identity and credit worthiness of the investor companies and the genuineness of the transaction. Invoking the provisions of section 68, the AO made addition of Rs.1,90,00,000/- to the total income of the assessee.
Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of reassessment proceedings. The assessee has also made elaborate submissions. The ld. CIT(A) called for a remand report from the AO. After considering the submissions of the assessee, remand report of the AO and the rejoinder of the assessee to such remand report, the ld. CIT(A) upheld the validity of the reassessment proceedings and also upheld the addition on merit.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “
1. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi New Delhi has erred both on facts and in law in upholding the impugned order passed by the respondent illegally, violating the principles of natural justice, without fair and objective application of mind to the facts of the case and the law applicable and without being guided by the binding decisions of courts and tribunals and hence liable to be set aside and quashed and declared non est. in law.
2. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment of the appellant at income of Rs.17,121,533/- as against the income of (Rs.1,878,467/-) declared by the appellant.
3. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment 7 that could not have been re-opened u/s 147/148 as no valid reasons have been recorded by the Assessing Officer to establish any satisfaction on his part that any income belonging to the appellant has escaped assessment.
4. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law , in sustaining the action of AO as no incriminating material whatsoever was found/unearthed as a result of search.
5. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO in initiation of proceedings u/s 147, of the IT Act, solely on the basis Unverified/ unratified/unsubstantiated/unconfirmed statement of Shri Mul Chand Malu.
6. That the Ld. CIT(A) has erred, both on facts and in law, in sustaining the addition of Rs. 19,00,000/- u/s 68 on account of share capital/share premium without appreciating the facts of the case.
7. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the additions of Rs. 1,90,00,000/- despite the fact that the assessee has discharged the onus cast upon it under section 68 of the Income-tax Act.
8. On the facts and circumstances of the case, Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant.
9. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross- examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A).
10. On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO. As the proceedings initiated u/s 147/148 are invalid, the proceedings should have been initiated u/s 153C. 11.That the provisions of sections 234A, 234B and 234C of the Act are not at all applicable. 12.That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 13.The appellant craves leave to add, amend or alter any of the grounds of appeal.” 8
Grounds of appeal No.1, 12 and 13 being general in nature are dismissed. Ground of appeal No.11 being consequential in nature is dismissed. So far as the other grounds are concerned, the ld. Counsel for the assessee strongly challenged the order of ld.CIT(A). He drew the attention of the Bench to the following date chart:- DATE EVENT Remarks 09.12.2013 Statement of one Vikash Aggarwal was Copy of the statement is at recorded by Calcuta investigation wing Page no-52 of the PB 30.09.2014 Return of Income for the impugned year Admitted fact declaring loss was filed by assessee 09.10.2014 A search was conducted in Kuber Group of Admitted fact Companies 24.01.2014 Statement of Devesh Upadhya was Page No-82 of the PB recorded by Kolkota Wing 30.12.2014 Statement of Devesh Upadhya was See Page NO-74 of the PB recorded by the investigation wing of Kolkota 02.03.2015 Statement of Devesh Upadhya was See Page NO-67 & 70 of recorded again the PB 01.05.2015 Statement of Devesh Upadhya was See Page NO-58 of the PB recorded again 10.11.2016 Commission under section 131(1)(d) of the See Page no-48 of the PB Act was issued by Delhi 31.03.2017 Reasons for impugned year was recorded Page NO-3 & 4 of the PB 31.03.2017 CIT granted Sanction Pg no-6 of the PB
31.03.2017 Notice u/s 148 was issued Admitted fact in Order of Asst 20.04.2017 Assessee filed objections for reassessment Page no-7 of PB 21.04.2017 Order disposing the objection of assessee See Page No-17 of PB 12.05.2017 Assessment order was passed See assessment order 8.1 He submitted that the AO while recording reasons has made very wrong observations and hence it can be inferred that there was no tangible material with the AO for having reasons vis-a-vis escapement of income. He submitted that the 9 information on the basis of which reasons were conceived was not gathered in search or post search enquiries which is evident from the date of events mentioned above. He submitted that search date was 09.10.2014 & commission u/s 131(1)(d) was issued on 10.11.2016 and statements of the person alleged to have control over the investor companies were much prior to the date of search and issuance of commission. The statements were recorded on 9-12-2013, 24.01.2014, 30.12.2014, 02.03.2015 & 01.05.2015 and commission was issued on 10.11.2016. Therefore, the averment of the AO that during search and post search proceedings ,information relating to entities providing accommodation entries of share application money, share premium, share capital and unsecured loans to Kuber Group entities came to light is factually incorrect.
8.2 The ld. Counsel for the assessee submitted that the AO has alleged that M/s Binapani Mercentile (one of the investor) was a jama kharchi company. However, this fact is contrary to the report of commission. Referring to page 48 of the paper book, he submitted that the Calcutta wing has mentioned the name of Jama Kharchi companies and the name of BINAPANI was not there in that list. Further perusal of Page No- 50 would show that name of BINAPANI was at serial number-7 and covered in the category of those companies whose address were not traceable. Therefore the observation of the AO that BINAPANI was Jamakharchi Company is factually incorrect and contrary to the report of investigation wing which shows that the AO has not applied his mind at all.
8.3 Ld. Counsel for the assessee referring to Q 14 at Paper Book page 54, submitted that Mr Vikash Aggarwal in his statement, which is part of the assessment order as Annexure B, has provided accommodation share capital to some other companies and that too in some other Assessment years and not in AY 2014-15. He submitted that the AO in the reasons recorded has admitted in last para at 1st page of the reasons recorded that statements of Vikash Kumar Aggarwal were recorded during previous enquires/ surveys/ searches and not in connection with the present commission issued in Kuber Group. Therefore it is legally impermissible to entrap the future transactions without there being any happening/ material.
8.4 Ld. Counsel for the assessee submitted that the AO has next alleged that BINAPANI was controlled by Vikash Aggarwal. However the statement of Vikash Aggarwal neither reveal the name of the investor company nor reveal the name of assessee company anywhere. In fact the statement provides name of other two companies who has taken bogus share capital which is evident from Q. No. 7 at para 51 of the paper book and Question No.10 at page 53 of the paper book.
8.5 So far as amount received from M/s Kansabati Tradecome Pvt Ltd is concerned, he submitted that the AO in the reasons recorded has alleged that M/s Kansabati Tradecome Pvt Ltd is one of the Paper Company of Devesh Upadhaya and has provided share application money to assessee. However, the same is not correct. Referring to page number 78-79 of PB, question number 7 & 8, he submitted that Kansabati has provided bogus LTCG in that period and not bogus share capital to any one. Therefore the AO’s observations for a future transaction is wrong and contrary to the records. He accordingly submitted that all above facts prove beyond doubt that AO has mentioned wrong facts in the reasons recorded and has also not examined the so called stale information independently before forming a belief that income of assessee has escaped assessment.
8.6 Referring to the following decisions, he submitted that if the AO mentioned wrong facts which are contrary to the records, then assumption of jurisdiction is bad in law:- i. CIT Vs. Atlas Cycle Industries 180 ITR 319( P&H) ii. Pr. CIT Vs. SNG Developers Ltd. 404 ITR 312(Del) iii. Shamshad Khan vs. ACIT 395 ITR 265;(Del) iv. Siemens Information System Ltd. Vs. ACIT 293 ITR 548.(Bom) v. CIT Vs Rainee Singh 330 ITR 417(Del) vi. VSR Enterprises- dated 17.02.2021. vii. Shri Natrajan Monie- ITA NO 1817/Del/2017- dated-07.12.2020. viii. SJM international in ITA No-3762/Del/2018 dated 09.08.2021 8.7 Referring to the following decisions, he submitted that the expression “reason” means cause or justification. It has to be based upon some material. Further the expression used in 147 is “has reason to believe” which does not mean “has reason to suspect”. For the above proposition, he relied on the following judgments:- (i) Ganga Prasad Maheswari Vs CIT, 139 ITR 1043(AII); and (ii) Indian Oil Corporation v. ITO (1986) 159 ITR 956 (SC).
In his next plank of arguments, the ld. Counsel for the assessee submitted that there is no independent application of mind by the AO. He submitted that the AO must apply his mind to the information coming from outside and then entertain a belief that income has escaped assessment. Referring to the reasons recorded, he submitted that the AO has solely relied on stale information and hence it is case of borrowed satisfaction. Otherwise the AO would not have made incorrect observations and relied on the past events to assume the sanctity of future transactions. For the above proposition, he relied on the following decisions:- (a) G&G Pharma- 384 ITR 147(Del); & (b) CIT v. Smt. Pramjit Kaur (2009) 311 ITR 38 (P&H).
The ld. Counsel for the assessee in yet another plank of argument submitted that the date of reasons recorded, the date of sanction and the date of issuance of notice coupled with factual inaccuracies committed by the AO would prove that ld. CIT has granted the approval in a mechanical manner. He submitted that had the CIT perused the stale material, then he would have certainly asked the AO to correct the mistakes committed by him in the reasons recorded. For the above proposition of mechanical approval, he relied on the following decisions:- 13
(A) Central India Electric Supply Co. Ltd vs . ITO (2011) 333 ITR 237 (Del.): 51 DTR 51 (Del.); (B) German Remedies Ltd. v. DCIT (2006) 287 ITR 494 (Bom.); (C) United Electrical Co. P. Ltd. v. CIT (2002) 258 ITR 317 (Del.); (D) CIT Vs Goyanka Lime 237 Taxman 378(SC); (E). CIT Vs N.C. Cables, 98 CCH 18 (Del); and (F) Chuga Mai Rajpal, 79 ITR 603(SC) Larger Bench.
Ld. Counsel for the assessee submitted that perusal of sequence of events would prove beyond doubt that AO has passed the final order of assessment within four weeks of the order of disposing the objection of assessee. This is another ground for annulling the assessment. He submitted that in the following judgments the various Benches of the ITAT and Hon’ble Bombay High Court has held that if the AO has not waited for four weeks after the passing of order on the objections of the assessee then action of 148 is not tenable. a. Bharat Jyanti Lai Shah Vs UOI 378 ITR 596(Bom) b. Kamlesh Goel Vs ITO - ITA NO-5730/2Q17 dated 30.08.2018 c. Meta Plast Engeineering Vs ITO -ITA No-5780/Del/2014 d. FGR Logistics Vs ACIT ITA No-4560/Del/2019- dated 01.01.2021
12. He submitted that the assessee further seeks to rely on the judgment of the coordinate bench in Kuber Group wherein the ITAT has quashed the assessment framed under section 147, observing that AO failed to provide the opportunity to cross examine Mr Vikash Kumar Aggarwal & Devesh Upadhay. Referring to the 14
Tribunal in the case of Kuber Khanpan & Kuber Products, vide ITA No-580 & 322, order dated 21.10.2019, he submitted that in these cases also the AO was same, date of recording of reasons was same, date of issuance of notice u/s 148 was same and the persons whose statements were relied were also same.
The ld. Counsel for the assessee submitted that third party statements cannot be relied upon for assuming jurisdiction. He submitted that during assessment proceedings the AO has relied on the statement of Mr. Vikash & Devesh without providing opportunity to cross examine them. During remand proceedings the AO, in the remand report has said that he has framed the assessment on the basis of statement of Shri Mul Chand Malu. He submitted that Mr Malu was neither the Director nor the employee of the assessee Company and hence all these statements cannot be relied upon. He submitted that the Tribunal in the case of Kuber Khadyan in has held that statement of third party cannot be relied upon for framing assessment u/s 153C. Though the present case is under section 147, however, the ratio laid down would apply mutatis mutandis in the present case.
So far as merits of the case is concerned, he submitted that assessee, in order to discharge his burden, has filed the following details as mentioned in the order of assessment at Para 6.6. a. ITR of the investor companies
b. Share application forms c. Confirmations d. Bank Statements. e. MCA Data 14.1 He submitted that the AO discarded the above evidence without bringing on any material on record and without providing any opportunity to cross examine the so called entry providers and relying on the stale informations which was related to past events and made the additions in an arbitrary and capricious manner. Referring to the following decisions, he submitted that it has been held that no addition can be made on the basis of statements of third party if an opportunity to cross examination has not been granted. a) CIT Vs Sunrise Tools (Dei) 88 CCH 26 b) Brij Bhusan Singhal 54 CCH 45(Del)- Distinguishing M.Piara Chodi
Ld. Counsel for the assessee submitted that perusal of the assessment order would show that at the time of framing of assessment order the AO has solely relied on the stale information of the investigation wing without carrying out any enquires as per section 142(1).
15.1 Referring to the decisions of the coordinate Bench of the Tribunal in the case of Karuna Garg in dated 06.08.2019, he submitted that the Tribunal has held that the AO cannot frame an assessment solely on the basis of investigation wing information and he must carry out independent 16
142(1) of the Act before drawing any adverse inference against assessee. He submitted that this decision has been affirmed by the Hon’ble High Court of Delhi. The ld. Counsel for the assessee drew the attention of the Bench to the following observations of Hon’ble High Court:- "A perusal of the assessment order clearly shows that the Assessing Officer was carried away by the report of the Investigation Wing Kolkata. It can be seen that the entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing, it is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. Section 142 of the Act contains the provisions relating to enquiry before assessment. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and reaffirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above cleariy show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry”
15.2 He accordingly submitted that the grounds raised by the assessee be allowed.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, on the basis of a search operation conducted u/s 132 of the Act on 9th October, 2014 in the Kuber group of cases and on the basis of the statement recorded of Shri Mul Chand Malu and on the basis of post search enquiries, reopened the assessment after recording reasons. The reasons are already reproduced in the preceding paragraphs. Accordingly, the AO issued notice u/s 148 of the Act. The assessment proceedings were completed u/s 143(3)/147 of the Act by the AO determining the total income of the assessee at Rs.1,71,21,533/- wherein he made addition at Rs.1,90,00,000/- u/s 68 of the Act on account of share capital and share application money received by the assessee from two concerns, namely, M/s Binapani Merchandise Pvt. Ltd. – Rs.1,50,00,000/- ; and M/s Kansabati Tradecom Pvt. Ltd. – Rs. 40,00,000/-. We find, the ld.CIT(A) upheld the validity of the reassessment proceedings as well as the addition on merit. It is the submission of the ld. Counsel that the reassessment proceedings u/s 147 of the Act was initiated solely on the basis of unverified, unrectified, unsubstantiated and unconfirmed statement of Mr. Malu. It is his submission that the information on the basis of which the reasons were conceived was not gathered in search or post-search enquiries. It is his submission that the search date was 9th October, 2014 and commission u/s 131(1)(d) of the Act was made on 10.11.2016 and the statement of the persons alleged to have control over 18
the investor companies were much prior to the date of search and issuance of commission. Since the statements were recorded on 9.12.2013, 24.01.2014, 30.12.2014, 02.03.2015 and 01.05.2015, it is the submission of the ld. Counsel that the averment of the AO that during search and post-search enquiries information relating to the entities providing accommodation entries of share application money, share premium and share capital and unsecured loan to Kuber group entities came to light is factually incorrect. It is also his submission that M/s Binapani Merchandise Pvt. Ltd. is not a ‘jamakharchi’ company as alleged by the AO. However, it is only under the category of a company whose addresses were not traceable. Further, the statement of Shri Vikas Aggarwal were recorded during the previous enquiries/surveys/searches and not in connection with the present commission issued in Kuber Group. It is also his submission that Shri Vikas Aggarwal has never stated that he has given any accommodation entry to the assessee company which is evident from Question No.10 put to Shri Vikas Aggarwal and the name of the assessee company does not appear. So far as M/s Kansabati Tradecom Pvt. Ltd. is concerned, it is the submission of the ld. Counsel for the assessee that Shri Devesh Upadhyaya has never admitted that he has given any accommodation entry to the assessee. In his answer to questions No.7 and 8 Shri Devesh Upadhyaya has stated that accommodation entries of bogus long-term capital gain is provided to various entities and not share capital and premium. It is also his submission that during the assessment proceedings, the AO has relied on the statement of Shri Vikas 19
Aggarwal and Shri Devesh Upadhyaya without providing any opportunity to the assessee to cross examine them. Even during the remand proceedings the AO himself has admitted that the assessment was made on the basis of statement of Shri Mul Chand Malu, who is neither a director nor employee of the assessee company and, therefore, his statement cannot be relied upon. It is thus the submission of the ld. Counsel for the assessee that the reassessment proceedings initiated by the AO are not in accordance with the law. Further, the assessee has filed all the relevant documents to substantiate the identity and credit worthiness of the loan creditor and genuineness of the transaction and without allowing the cross-examination the AO could not have made the addition solely on the basis of third party statement. Thus, it is the argument of the ld. Counsel that the reopening was made by the AO on the basis of wrong facts and he has not examined the information received from the Investigation Wing independently and, therefore, such reopening is invalid.
We find some force in the above argument of the ld. Counsel for the assessee. We find, in the instant case the information on the basis of which reasons were conceived was not gathered in search or post search enquiries. Further, the observation of the AO that M/s Binapani Merchandise Pvt. Ltd. is a Jamakharchi company is contrary to report of the commission copy of which is placed at page 48 and 49 of the paper book which is as under:-
From the above, it is clear that this company comes under the category of those companies whose address is not traceable. We further find, Shri Vikas Aggarwal, in his answer to questions No.7 to 12 has not named any of the 22
companies who deposited the money is appearing. Further, in none of the statements recorded by the Investigation Wing of Kolkata, the name of any company who deposited money with the assessee company is appearing.
We find, the AO at para 6 of the order has mentioned as under:- “6. During search, post search and survey proceedings in Kuber Group, details relating to companies giving accommodation entries of share application money, share premium, share capital and unsecured loans came to light. During search and seizure operations u/s 132 of Income Tax Act 1961 on 9.10.2014, in the statement recorded u/s 132(4) of the I.T. Act and during the statement recorded on oath on 15.12.2014 at Room no.254, Income Tax Office, Jhandewalan, New Delhi, Shri Mul Chand Malu had offered to declare undisclosed income of Rs. 100 crore of the Kuber Group of companies and their directors under specific head of share capital/ share premium/capital formation out of total undisclosed income of Rs.150 crore. The relevant parts of the statements are reproduced as under:-“
We find, although the assessee has specifically asked for cross- examination of the persons whose statements were relied on by the AO, however, the same was not provided.
So far as the name of Mr. Devesh Upadhya is concerned, we find the AO has stated that in the commission report received from Kolkata office, statement of Vikas Agrawala, Devesh Upadhya and Praveen Kumar are mentioned. However, in none of these statements of entry operators, the name of the assessee is mentioned. Further, opportunity to cross examine has not been provided. A perusal of the chronology of date chart shows that the statements of all these
Kuber group of cases i.e., on 09.10.2014.
We find, identical issue had come up before the Tribunal in the case of sister concerns of the assessee, namely, Kuber Khanpan Udyog Pvt. Ltd. and Kuber Food Products India Pvt. Ltd. in and ITA No.322/Del/2019, respectively, order dated 22nd October, 2019 for AY 2011-12. We find, the Tribunal, in the case of Kuber Khanpan Udyog Pvt. Ltd., while deciding the issue had noted the following facts at para 4 of the order:- “4. Brief facts of the case is that Kuber Khanpan Udyog Pvt. Ltd filed its return of income on 29.09.2011 for Rs. 320270/-. The assessment of the company was reopened u/s 148 of the Act on 31.03.2017. The Assessee filed return in response to that notice on 13.04.2017 declaring the same income. The assessment u/s 143(3) read with section 147 of the Act was passed on 12.05.2017 at Rs. 14795510/-. The addition of Rs. 1.35 crores was made in the hands of the Assessee u/s 68 of the Act. During the search and seizure u/s 132 of the Act on 09.10.2014 on Kuber Group of Cases details relating to companies with respect to share capital and unsecured loan came to the light. The statement recorded on oath on 15.12.2014 Shri Mulchand Mallu declared undisclosed income of Rs. 100 crores of the Kuber Group of Companies and its directors out of total undisclosed income of Rs. 150 crores. During the course of assessment proceedings statement of Mr. Malu was also recorded u/s 131 of the Act. The AO noted that the Assessee issued share capital of Rs. 1.35 crores from M/s. Pawmex Sales Pvt. Ltd and same was added u/s 68 of the Act. Against the order of the ld Assessing Officer Assessee preferred appeal before the ld CIT(A), who dismissed the appeal of the Assessee. …..”
23.1 We find, the Tribunal, after considering the arguments advanced by both the sides, deleted the addition by observing as under:-
“11. Now we come to the other issues of the reopening of the assessment challenged by the assessee. The reopening has been challenged by the assessee stating that initiation of proceedings u/s 147 of the income tax act 24 is solely on the basis of the unverified, on rectified, unsubstantiated and unconfirmed statement of Mr Malu. It is further the claim of the assessee that the learned assessing officer has violated the principles of natural justice by not providing the opportunity for cross-examination of the persons whose statements have been relied upon by him in spite of specific request made by the appellant in the assessment proceedings as well as before the learned CIT - A. Admittedly in this case notice u/s 148 of the income tax act was issued on 31/3/20 17. The reasons recorded in the first paragraph clearly refer to the search and seizure operation carried out on the coupe group of cases on 9/10/2014. During post search investigation summons were issued u/s 131 of the income tax act to comic sales private limited, which has provided the share capital to the assessee company. The summons returned unserved. Further enquiries were made issuing commission u/s 131 (1A) of the act and information was gathered from investigation wing that the share deposit company is not physically existing at the given address 125/1, cotton Street, Kolkata - 700007 whereas the correct address of this company was 16 A, Shakespeare Sarani, New B K Market, 5th Floor, Kolkatta 71. Thus, the learned assessing officer made the inquiries at the incorrect address. Furthermore, the learned assessing officer has heavily relied upon the statement of Mr. Vikas Agarwal residing at BC - 75, Akanskha apartment, 4th floor Calcutta 101 that was recorded on 9/1/2014. He is an alleged entry operator. He admitted this in answer to question number 6 of his statement. He named in answer to question number 7 - 12 companies, however, the name of the company who deposited share capital with the assessee was not appearing in the statement. Further, in none of the other statements recorded by the investigation wing Kolkata, the name of the company who deposited money with the assessee was appearing. During the course of appellate proceedings before the learned CIT - A, assessee submitted a remand report dated 25/10/2018, which is at page number 22 of 38 of the appellate order. In para number 5 the learned AO stated that the assessment order are based on the statement of Shri Moolchand Malu, post search investigation and investigation during assessment proceedings. The assessee specifically asked the AO to provide cross-examination or the information to show that the amount of share capital taken by the assessee from the above stated company is an accommodation entry. None of the statements of the investigation wing, though referred to many of the companies, however the name of this company from whom the assessee has taken share capital is appearing. In para number 8 of the remand report, the learned assessing officer has categorically stated that during the assessment proceedings commission u/s 131 (1) (D) of the income tax act, 1961 was issued to the Calcutta investigation wing. A list of 27 companies was sent for necessary enquiry. As per report of Calcutta wing, 9 companies are such companies, which are used for routing, and providing accommodation entry to the beneficiaries as per the statement of the directors/to persons of respective companies admitted during both during the previous enquiry survey/searches. For balance 18 companies, as per inspector report, no such 25 companies existed at the addresses mentioned. The name of the company who deposited money with the assessee appears in the list of 18 companies where the inspector has gone to the incorrect address as held above. Further, at para number 10 of the remand report, request of the assessee for cross-examination is dealt with. The learned assessing officer and stated that in the commission report received from Calcutta office, statement of Mr VIkas Kumar AGarwal, Devesh Upadhyay, and Praveen Kumar was mentioned. However, in none of these entry operators' statement the name of the company, which deposited money with the assessee, is mentioned. Further assessee asked the cross-examination of these persons who have mentioned the name of the above-deposited company. Statement recorded of all these persons are prior to date of search on Kuber Group. Thus, statements are recorded by the investigation wing prior to search, naturally before the reasons were recorded. Before the learned CIT - A, on the specific request of the assessee that AO has not granted an opportunity of the cross-examination of those persons, even the learned CIT - A directed the AO to grant cross- examination of those person however AO expressed his inability to do so. With respect to the identity, creditworthiness and genuineness of the transactions the assessee submitted return of income of the share applicant, it is audited balance sheet, confirmation of the transactions and bank statement of the share applicants. Therefore, the claim of assessee is that it has discharged initial onus cast upon it under section 68 of the income tax act. The learned AO merely on the basis of the statement of the entry operators, who did not name the share deposit as 1 of the companies operated by them, the inspector report saying that share deposit and did not exist by inquiring at the incorrect address and failure to give cross- examination of those entry operators, which are the only statement against the assessee, the addition made by the learned assessing officer cannot be sustained. Honourable Supreme Court in CIVIL APPEAL NO. 4228 OF 2006 M/S ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE,KOLKATA-II has held that when except the statement of the 3rd party is the only evidence available with the revenue authorities, addition cannot be made on that solitary evidence without granting the cross-examination of such 3rd party to the assessee when asked for. In the present case the assessee asked for cross-examination before the assessing officer and as well as before the learned CIT - A, the assessee did not give the cross-examination of those accommodation entry providers. Further, the copies of the statement given by the assessing officer during the course of remand proceedings, none of the statement of the entry provider implicated the company, which deposited the share capital with the assessee. In view of the above facts, the addition made by the learned assessing officer and sustained by the learned CIT - A cannot be upheld. Therefore we direct the learned AO to delete the addition of INR 13,500,000 in ITA number 580/del/2019 and INR 21,500,000 in ITA number 322/del/2019.
In the result, both these appeals are partly allowed.” 26